Bilateral: Overview, definition and example
What does bilateral mean?
Bilateral refers to something that involves two sides or parties. In the context of contracts, a bilateral agreement is a deal where both parties make promises to each other. Each side agrees to do (or not do) something in exchange for the other party’s promise. These agreements are the most common type of contract.
For example, in a sales agreement, one party promises to deliver goods, and the other promises to pay for them.
Why is bilateral important?
Bilateral agreements are important because they form the backbone of most business and legal relationships. They ensure mutual responsibilities are clearly defined, creating balance and accountability. Both parties know what’s expected of them and what they’ll receive in return.
Bilateral agreements also make enforcement easier. Since both sides have duties to fulfill, the legal system can step in if one party fails to deliver, ensuring fairness and reliability in contractual relationships.
Understanding bilateral through an example
Imagine a vendor agrees to supply a bakery with 100 pounds of flour every month. The bakery, in return, promises to pay $500 per month for the flour. This is a bilateral agreement: the vendor promises to deliver the product, and the bakery promises to pay.
In another case, a software developer agrees to build a custom app for a client. The client, in return, promises to pay in installments as the project progresses. Both parties have obligations, making this a bilateral agreement.
An example of a bilateral clause
Here’s how a bilateral clause might look in a contract:
“The Seller agrees to deliver the goods described in Exhibit A by the agreed delivery date, and the Buyer agrees to pay the total purchase price as specified in Section 2. Both parties shall perform their respective obligations in good faith.”
Conclusion
Bilateral agreements involve mutual promises between two parties, creating a clear structure for responsibilities and benefits. They are the foundation of most business contracts, ensuring fairness and accountability on both sides.
By drafting bilateral agreements with precise terms and clear obligations, businesses can build strong relationships, reduce misunderstandings, and ensure enforceable commitments. They’re a cornerstone of effective contracting.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.