Compare bilateral and unilateral real estate contracts with examples.

• A. Bilateral contracts involve mutual promises (purchase agreement); unilateral contracts involve one promise that becomes binding upon a specified action (option contract).
• B. Bilateral contracts involve only one party; unilateral involve both parties.
• C. Bilateral contracts do not require writing; unilateral contracts always require writing.
• D. Bilateral contracts are illegal in real estate; unilateral contracts are standard.

Answer: (A)

In real estate, the key distinction is whether both sides exchange promises or only one side makes a promise that is triggered by an action. A bilateral contract involves mutual promises from both parties. For example, in a typical real estate purchase agreement, the buyer promises to pay the negotiated price and the seller promises to transfer title at closing. Because both sides have enforceable promises, the contract is binding for both the buyer and the seller from the outset.

A unilateral contract, on the other hand, rests on one party’s promise that becomes binding only when a specified action is taken. A common real estate example is an option to purchase. The optionor promises to sell the property at a set price if the optionee chooses to exercise the option. The optionee is not obligated to buy, so no binding obligation exists until they exercise. Once exercised, a separate bilateral sale agreement typically follows to complete the transaction.

Understanding this helps explain why purchase agreements and listings are usually bilateral, while options represent a unilateral promise that creates a future bilateral obligation if the option is exercised.