Using Apple's AirDrop, you're attempting to send photographs to a friend. Both of you have Bluetooth and Wi-Fi turned on. You both aren't using your phones as hotspots. You are still unable to share files with your friend even though she has you in her contact list and has AirDrop Receiving set to Contacts Only. What are the TWO possible causes here?

You must have both Wi-Fi and Bluetooth turned on for AirDrop to work. You need to be within Wi-Fi and Bluetooth range. Both parties must turn off their hotspots. You won't be able to send receivers information if you are not in their contact list and they have AirDrop set to receive from contacts only.  Your Apple ID email or phone number must be in the contact card if you are in their contacts list. They can receive the file even if you are not in their contacts list if they change the AirDrop Receiving setting to Everyone.