A bilateral contract is a type of contract where both parties involved in the agreement are bound to perform an action or provide something of value to the other party. On the other hand, a unilateral contract is a type of contract where only one party is obligated to perform an action or provide something of value to the other party. The key difference between the two types of contracts is the level of obligation imposed on the parties involved.

In a bilateral contract, both parties involved share mutual obligations and responsibilities. The terms of the agreement are negotiated and agreed upon by both parties before entering into the contract. Once the contract is signed, both parties are legally bound to fulfill their obligations. For instance, a contract between an employer and an employee, where the employer agrees to pay the employee a monthly salary in exchange for services rendered, is a bilateral contract. Both parties agree to the terms and are bound to fulfill their obligations to commence the employment.

In contrast, a unilateral contract is a contract where only one party makes a promise or an offer that the other party can accept by performing the specific action outlined in the contract. A common example of a unilateral contract is an insurance policy, where the insurer promises to pay a certain amount of money to the insured upon the occurrence of a specific event, such as an accident or illness. In this case, the insurer is the only party bound by the contract, and the insured has no obligation to perform any action unless the event occurs.

In conclusion, the key difference between a bilateral and a unilateral contract is the level of obligation imposed on the parties involved. A bilateral contract requires both parties to fulfill their obligations outlined in the contract, while a unilateral contract only imposes an obligation on one party, usually the party making the promise or offer. As a result, it is important to understand the terms and conditions of any contract before entering into it, to ensure that both parties` rights and obligations are clearly defined.