Bilateral Contract

A bilateral contract is the most common form of agreement in real estate. It is established on the principle of “a promise for a promise.” Both parties are legally bound to perform their respective duties as specified in the agreement.

Texas-Specific Nuance & Citation

In Texas, standard TREC promulgated purchase contracts (such as the One to Four Family Residential Contract) are bilateral agreements once fully executed and signed by both the buyer and seller. The seller promises to transfer title, and the buyer promises to pay the purchase price.

The Trap

A contract is only bilateral if both parties have made binding promises. If an agreement allows one party to walk away at any time without any penalty or consideration (like an option period before the fee is paid), it may be considered a unilateral agreement or illusory.

Worked Example

A buyer and seller sign a TREC contract for a home in Amarillo. The buyer promises to pay $300,000 at closing, and the seller promises to deliver a warranty deed. This is a bilateral contract. If either party refuses to perform, they are in default, and the other party can sue for specific performance.