A contract that includes promises from both parties is referred to as what type of contract?

A contract that involves promises from both parties is referred to as a bilateral contract. In this type of agreement, each party makes a commitment to fulfill certain obligations. For example, in a real estate transaction, one party might promise to sell a property, while the other promises to pay a certain amount of money for it. This mutual exchange of promises establishes the contract’s binding nature, making both parties liable to perform their respective duties.

The significance of a bilateral contract lies in its requirement for reciprocity. Each party's promise is contingent upon the other party fulfilling their promise, which creates a legal obligation for both sides. This contrasts with unilateral contracts, where only one party makes a promise in exchange for an act from another party. Understanding these definitions is crucial for real estate transactions, as many standard agreements, such as listing contracts and purchase agreements, are bilateral in nature.