Wisconsin Real Estate Sales Practice Exam

Which is an example of a bilateral contract?

1. Lease Agreement

2. Power of Attorney

3. Offer to purchase

4. Option to Purchase

The correct answer is: Offer to purchase

A bilateral contract is an agreement in which both parties involved have obligations and promises to fulfill. In the context of real estate, when one party makes an offer to purchase property and the other party accepts it, both parties become bound by their respective duties. The buyer agrees to pay a specified amount for the property, while the seller agrees to transfer ownership. This mutual exchange of promises creates the characteristic of a bilateral contract. In contrast, a lease agreement typically involves both parties, but its primary purpose is to establish rights and responsibilities of landlords and tenants, which may not strictly fit the definition of a bilateral contract in the same manner as a purchase agreement. A power of attorney involves one party delegating authority to another, meaning there is an obligation on one side but not an equal exchange of promises. An option to purchase provides the buyer the right, but not the obligation, to purchase the property within a certain timeframe, creating a one-sided obligation rather than a bilateral one. Thus, the offer to purchase stands out as the quintessential example of a bilateral contract, with both the buyer and seller bound to perform their respective duties upon acceptance.