What type of contract includes promises made by both parties?

A bilateral contract is characterized by the exchange of promises between two parties, where each party commits to fulfill certain obligations. This mutual agreement is foundational to private contract law, as it establishes a clear understanding that each party is both a promisor and a promisee. For instance, in a typical bilateral contract, one party might promise to deliver goods while the other promises to pay for those goods, creating a reciprocal obligation.

In contrast, a unilateral contract involves one party making a promise in exchange for an act by another party, where only one party is legally bound to perform. Implied contracts are formed by the actions or circumstances of the parties rather than written or spoken words, and gratuitous contracts are agreements where one party provides a benefit to another without expecting anything in return, which doesn't reflect a mutual promise. Therefore, the defining aspect of bilateral contracts, with its inherent two-way promise exchange, makes it the correct answer.