PSI Virginia Real Estate Practice Exam

Which type of contract involves reciprocal promises between parties?

1. Bilateral contract

2. Unilateral contract

3. Void contract

4. Option contract

The correct answer is: Bilateral contract

A bilateral contract is defined by the presence of reciprocal promises between the parties involved. In this type of contract, both parties agree to perform specific actions or provide a benefit to each other, creating mutual obligations. For instance, in a real estate transaction, when a buyer promises to pay a certain amount for a property and the seller promises to transfer ownership of that property, both parties are making commitments that bind them to the terms of the contract. This mutual exchange is what characterizes a bilateral contract and distinguishes it from other types, such as unilateral contracts where only one party makes a promise, or void contracts that are not enforceable in court. Understanding this distinction is crucial for recognizing how agreements are structured and the obligations they create in real estate dealings.