Which of the following best describes a bilateral contract?

A bilateral contract is characterized by the mutual promises made by both parties involved in the agreement. In this type of contract, each party commits to fulfilling a promise to the other, establishing a reciprocal relationship. For example, in a bilateral sales agreement, one party promises to deliver goods while the other party promises to pay a specified amount in return. This mutual exchange is essential for the creation of the contract, distinguishing it from unilateral contracts, where only one party is bound to perform.

Understanding bilateral contracts is crucial because they illustrate the foundational principle of contract law that emphasizes mutuality and obligation. Unlike unilateral contracts that only require one party’s action in exchange for a promise, bilateral contracts ensure that both parties are involved and obligated, creating a balanced agreement.

The other options highlight aspects that do not accurately define a bilateral contract. For instance, a promise in exchange for an action describes a unilateral contract, while a requirement for only one party to fulfill an obligation again aligns more with unilateral agreements. The enforceability requirement being linked strictly to formal signatures is a misconception; many bilateral contracts can be enforceable even if they are not formally signed, provided that the mutual assent and intent to enter into a contract is evident.