A bilateral contract is a contract in which both parties exchange promises to perform. One party’s promise serves as consideration for the promise of the other. As a result, each party is an obligor on that party’s own promise and an obligee on the other’s promise. (compare: unilateral contract)
The most common types of bilateral contracts are business contracts such as sales contracts for which the buyer promises to pay the price and the seller promises to deliver the goods. In this example, the buyer and the seller obligate themselves reciprocally, so that the obligation to pay the price is correlative to the obligation to deliver the goods. Other examples of bilateral contracts include employment contracts, leases and warranties.
[Last updated in May of 2020 by the Wex Definitions Team]