Louisiana Bail Bonds Practice Exam

How does a bilateral contract differ from a unilateral contract?

1. Only one party is obligated

2. Both parties have promised to perform

3. It is not legally binding

4. It requires a written document

The correct answer is: Both parties have promised to perform

A bilateral contract is defined by the mutual promises exchanged between two parties, creating obligations for both sides. In a bilateral agreement, each party commits to fulfill certain actions or duties, which solidifies the contract and ensures both parties have responsibilities. This mutual engagement is what distinguishes bilateral contracts from unilateral contracts, where one party makes a promise that the other party can accept simply by performing a specified action. In the case of unilateral contracts, only the party making the promise is bound to perform, while the other party is not under any obligation until they take action that fulfills the terms set forth by the offeror. The legally binding aspect of a bilateral contract ensures that both parties have enforceable obligations, which creates a more balanced and reciprocal agreement. The other options do not accurately characterize the nature of bilateral contracts. For instance, bilateral contracts are indeed legally binding, provided they meet other essential legal requirements, so it is incorrect to say they are not legally binding. Additionally, while many contracts benefit from being in written form, not all contracts require written documentation to be enforceable; verbal agreements can also form bilateral contracts, depending on the circumstances.