Understanding Bilateral Contract
A bilateral contract is the most frequently understood instance of contract. All business contracts in which each party makes a promise to the other party in the contract is a bilateral contract. Bilateral means that both sides are involved equally.
Bilateral business contracts bind both sides to perform an action. Bilateral business contracts give rights to both parties, as well as assigning each party with an obligation to action which they are expected to discharge. In bilateral business contracts, both sides have given consideration.
As a result of these three circumstances the normal requirements of a contract have been fulfilled. A bilateral contract requires an acknowledgment by the offeror of the oferee's acceptance.
Bilateral business contracts are mutually binding to both the offeror and the offeree. Depending on the type of contract, the parties in business contracts may also be referred to as promisors and promisees. A bilateral business contract becomes binding to both parties at the moment that the promises are exchanged by both parties.
Unless obviously intended otherwise, business contracts are presumed to be bilateral in nature.
In order to make the definition of bilateral business contracts more readily apparent, a bilateral contract may be referred to as a contract that only entails an exchange of promises. Contracts that call for performance at the moment that the contract is made, or the exchanging of a promise for a promise are not considered bilateral contracts..
Although many bilateral business contracts involve negotiation, this is merely a common element of bilateral business contracts, not an essential element.
Bilateral business contracts are different from unilateral contracts in that there is a mutual exchange of responsibility.
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