What is a bilateral contract?

Answer 1

A bilateral contract is one in which both parties exchange promises to perform. Here is an example:

I promise to give you my car if you promise to give me $20,000.

In that example, both parties are exchanging promises. The parties are bound as soon as the return promise is given.

By contrast, a unilateral contract is one in which acceptance has to be in the form of performance. Here is an example:

I promise to pay you $5 if you go out and find my lost dog.

In that example, a promise to find the dog is meaningless. Acceptance has to be in the form of going out and finding the dog.