Which contract type involves an exchange of promises between two parties?

A bilateral contract is characterized by the exchange of promises between two parties, where each party commits to fulfilling specific obligations. This creates a binding agreement, as both parties have obligations that they must perform. For example, in a real estate transaction, when a buyer offers to purchase a property and the seller accepts that offer, both parties are making promises: the buyer promises to pay the agreed-upon price, while the seller promises to transfer the property title.

In contrast, a unilateral contract involves only one party making a promise that the other party can accept by performing a specific action, such as a reward for finding a lost pet. Implied contracts are formed through the actions or conduct of the parties rather than explicitly stated terms. Executed contracts are those that have been fully performed by all parties involved, which does not pertain specifically to the exchange of promises, as it indicates that the contractual terms have already been completed.

Therefore, a bilateral contract is the correct answer because it directly involves the mutual exchange of promises that create obligations for both parties.