Which type of contract involves an exchange of promises?

A bilateral contract is one in which both parties make promises to each other. This type of contract establishes a mutual agreement where each party is both a promisor and a promisee. For example, in a lease agreement, the landlord promises to provide a dwelling in exchange for the tenant's promise to pay rent. This exchange of promises creates obligations for both parties and signifies a binding agreement.

In contrast, an implied contract is formed by the actions or circumstances of the parties involved rather than through explicit written or spoken words. A unilateral contract involves a promise made by one party in exchange for an act by another party, meaning only one side makes a commitment. Lastly, an executory contract refers to a contract that has not yet been fully performed by all parties, focusing on the execution of the promises rather than the mutual exchange inherent in a bilateral contract. Thus, the defining characteristic of a bilateral contract is the exchange of promises, making it the correct choice in this context.