Bilateral Contract

What is a 'Bilateral Contract'

A bilateral contract is a 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.

BREAKING DOWN '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.

RELATED TERMS
  1. Unilateral Contract

    A legally enforceable promise - between legally competent parties ...
  2. Continuous Contract

    A reinsurance contract that does not have a fixed contract end ...
  3. Third Party Beneficiary

    A person who will benefit from a contract made between two other ...
  4. Counterpurchase

    An exchange of goods between two parties that, by means of two ...
  5. Bilateral Trade

    The exchange of goods between two countries. Bilateral trade ...
  6. Forward Exchange Contract

    A special type of foreign currency transaction. Forward contracts ...
Related Articles
  1. Professionals

    Business Law: Contracts

    Business Law: Contracts
  2. Term

    The Difference Between Forwards and Futures

    Both forward and futures contracts allow investors to buy or sell an asset at a specific time and price.
  3. Professionals

    Contract Requirements

    Contract Requirements
  4. Investing

    How Do Futures Contracts Work?

    Futures contracts are one of the most important financial innovations in history, but they are often misunderstood. Find out this contract is used to transfer risk between different parties. ...
  5. Professionals

    Terminating a Forward Contract Prior to Expiration

    CFA Level 1 - Terminating a Forward Contract Prior to Expiration. Learn how to terminate your position in a forward contract through use of an offset. Discusses default risk upon terminating ...
  6. Markets

    Intermediate Guide To E-Mini Futures Contracts - Rollover Dates And Expiration

    A contract month is the month in which a futures contract expires. All of the e-mini stock index futures contracts trade on the March quarterly expiration cycle (March, June, September and December). ...
  7. Professionals

    Futures vs. Forwards

    CFA Level 1 - Futures vs. Forwards. Contrasts the key features of futures and forward contracts. Provides the characteristics of a futures contract deal and the parties involved.
  8. Professionals

    Contract Characteristics

    Contract Characteristics
  9. Professionals

    Forward Markets and Contracts: Settlement Procedures

    CFA Level 1 - Forward Markets and Contracts: Settlement Procedures. Learn the differences between being long or short in a forward contract. Also contrasts how physical and cash deliveries are ...
  10. Investing Basics

    What is a Forward Contract?

    A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date.
RELATED FAQS
  1. How can a futures trader exit a position prior to expiration?

    A futures contract is an agreement to buy or sell a commodity at a pre-determined price and quantity at a future date in ... Read Answer >>
  2. What is the difference between forward and futures contracts?

    Fundamentally, forward and futures contracts have the same function: both types of contracts allow people to buy or sell ... Read Answer >>
  3. What is a forward contract against an export?

    Understand forward exchange contracts in exporting, and learn the purpose of using a forward contract and its advantages ... Read Answer >>
  4. How do the investment risks differ between options and futures?

    Learn what differences exist between futures and options contracts and how each can be used to hedge against investment risk ... Read Answer >>
  5. How are forward contracts regulated in the United States?

    Read about the risks of forward contracts and why they are not readily subject to regulation, including what happens when ... Read Answer >>
  6. What kinds of derivatives are types of forward commitments?

    Learn more about what a derivative is, what a forward commitment is and which types of derivative securities have forward ... Read Answer >>
Hot Definitions
  1. Goodwill

    An account that can be found in the assets portion of a company's balance sheet. Goodwill can often arise when one company ...
  2. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  3. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  4. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
Trading Center