Which type of contract arises from an exchange of promises between two parties?

A bilateral contract arises from an exchange of promises between two parties, where each party commits to fulfilling their side of the agreement. This mutual exchange creates an obligation for both parties, meaning that both are bound to perform their respective duties as outlined in the contract. For instance, in a typical sales agreement, one party promises to deliver a product, while the other promises to pay a specified amount for that product. This mutuality of promise is a defining characteristic of bilateral contracts and is fundamental to many business transactions.

In contrast, a unilateral contract involves only one party making a promise, with the other party accepting that promise by performing a specific action. An executed contract refers to a contract that has been fulfilled by all parties, and an executory contract is one that has not yet been fully performed by one or more parties. Neither of these terms captures the essence of an exchange of promises, which is central to the definition of a bilateral contract.