In a bilateral contract, both parties are obligated to perform because:

• A. Only one promises to do something
• B. Both parties promise to do something
• C. No promises are required
• D. The contract is only binding if notarized

Answer: (B)

Mutual promises create mutual obligations. In a bilateral contract, each party promises to do something in exchange for the other party’s promise. That promise-for-promise structure binds both sides—the contract is formed when the promises are exchanged (offer and acceptance with consideration), and each party is obligated to perform. If one side fails to perform, the other can sue for breach. Notarization isn’t what makes the contract binding; most contracts are enforceable without notarization as long as there is a valid offer, acceptance, and consideration. A unilateral contract, by contrast, arises when one party promises to act in return for the other party’s performance, not a promise from that party.