JD Next Practice Exam

What characterizes a bilateral contract?

1. It seeks acceptance through a completed action

2. It requires no performance from either party

3. It seeks acceptance by a return promise

4. It is unilateral in nature

The correct answer is: It seeks acceptance by a return promise

A bilateral contract is characterized by the exchange of mutual promises between two parties. This means that both parties agree to perform certain actions or provide certain benefits, creating an obligation for each side. Therefore, when one party makes a promise, the acceptance occurs through the other party's return promise, thus forming a binding agreement. In a bilateral contract, for example, if one party agrees to sell a car in exchange for payment, the agreement involves both parties making promises: the seller promises to deliver the car, while the buyer promises to pay the agreed amount. This dynamic of mutual commitment is what fundamentally distinguishes bilateral contracts from other types of agreements, such as unilateral contracts, where only one party makes a promise contingent on the performance of an act by the other party. The other options do not accurately capture the essence of a bilateral contract. A completed action indicates a unilateral contract, while stating that no performance is required contradicts the fundamental nature of a bilateral agreement where both parties are obliged to act. Additionally, categorizing it as unilateral fundamentally mischaracterizes the nature of the agreement itself.