In contract law, what is a mutual exchange of promises known as?

In contract law, a mutual exchange of promises is defined as a bilateral contract. In a bilateral contract, both parties make commitments to perform certain actions or fulfill specific obligations. For instance, when one party agrees to provide goods or services in exchange for payment from the other party, both sides are entering a mutual agreement where each promises to deliver what was agreed upon. This characteristic distinguishes bilateral contracts from unilateral contracts, where only one party makes a promise in exchange for an act by the other party.

The concept of mutuality is fundamental in understanding how the parties are bound to the terms of the contract, reinforcing the necessity for both sides to fulfill their promises to create enforceable obligations. This mutual commitment is what lays the foundation for most everyday contractual transactions, such as buying a car or signing a lease.