Certified Residential Appraiser Practice Exam

What is an example of a bilateral contract?

1. A promise made in a will

2. A real estate contract between a buyer and seller

3. A bystander agreeing to pay someone for services

4. A contract defined only by gestures

The correct answer is: A real estate contract between a buyer and seller

A bilateral contract is an agreement in which both parties make mutual promises to each other. In the context of real estate, when a buyer and seller enter into a contract, the buyer typically agrees to pay a certain price for the property, while the seller agrees to transfer the property title to the buyer. This exchange of promises creates a legally binding obligation for both parties, demonstrating the essence of a bilateral contract where there are reciprocal obligations. The other scenarios do not reflect the characteristics of a bilateral contract. For instance, a promise made in a will involves one party's intent to transfer assets upon their death, without a reciprocal promise from the beneficiaries at that moment. The agreement of a bystander to pay someone for services does not fit a formal contractual framework where explicit promises are exchanged, given that it focuses more on a unilateral promise rather than a mutual agreement. Lastly, a contract defined only by gestures lacks the clear, explicit terms required to establish mutual obligations, which are fundamental in defining a bilateral contract.