What type of contract involves an exchange of promises where both parties are obligated to perform?

A bilateral contract is characterized by an exchange of promises where both parties engage in an obligation to perform. In this type of contract, one party's promise is contingent upon the other party's promise. For instance, if one party agrees to sell a car and the other party agrees to pay for it, both parties have made promises that are legally binding. The seller must deliver the car, and the buyer must pay the agreed-upon price. This mutual exchange establishes a reciprocal relationship that defines a bilateral contract.

In contrast, a unilateral contract involves only one party making a promise that is accepted or performed by another party, such as a reward for finding a lost item, where only the offeror is bound to act upon the promise once the specified condition is met. Implied contracts are formed by actions or circumstances rather than explicit agreements, indicating that obligations may arise without a direct promise being made. An open contract is less defined and does not refer to a specific legal category commonly recognized in contract law, making it less applicable in this context.