Bilateral Contract

Definition of 'Bilateral Contract'


A bilateral contract is a reciprocal arrangement between two parties where each promises to perform an act in exchange for the other party's act. Each party is an (a person who is bound to another) to its own promise, and an obligee (a person to whom another is obligated or bound) on the other party's promise. A bilateral contract specifies a duty to act in exchange for another party's duty to act.

Investopedia explains 'Bilateral Contract'


A bilateral contract, as opposed to a unilateral contract, is the type of contract that frequently comes to mind when contemplating contracts. It is a contract between two people or parties. An example of a bilateral contract would be the contract for the sale of a home. A home buyer agrees to pay the seller a certain amount of money in exchange for the title to the home; the home seller agrees to deliver the title in exchange for the specified sale price. When the contract is not fulfilled there is a breach in contract.



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