Leasing License Practice Exam

Which type of contract involves two or more parties making commitments to each other?

1. Unilateral contracts

2. Implied contracts

3. Express contracts

4. Bilateral contracts

The correct answer is: Bilateral contracts

The type of contract that involves two or more parties making commitments to each other is known as a bilateral contract. In a bilateral contract, each party promises to perform an act in exchange for the other party's promise. This mutual exchange of promises creates obligations for both parties. For example, in a standard sales agreement, one party agrees to deliver a product while the other agrees to pay a specific amount for it. Each party's promise serves as consideration, making the contract enforceable by law. In contrast, unilateral contracts involve a promise made by one party in exchange for an act performed by another; the second party is not obligated to act but if they do, the first party must fulfill their promise. Implied contracts are established through the actions or conduct of the parties, rather than written or spoken words, which do not necessarily indicate mutual promises. Express contracts are explicitly stated, either orally or in writing, but can still be either unilateral or bilateral; it's the commitment aspect that distinguishes a bilateral contract specifically.