Which statement best distinguishes a bilateral contract from a unilateral contract?

Which statement best distinguishes a bilateral contract from a unilateral contract?

• A. Bilateral contracts require performance first; unilateral does not.
• B. Bilateral contracts must be in writing; unilateral contracts can be oral.
• C. Bilateral transfers ownership; unilateral does not.
• D. Bilateral contracts involve mutual promises; unilateral contracts involve a promise in exchange for performance.

Answer: (D)

The difference hinges on how acceptance and promises work. In a bilateral contract, both sides exchange promises to perform—each party commits to something. In a unilateral contract, only one promise is made, and acceptance occurs when the other party performs the requested action in response to that promise. That’s why the best statement says bilateral contracts involve mutual promises, while unilateral contracts involve a promise in exchange for performance. The other descriptions don’t fit: timing of performance isn’t what defines bilateral contracts, writing isn’t required for either type in general, and ownership transfer isn’t the defining feature of these contract kinds. For example, a deal where two parties promise to pay and deliver is bilateral; a reward offer where performance completes the contract is unilateral.

The difference hinges on how acceptance and promises work. In a bilateral contract, both sides exchange promises to perform—each party commits to something. In a unilateral contract, only one promise is made, and acceptance occurs when the other party performs the requested action in response to that promise.

That’s why the best statement says bilateral contracts involve mutual promises, while unilateral contracts involve a promise in exchange for performance. The other descriptions don’t fit: timing of performance isn’t what defines bilateral contracts, writing isn’t required for either type in general, and ownership transfer isn’t the defining feature of these contract kinds. For example, a deal where two parties promise to pay and deliver is bilateral; a reward offer where performance completes the contract is unilateral.