Which of the following accurately describes a bilateral contract?

A bilateral contract is defined as a mutual agreement between two parties where both sides exchange promises to perform certain actions or fulfill specific obligations. This foundational characteristic distinguishes bilateral contracts from unilateral contracts, where only one party is bound to perform their commitment upon the other party’s action or performance.

In this context, the correct answer highlights the essential requirement of mutuality in a bilateral contract—the necessity for both parties to undertake certain duties, creating a reciprocal agreement. This principle ensures that both parties have legal obligations that they are expected to fulfill, thus maintaining fairness and balance in the contractual relationship.

The other answer options describe characteristics that do not align with the standard definition of a bilateral contract. For instance, stating that only one party is obligated to perform refers to a unilateral contract, while mentioning contracts that can be unilaterally changed suggests a lack of mutual agreement, which is contrary to the nature of bilateral contracts. Finally, contracts involving only verbal agreements does not specify the critical aspect of mutual promises, as bilateral contracts can also be written, and many are typically formalized to ensure clarity and enforceability.