A bilateral contract involves what type of agreement?

A bilateral contract is defined as a mutual agreement where both parties make promises to each other. In this type of contract, one party's promise serves as the consideration for the other party's promise. This is established through an exchange of commitments—each party agrees to do something in return for the other party’s agreement to do something else.

For example, in a typical real estate transaction, one party (the buyer) agrees to pay a specific price for a property, while the other party (the seller) agrees to convey the property to the buyer. Each party's promise is dependent on the other’s promise, which is the hallmark of a bilateral contract.

Other options represent specific transactions or arrangements but do not encapsulate the fundamental concept of a bilateral agreement where both parties are engaged in a promise for a promise. This makes the understanding of bilateral contracts essential for grasping broader implications in contract law and applicable scenarios.