Which of the following terms describes a situation where two parties owe performance to each other?

The term that accurately describes a situation where two parties owe performance to each other is known as a commutative contract. In this context, both parties have mutual obligations; each party is required to give something of value in return for something else of value. This is a foundational characteristic of commutative contracts, where the exchange of goods, services, or other forms of consideration is explicit and agreed upon by both parties.

In contrast, an implied contract is generally rooted in the actions or circumstances surrounding the parties rather than in a formal agreement, possibly leading to one party performing without the explicit agreement from the other. A unilateral contract involves one party making a promise in exchange for an act by another party; in this setup, only one side has an obligation. Lastly, a conditional contract is contingent upon certain events or conditions being fulfilled, and therefore does not necessarily involve both parties having mutual obligations until those conditions are met.

Thus, the focus on mutual obligations in a commutative contract makes it the correct choice in this scenario.