PSI New Jersey Real Estate State Practice Exam

What key feature differentiates a bilateral contract from a unilateral contract?

1. Performance obligations of the parties

2. Offers made by both parties

3. Number of party signatures

4. Presence of an option clause

The correct answer is: Performance obligations of the parties

A bilateral contract is characterized by the fact that it involves mutual obligations between two parties, meaning both parties commit to fulfilling certain performances. In this type of contract, one party's promise is contingent upon the other party's promise, creating a reciprocal relationship where each party is both a promisor and a promisee. In contrast, a unilateral contract involves only one party making a promise in exchange for an act or performance from another party. This means that only one party is bound to the contract, and fulfillment of the contract depends on the action of the other party, which does not create an obligation for that party to act. Understanding this distinction is crucial in real estate dealings, as it affects how agreements are formed, enforced, and the responsibilities of the involved parties. The clarity in roles provided by a bilateral contract helps foster trust and accountability among parties in various transactions.