What kind of contract involves an exchange of promises between two parties?

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The correct answer is a bilateral contract, which is characterized by an exchange of promises between two parties. In this type of contract, each party commits to fulfilling certain obligations or promises, creating mutual obligations. For instance, in a real estate transaction, one party may agree to sell a property, while the other party agrees to pay a specified amount for it. This reciprocal nature of promises is what distinguishes bilateral contracts from others, such as unilateral contracts, where only one party makes a promise and the other party is not required to do anything in return.

Other types of contracts mentioned, such as valid contracts, refer to agreements that meet legal requirements and can be enforced by law, yet they do not specifically indicate the exchange of promises. Enforceable contracts also refer to contracts that can be upheld in court but do not inherently imply the mutual obligations present in bilateral contracts. So, the essence of a bilateral contract lies in its nature of mutual exchanges, which is foundational to many agreements in both personal and professional contexts.

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