What characterizes a bilateral contract?

A bilateral contract is characterized by the mutual promises made by both parties, where each party commits to fulfilling an obligation or action outlined in the agreement. This mutuality is the distinguishing feature of bilateral contracts, as both parties are bound to perform their respective promises, establishing reciprocal obligations.

For instance, in a common scenario such as the sale of a car, one party promises to deliver the car, while the other promises to pay a specified amount of money. This exchange of promises is what solidifies the contract as bilateral, distinguishing it from other types of agreements, such as unilateral contracts, where only one party makes a promise that the other party accepts through performance.

The other options focus on singular aspects or characteristics that do not accurately define a bilateral contract. The first choice suggests a scenario where only one party is obligated, which aligns more with unilateral contracts. The third and fourth options regard the formality or enforceability of contracts, which, while relevant in legal discussions, do not characterize the fundamental nature of a bilateral contract itself. In essence, the heart of a bilateral contract lies in the reciprocal promises made between the parties involved.