ARJUN CHHABRA TUTORIAL

Of Arjun Chhabra
(CS LLB LLM)
Law Maven

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 ARJUN CHHABRA TUTORIAL
Of Arjun Chhabra
(CS LLB LLM)
Law Maven
CMA FOUNDATION LAW ONE DAY BEFORE REVISION NOTES
Section – A Fundamentals Of Commercial Laws
Study Note 1: Indian Contract Act, 1872
Contract = An Agreement + Enforceability of an Agreement

Agreement = Offer (or Proposal) + Acceptance of Offer (or proposal)

Note: 1. A proposal when accepted becomes a promise.

2. Every promise and every set of promise forming consideration

for each other is an agreement.

Enforceability An agreement is said to be enforceable by law if it creates some

legal obligation.

Scope of Law of Contract

Not Whole Law of Concerned with only those agreements (e.g. Business or Commercial

Agreements Agreements) where parties have the intention to create legal

obligations

Not Whole Law of Concerned with only those obligations which arise out of

Contracts agreements and is not concerned with those obligations (e.g.

obligation to maintain wife & children) which do not arise out of

agreements.

1. Agreements between a husband and wife living in friendly environment are

(a) Valid contracts (b) A void contracts

(c) Domestic arrangements (d) Voidable contract

Classification of Contracts
Type of Contract Meaning

1. On the Basis of

Creation

(a) Express Contract made by words spoken or written

(b) Implied Contract made otherwise than by words spoken or written.

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 ARJUN CHHABRA TUTORIAL
Of Arjun Chhabra
(CS LLB LLM)
Law Maven
(c) Tacit Contract understood from the conduct of parties or circumstances of the

case

2. On the Basis of

Execution

(a) Executed Contract Both the parties have performed their respective obligations.

(b) Executory Both the parties have still to perform their respective obligations.

Contract

(c) Partly Executed, one of the parties has per formed his obligation and the other

Partly Executory party has still to perform his obligation.

(d) Unilateral only one party has to perform his Promise or obligation to do

Contract forebear.

(e) Bilateral Contract One in which both parties have to perform their respective

obligations.

3. On the Basis of

Enforceability

(a) Valid Contract Which satisfies all the conditions prescribed by law.

(b) Void Contract A contract which was valid when entered into but which

subsequently becomes void due to impossibility of performance

due to change of law or any other reason

(c) Void Agreement

An agreement not enforceable by law
Note: Collateral Agreements do not become void.

(d) Voidable Contract An agreement which is enforceable by law at the option of one or

more of the parties but not at the option of the other or others.

(e) Illegal Agreement

One the object or consideration of which is unlawful.
Note: Collateral Agreements also become void.

(f) Unenforceable A contract which is actually valid but cannot be enforced because

Contract of some technical defect. Such contract can be enforced if the

technical defect is removed.

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 ARJUN CHHABRA TUTORIAL
Of Arjun Chhabra
(CS LLB LLM)
Law Maven
2. Voidable contract

(a) are enforceable by law if they are not avoided

(b) are not enforceable by law

(c) can be enforced if the court directs

(d) can be enforced with prior permission of Court / Government

3. In an executed contract

(a) both the parties have yet to fulfill their promises

(b) any one party has fulfilled the promise

(c) both the parties have fulfilled their promises (d) both b & c

4. A void agreement

(a) is illegal (b) is not void ab-initio

(c) may or may not be illegal (d) none of the above

5. Right in rem implies:

(a) a right available against the whole world

(b) a right available against a particular individual

(c) a right available against the Government

(d) none of the above

6. A void contract

(a) is void from the very beginning

(b) is valid in the beginning but becomes void later on

(c) is enforceable at the option of one of the contracting parties only

(d) none of the above

7. A void agreement is one

(a) which is forbidden by law (b) enforceable at the option of one of the parties

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 ARJUN CHHABRA TUTORIAL
Of Arjun Chhabra
(CS LLB LLM)
Law Maven
(c) which is not enforceable by law (d) enforceable by law

8. Which of the following statements is false

(a) Law of contract is the whole law of obligations (b) Certain contracts must be in writing

(c) All contracts are agreements (d) All illegal agreements are void

9. Which of the following contracts are not recognized by Indian Contract Act, 1872?

(a) Recognizance (b) Court Judgment

(c) Contract under seal (d) All the above

10. Voidable contract is one

(a) Which is lawful

(b) Which is invalid

(c) Which is valid so long it is not avoided by the party entitled to do so

(d) None of these

11. P engages B to kill C and borrows Rs.100 from D to pay B. If D is aware of the purpose

of the loan, the transaction is

(a) Valid (b) Void (c) Illegal (d) Not enforceable

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 ARJUN CHHABRA TUTORIAL
Of Arjun Chhabra
(CS LLB LLM)
Law Maven
Essential Elements of a Valid Contract
Provisions of Sec. 10 “All agreements are contracts if they are made by the free
consent of the parties competent to contract, for a lawful
consideration and with a lawful object and are not hereby
expressly declared to be void.”
Essential Elements of a 1. Proper Offer and its Proper Acceptance
Valid Contract 2. Intention to create legal relationship
3. Free Consent
4. Capacity to Contract
5. Lawful Consideration
6. Lawful Object
7. Agreement not expressly declared void
8. Certainity of Meaning
9. Possibility of Performance
10. Legal Formalities
12. The source of the law of contract is

(a) Indian Contract Act, 1872 (b) Judicial decisions

(c) Customs or usage of trade (d) All the above

13. Law of contract

(a) Is the whole law of obligations

(b) Is the whole law of agreements

(c) Deals with only such legal obligation which arise from agreement

(d) Deals with social agreements

14. Social agreements are

(a) Enforceable in the courts (b) Not enforceable in the courts

(c) Subject to legal obligations (d) Made by social workers

15. Mercantile Law

(a) Is applicable to businessmen only (b) Is applicable to everybody

(c) Is applicable to non-businessman only (d) Is applicable to Indians only

16. A contract consists of

(a) Mutual promises or agreement enforceable by law

(b) Agreement not enforceable by law

(c) Involuntary obligations

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 ARJUN CHHABRA TUTORIAL
Of Arjun Chhabra
(CS LLB LLM)
Law Maven
(d) None of the above

17. An agreement to create legal liability

(a) Is not enforceable by law (b) Is a void agreement

(c) Is enforceable by law (d) None of the above

18. Obligation between parties that form contract

(a) Are all kinds of obligations (b) Are legal obligation which spring from agreements

(c) Are not voluntary in nature (d) None of the above

19. A contract or an obligation to perform a promise could arise in the following ways

(a) By agreement and contract (b) By standard form of contracts

(c) By promissory estoppel (d) None of the above

20. All contracts

(a) should be in writing (b) should be oral

(c) should be registered (d) none of the above

21. The terms of agreement

(a) must be certain (b) must be capable of made certain

(c) un-ambiguous and clear (d) all the above

22. A contract is a contract

(a) from the time it is made (b) from the time its performance is due

(c) at the time from its performance (d) none of the above

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 ARJUN CHHABRA TUTORIAL
Of Arjun Chhabra
(CS LLB LLM)
Law Maven

Meaning, Mode And Rules For A Valid Offer

Meaning of Offer A person is said to have made the proposal when he signifies to
another his willingness to do or to abstain from doing anything
with a view to obtaining the assent of that offer to such act or
abstinence.

Meaning of “Offerer” The person making the proposal is called the offerer or
proposer.

Meaning of “Offeree” The person to whom the proposal is made is called the ‘offeree’
or ‘proposee’.

How to make an offer?

(a) Express offer
(b) Implied offer

To Whom Offer can be Made?

(a) Specific Offer
(b) General Offer

Legal Rules for a Valid Offer 1. Intention to create legal relations

2. Certain and unambiguous
3. Different from a mere declaration of intention
4. Different from an1 invitation to offer
5. Proper communication
6. No term the non-compliance of which amount to acceptance
7. Communication of special terms

Meaning of Cross Offers Two offers which are similar in all respects made by two parties
to each other, in ignorance of each other’s offer are known as
'cross offers’.

Cross offers do not amount to acceptance of one’s offer by the

other. Hence, no contract is entered into on cross offers.

Meaning of Standing Offer An offer of a continuous nature is known as 'standing offer.

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 ARJUN CHHABRA TUTORIAL
Of Arjun Chhabra
(CS LLB LLM)
Law Maven
Basis of Distinction Offer Invitation to Offer

1. Meaning Where a person shows his Where a person invites others to make an
willingness to enter into a offer to him, it is called as an invitation to
contract, it is called as an offer. offer.

2. Purpose An offer is made by a person with The purpose of making an invitation to offer
the purpose of entering into a is to receive the offers or to negotiate the
contract. terms on which the person making the
invitation is willing to contract.

3. Legal effect An offer, if acted upon (i.e., An invitation to offer, if acted upon, only
accepted), results in a contract. results in making of an offer.

Meaning, mode and rules for a valid acceptance

Meaning of Acceptance means giving consent to the offer. "A proposal is said to be

Acceptance accepted when the person to whom the proposal is made signifies his

assent thereto. A proposal when accepted becomes a promise.”

Who can Accept Made to a definite person or particular group of persons (called specific

Offer? offer)

(a) in case of Can be accepted only by that definite person or that particular group of

Specific Offer persons to whom it has been made and none else.

(b) In case of Made to the world at large or public in general (called general offer) Can

General Offer be accepted by any person having knowledge of the offer by fulfilling the

terms of the offer.

How to make an Like an offer, an acceptance may also be either an ‘implied acceptance' or

Acceptance ‘express acceptance’.

(a) Express Made by words spoken or written.

Acceptance

(b) Implied Made otherwise than in words.

Acceptance

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 ARJUN CHHABRA TUTORIAL
Of Arjun Chhabra
(CS LLB LLM)
Law Maven

Legal Rules for a Valid Acceptance

1. Absolute and Unqualified

2. Prescribed/Usual Manner

3. Communication to Offerer

4. Communication by Offeree

5. Within Prescribed/ Reasonable Time

6. Before Lapse of Offer

Communication of Offer and Acceptance

Communication of Complete when it comes to the knowledge of the person to whom it is
offer made
Communication of As against the Offeror - when letter of acceptance is posted by the
acceptance acceptor.

As against the acceptor - When letter of acceptance comes to the

knowledge of the proposer.

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 ARJUN CHHABRA TUTORIAL
Of Arjun Chhabra
(CS LLB LLM)
Law Maven
Revocation of Offer and Acceptance
Time for Offer - before communication of its acceptance is complete, as
revocation against the proposer.

Acceptance - before communication of its acceptance is complete, as

against the acceptor.
No Revocation in the question of revocation does not arise because there is
Case of Contract instantaneous communication of the offer and its acceptance (i.e. the
over Telephone or offer is made and accepted at the same time).
Telex of fax
When does An 1. By Revocation
Offer come to 2. By Lapse of time
end? (or Lapse of 3. By Death or insanity of the offerer/offeree
An offer) 4. By Failure to Accept condition Precedent
5. By Counter Offer
6. By not Accepting in the Prescribed Mode or usual Mode
7. By Rejection of Offer by Offeree
8. By Subsequent illegality or Destruction of Subject Matter of
the Offer
23. Acceptance is to offer what a lighted match is to a train of gun powder. This statement
indicates
(a) Once an offer is accepted it results in binding contract
(b) Communication of acceptance is necessary
(c) Acceptance must be absolute & unqualified
(d) All the above

24. An offer comes to an end by

(a) acceptance (b) communication (c) revocation (d) none of the above

25. Death or insanity of the proposer will revoke the proposal

(a) Automatically
(b) If the fact of the death or insanity is known to the offeree
(c) The knowledge of death or insanity is irrelevant
(d) Only if the family members of the proposer informs the offeree

26. An offer stands revoked

(a) If the fact of the death or insanity is known to offeree (b) By counter offer
(c) By rejection of offer (d) All the above

27. Cross offer do not constitute a contract because

(a) there is no acceptance (b) there is implied acceptance
(c) crossing implies cancellation (d) it amounts to counteroffer

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 ARJUN CHHABRA TUTORIAL
Of Arjun Chhabra
(CS LLB LLM)
Law Maven
28. A proposal can be revoked
(a) Before posting of letter of acceptance by the acceptor
(b) Before receiving the letter of acceptance by the offeror
(c) After posting the letter of acceptance by the offeree
(d) Cannot be revoked

29. Communication of acceptance is not necessary

(a) By performance of conditions of the offer by offeree
(b) By acceptance of consideration by the offeree
(c) By acceptance of benefit/service by the offeree
(d) All the above

30. A counteroffer proposing different terms and conditions

(a) Amounts to acceptance of the offer (b) Amount to rejection of the offer
(c) Results in making of the provisional contract (d) Both (b) & (c)

31. When the promisee does not accept the offer of performance, the promisor is not
responsible for non- performance
(a) True (b) False (c) Both(a)&(b) (d) None of the above

32. For an acceptance to be valid, it must be

(a) Partial & qualified (b) Absolute & unqualified
(c) Partial & unqualified (d) Absolute & qualified

33. Acceptance takes place as against the proposer, when

(a) When the letter of acceptance is posted by the acceptor
(b) When the letter of acceptance is received by the proposer
(c) When the offeree, writes the letter of acceptance, but doesn’t post it
(d) All the above

34. An advertisement for sale goods by auction

(a) Amounts to an invitation to offer (b) Amounts to an offer to hold such sale
(c) Amounts to an implied offer (d) Amount to a general offer

35. A contract is formed when the acceptor

(a) has done something to signify his intention (b) makes his mind to do so
(c) reads the offer (d) all the above

36. If the offeree does not accept the offer according to the mode prescribed, then
(a) The offeror may accept or reject such acceptance
(b) The offer lapses automatically
(c) It is a counter offer
(d) Offeree commits a breach of contract

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 ARJUN CHHABRA TUTORIAL
Of Arjun Chhabra
(CS LLB LLM)
Law Maven

37. Communication of offer is complete when

(a) The letter is posted to the offeree
(b) The letter is received by the offeree
(c) The offer is accepted by the person to whom it is made
(d) It comes to the knowledge of the offeror that the letter has been received by the
offeree

38. Mental acceptance is

(a) No acceptance at all (b) Valid
(c) Binding promise (d) None of the above

39. A bid at an auction sale is

(a) An implied offer to buy (b) An express offer to buy
(c) An Invitation to offer to buy (d) An invitation to come to bid

40. General offers open for world at large can be accepted by

(a) Any person in the world
(b) Any person within the country
(c) Any person who complies with the conditions of the offer
(d) Any person who reads the advertisement

41. The communication of an acceptance is complete as against the acceptor

(a) When it is posted by him
(b) When it is put in the course of transmission
(c) When it comes to the knowledge of the proposer
(d) None of these

42. If the communication is made by an unauthorised person, it does not result in an

(a) Contract (b) Agreement (c) Offer (d) Consideration

43. Which section, of Indian Contract Act defines “performance of the conditions of a
proposal is an acceptance of the proposal”?
(a) Section 6 (b) Section 7 (c) Section 8 (d) Section 9

44.Which section of Law of Contract defines, “A proposal may be revoked at anytime, before
the communication of its acceptance is complete as against the proposer, but not
afterwards.”
(a) Section 5 (b) Section 4 (c) Section 6 (d) Section 7

45. According to Indian Contract Act, a promise is

(a) A communication of intention to do something
(b) A proposal which has been accepted

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 ARJUN CHHABRA TUTORIAL
Of Arjun Chhabra
(CS LLB LLM)
Law Maven
(c) A gentleman’s word to do something
(d) A statement on oath

46. When parties enter into a contract on telephone the contract becomes complete at
the place where acceptance is heard by the proposer. This has been provided
(a) In no section of Indian Contract Act but so decided by the Supreme Court
(b) In section - 2 (c) In section - 3 (d) In section – 4

47. A promisee is
(a) A person who makes a promise
(b) A person who monitors the statement of intentions of two parties
(c) A person to whom the promise is made
(d) None of these

48. Which of the following is an invitation for offer?

(a) A tender to supply goods at a certain time
(b) A request for a loan
(c) Bids in an auction sale
(d) A catalogue of goods for sale

49. Which of the following is an offer?

(a) The mere quotation of terms by trader
(b) The quotation of the lowest price in answer to enquiry
(c) Advertisement for sale or auction of goods
(d) Bids in an auction sale
50. An offer or its acceptance or both may be made [CS Arjun Chhabra]
(a) By words (b) By conduct (c) Either by words or by conduct (d) None of these

51. The difference between an advertisement for sale and a proposal is

(a) No difference at all
(b) That a proposal becomes a promise as soon as the party to whom it is made accepts
it but an advertisement does not
(c) Every case will be viewed according to the circumstances
(d) None of these

52. A catalogue of the goods of a company for sale ….. a series of offers but only an
invitation for offers.
(a) Is (b) Is not (c) In normal cases is (d) In normal cases is not

53. Is the Is promise defined under clause ………the same thing as an agreement which is
defined under clause (e) of section 2
(a) (a) (b) (b) (c) (c) (d) (d)

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 ARJUN CHHABRA TUTORIAL
Of Arjun Chhabra
(CS LLB LLM)
Law Maven
54. Where the offers were invited for purchasing the trees and the offer was accepted
on agreement as contemplated by Section 2 comes into existence.
(a) (b)
(b) (c)
(c) (d)
(d) (e)

55. An offer does not lapse if the

(a) offeror dies before acceptance
(b) The offeree dies before acceptance
(c) Acceptance is made by the offeree in ignorance of the death of the offeror
(d) Acceptance is made by the offeree with knowledge of the death of the offeror

56. A telephonic acceptance is complete when the offer is

(a) spoken into the telephone
(b) heard but not understood by the offeror
(c) heard and understood by the offeror
(d) is received, heard and understood by some person in the offeror’s house

57. Which one of the following statements about a valid acceptance of an offer is NOT
correct?
(a) Acceptance should be absolute and unqualified
(b) Acceptance should be in the prescribed manner
(c) Acceptance should be made while the offer is subsisting
(d) Acceptance should in all cases be through registered post

58. Consider the following statements:

1. There is no difference between the English law and Indian law with regard to
acceptance through post.
2. Both under the English law and the Indian law a contract is concluded when the letter
of acceptance is posted
3. Under the Indian law when the letter of acceptance is posted it is complete only as
against the proposer.
4. It is complete only as against the proposer.

Which of the above statements is/are correct?

(a) 1 and 2 (b) 2 alone (c) 3 alone (d) None

59. For binding contract both the parties to the contract must
(a) Agree with each other
(b) Stipulate their individual offer and consideration
(c) Agree upon the same thing in the same sense
(d) Put the offer and counter offers

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 ARJUN CHHABRA TUTORIAL
Of Arjun Chhabra
(CS LLB LLM)
Law Maven

60. The communication of acceptance through telephone is regarded as complete when

(a) Acceptance is spoken on phone
(b) Acceptance comes to the knowledge of party proposing
(c) Acceptance is put in course of transmission
(d) Acceptor has done whatever is required to be done by him

61.The term consensus ad-idem means

(a) Formation of the contract
(b) Reaching of agreement
(c) Meeting of minds
(d) General consensus

62. Which one of the following has the correct sequence?

(a) Offer, acceptance, contract, consideration (b)Offer, acceptance, consideration, contract
(c) Contract, acceptance, consideration, offer (d)Offer, consideration, acceptance, contract

63. When a person signifies his assent to a proposal made to him to refrain from doing
something, the resultant transaction is known as
(a) Promise (b) Agreement (c) Contract (d) Understanding

64. Which one of the following statements is true?

(a) Offer and acceptance are revocable
(b) Offer and acceptance are irrevocable
(c) An offer can be revoked but acceptance cannot
(d) An offer cannot be revoked but acceptance can be

65. Which one of the following is not the legal requirement of valid offer?
(a) It must be communicated to the offeree
(b) It must express offeror’ final willingness
(c) It must be made to a specific person and not to public at large
(d) It must be made with a view to obtain offeree’ assent

66. What can a catalogue of books, listing price of each book and specifying the place
where the listed books are available be termed as?
(a) An offer
(b) An obligation to sell book
(c) An invitation to offer
(d) A promise to make available the books at the listed

67. Consider the following statements:

1. General offer require the communication of acceptance.
2. All contracts are agreements

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 ARJUN CHHABRA TUTORIAL
Of Arjun Chhabra
(CS LLB LLM)
Law Maven
3. All agreements are contracts
4. All illegal agreements are void agreements
Which of the statements given above are correct?
(a) 2 and 4 (b) 1, 3 and 4 (c) 1 and 2 (d) 2, 3 and 4

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 ARJUN CHHABRA TUTORIAL
Of Arjun Chhabra
(CS LLB LLM)
Law Maven

CAPACITY OF PARTIES
Major

Sound Mind

Not Disqualified

68. A foreigner

(a) is competent to enter into contract if he fulfills the conditions of section 11.

(b) is not competent to enter into contract

(c) can enter into contract with permission of Central Govt.

(d) can enter into contract with the permission of court

69. Which of the following is not competent to contract?

(a) A minor (b) A person of unsound mind

(c) A person who has been disqualified from contracting by some law

(d) All of these

70. Two persons have the capacity to contract

(a) If both are not of unsound mind

(b) If none is disqualified from contracting by any law to which he is subject

(c) If both have attained the age of maturity

(d) All of the above

Position of Agreements by a Minor

Void -ab-initio

No Estoppel

In case of fraudulent representation of age by minor

No Ratification on attaining the Age of Majority

Validity of Minor’s Agreement jointly with a Major Person

Minor as a Partner

Minor can be an Agent and not Principal

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 ARJUN CHHABRA TUTORIAL
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(CS LLB LLM)
Law Maven
Minor can be a Shareholder or Member of a company

Minor can not be an Insolvent

Contract for Minor's Benefit

Contract by Minor’s Guardian

Contract for Supply of Necessaries

Minor's Liability in Tort

71. For necessaries supplied to a minor

(a) he is personally liable (b) his parents are liable

(c) his estate is liable (d) the contract is valid under Indian law

72. A minor enters into agreement representing himself to be a major consider the

following statement:

1. Minor commits fraud if the other party does not have personal knowledge of his age

2. Such agreement is not enforceable

3. The doctrine of estoppel does not apply in minor’s case

4. Other party is entitled to get back the benefit passed to minor, if innocent about his

age Which of the statements given above are correct?

(a) 1,3 and 4 (b) 2 and 3 (c) 1,2 and 4 (d) 2 and 4

73. M is a minor, B, the borrower, approaches M for a loan on the basis of a mortgage of

the house owned by B. Hence, M advances the money and B executed a mortgage in favour of

M, a minor. In these circumstances

(a) The mortgage is not enforceable by M, because he is a minor

(b) The mortgage is enforceable but only when he attains majority

(c) The mortgage is enforceable by M even though he is minor

(d) None of these

74. When a minor has been supplied with necessaries in credit

(a) The minor is not liable (b) The minor’s property’ is liable

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 ARJUN CHHABRA TUTORIAL
Of Arjun Chhabra
(CS LLB LLM)
Law Maven
(c) The minor is personally liable (d) The minor is liable at his option

75. A supplies B, a lunatic, with necessaries suitable to his condition in life. A is:

(a) Not entitled to be reimbursed from B’s property

(b) Entitled to be reimbursed from B’s property

(c) Personally liable

(d) None of these

76. When a person incurred expenses of Rs. 5000 for the necessaries supplied to the

minor, he can recover the said amount from the

(a) Minor personally (b) Property of the minor

(c) Property of his guardian (d) None of these

77. The principle of Estoppel cannot be applied against a minor since

(a) He has no sound mind

(b) He has no privilege to cheat persons by making any representation

(c) He may be induced by dishonest traders to declare in writing that he is a major at

the time of entering into a contract

(d) He has not attained the age of maturity

78. A convict when undergoing imprisonment

(a) Is capable of entering into a contract (b) Is incapable of entering into a contract

(c) Is capable of entering into a contract, if it is permitted by the court

(d) None of these

79. Is a pronote executed in favour of a minor good in law?

(a) Yes (b) No (c) Not in normal cases (d) Depends

80. Is purchase of property for the benefit of a minor by his maternal uncle valid?

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Law Maven
(a) Yes (b) No (c) Depends (d) None of the above

Position of Persons of unsound Mind

Who is a Person of
(a) to understand the terms of the contract,
Unsound Mind?
(b) to form a rational judgment as to its effect upon his interests.”
When can make “A person who is usually of unsound mind but occasionally of sound mind
Contract? may make a contract when he is of sound mind.”
When can not make “A person who is usually of sound mind but occasionally of unsound mind
Contract? may not make a contract when he is of unsound mind.”
81. The test of… is whether the person is capable of understanding the business

concerned and its implications.

(a) Incapacity to contract (b) Minority

(c) Soundness of mind (d) Reciprocity

82. is the most extreme form of mental unsoundness?

(a) Lunacy (b) Incapacity (c) Minority (d) Idiocy

83. The onus of proving insanity is on the …………….

(a) Prosecutor (b) State (c) Accused (d) On person who alleges it

84. Skip

85. M, a minor, misrepresenting that he is a major induces Z to enter into a contract

(a) M is a liable on the contract (b) M is a not liable on the contract

(c) M is liable to pay compensation (d) M is liable to the contract on attending majority

86. Select the false statement

(a) There can be no ratification of contract entered by a minor during his minority, even

after becoming major

(b) Restitution of benefit is allowed in case of a minor

(c) Agreement with a minor is void ab initio

(d) The rule of estoppel cannot be applied against a minor

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Law Maven
87. Which of the following types of persons are not disqualified from contracting?

(a) Foreign Sovereigns (b) Alien Enemy (c) Convicts (d) None

88. Which of the following person do not fall under the category of persons of unsound

mind?

(a) Drunkards (b) Lunatics (c) Idiots (d) Blind Person

89. With regard to the contractual capacity of a person of unsound mind, which one of

the following statements is most appropriate?

(a) A person of unsound mind can never enter into a contract

(b) A person of unsound mind can enter into a contract

(c) A person who is usually of unsound mind can contract when he is, at the time of

entering into a contract, of sound mind

(d) A person who is occasionally of unsound mind can contract although at the time of

making the contract, he is of unsound mind

CONSIDERATION
Meaning and essential elements of valid consideration
Meaning Consideration in simple term means something in return.
Form
Consideration must result either
(a) a benefit to the promisor and detriment or loss to the promisee,
(b) a detriment to both promisor or promisee.
Essential
1. It must be given at the desire of Promisor.
Elements of Valid
Consideration 2. It may be given by the promisee or any other person (i.e. stranger).
3. It may be past or present or future.
[Note: Past consideration is no consideration in England]
4. It need not be adequate but it must be of some value in the eye of
law.
5. It must be real and not Illusory
6. It must be something which the promisor is not already bound to
do.

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Law Maven
7. It must be lawful.
8. It must not be opposed to public policy.
90. Consideration is
(a) Doing or abstaining from doing something at the desire of promisor
(b) Essential condition of a contract
(c) Element of exchange in a contract
(d) All the above

91. A valid consideration includes,

(a) Executed or executory consideration (b) Past consideration
(c) Inadequate consideration (d) All of these

92. A valid consideration has the following essential elements:

(a) It must move at the desire of the promisor
(b) Consideration may be supplied by the promisee or any other person
(c) Consideration may be past, present or future
(d) All the above

93. Consideration contemplated under Indian law is,

(a) Past consideration only (b) Present consideration only
(c) Past, present or future consideration (d) Monetary consideration only

94. Consideration may be given by

(a) The promisor (b) The promisee
(c) Any other person (d) The promisee or any other person

95. Which are of the following statements is false.

(a) Promisee or any other person may supply consideration
(b) Past consideration is good Consideration
(c) Consideration need not be adequate
(d) Consideration should be adequate

96. The inadequacy of consideration may be taken into account by the court:
(a) In determining the question whether the consent of the promisor was freely given
(b) Always in all the cases
(c) When the parties complain
(d) When the promisor has not performed his promise

97. Consideration in a contract:

(a) May be present only (b) May be past and present only
(c) May be futuristic only (d) May be past, present and future

98. Consider the following statements: Consideration is

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Law Maven
1. A motive for any promise 2. A price for any promise
3. Only a moral obligation 4. Something of value in the eye of law Of these statements

(a) 1,2 and 3 are correct (b) 1 and 4 are correct

(c) 2 and 4 are correct (d) 3 alone is correct

99. Past consideration means

(a) Money received in the past without making even a proposal
(b) The price which is more than the promisee’s expectation
(c) A past act done before the promise is made
(d) None of the above

100. Which one of the following statements is incorrect with regard to nature of a valid
consideration?
(a) Consideration must be adequate (b) Consideration must be real
(c) Consideration may be past, present or future
(d) Consideration must move at the desire of promisor

101. Which one of the following statements about the doctrine of privity is correct?
(a) Only a party to the contract can sue (b) Stranger to a contract cannot sue
(c) A contract is enforceable by a stranger (d) Both (a)&(b)

102. Past consideration means

(a) Consideration and promise should move together
(b) Executed consideration
(c) Consideration is provided prior to the making of the contract
(d) Invalid consideration

103. An executed consideration is

(a) An act of mutual exchange of promises
(b) An act done in the expectation of a proposal
(c) An act done by one party as part of his promise
(d) Past consideration

104. An executory consideration is

(a) A consideration promised by the executive of a company
(b) A promise yet to be performed by both the parties
(c) Liability is outstanding on both the sides
(d) Both (b)&(c)

105. In Indian Law consideration must have been done at the desire of the promisor, if it
is done at the instance of a third party or without the desire of the promisor, it is
(a) Consideration (b) Not consideration (c) Offer (d) Promise

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Law Maven

106. Where consideration is illegal or physically impossible, uncertain or ambiguous, it shall

not be
(a) Transferable by law (b) Unenforceable by law
(c) Enforceable by law (d) None of these
Stranger to a Consideration and stranger to contract
Only those persons, who are parties to a contract, can sue and be sued upon the contract.
Third party to a contract cannot sue upon it, even though the contract may be for his benefit.

Exceptions to Doctrine of Privity of Contract

(a) Trust,

(b) Marriage settlement, partition and other family arrangements,

(c) Acknowledgement of liability,

(d) Assignment of a contract,

(e) Contracts entered into through an Agent, and

(f) Covenants running with land.

107. The exceptions to the doctrine of Privity of Contract include

(a) Family settlements (b) Agreements (c) Assignment (d) All of these

108. The exceptions to the rule A stranger to a contract cannot sue are

(a) Beneficiaries in the case of trust (b) Family settlement

(c) Assignment of contract (d) All the above

109. A stranger to a consideration

(a) Can file a suit (b) Cannot file a suit

(c) Can file, only with consent of court (d) Is similar to stranger to a contract

110. A stranger to a contract

(a) Can file a suit

(b) Can file a suit only with permission of court

(c) Can file a suit, if contract is in writing

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Law Maven
(d) Cannot file a suit

111. A man cannot acquire rights under a contract to which he is not a party. Which one of

the following is not an exception to this rule

(a) Beneficiaries under trust (b) Family settlement (c) Gift (d)

Assignment of rights

No Consideration, No Contract

Validity An agreement made without consideration is void.

(a) Written and registered agreements arising out of love and
Six Exceptions to
above Rule affection between parties standing in near relation,

(b) Past Voluntary service,

(c) Promise to pay a time barred debt,

(d) Completed gifts,

(e) Bailment,

(f) Contract of agency, and

(g) Charity - If a person promises to contribute to charity and on this

faith, the promisee undertakes a liability to the extent not
exceeding the promised subscription, the contract shall be valid.
112. An agreement without consideration is void under
(a) Sec. 25(1) of the Contract Act
(b) Sec. 25(3) of the Contract Act
(c) Sec. 25(2) of the Contract Act
(d) None of the above clauses in sec. 25

113. An agreement without consideration is void except in case of compensation for

(a) Voluntary services rendered
(b) Voluntary services rendered at the request of the other party to the agreement
(c) Voluntary services rendered at the request of third person
(d) Reimbursement of expenses incurred

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Law Maven
114. A contract without consideration is void. There are exceptions. Which one of the

following exceptions is correct?

(a) Promise to pay disputed debt (b) Promise to pay time-barred

(c) Promise to pay time-barred debt which is in writing and signed

(d) Promise to pay any debt

115. A promise to pay a time-barred debt must be

(a) Oral (b) Written and signed (c) Registered (d) Written and registered

116. Which of the following statement is incorrect

(a) Consideration must be real

(b) Performance of existing obligation is no consideration

(c) Forbearance to sue is good a consideration

(d) Agreements without consideration are always void

FREE CONSENT
Meaning of Consent According to Section 13, “Two or more persons are said to consent

when they agree upon the same thing in the same sense.” In English

Law, this is called ‘consensus-ad-idem'.

Effect of Absence of When there is no consent at all, the agreement is void -ab-initio, i.e.

Consent it is not enforceable at the option of either party.

Meaning of Free Consent is said to be free when it is not caused by (a) coercion, or

Consent (b) undue influence, or (c) fraud, or (d) misrepresentation, or (e)

mistake.

Effect of Absence of When there is consent but it is not free (i.e. when it is caused by

Free Consent coercion or undue influence or fraud or misrepresentation), the

contract is usually voidable at the option | of the party whose

consent was so caused.

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Law Maven
117. While obtaining the consent of the promisee, keeping silence by the promisor when

he has a duty to speak about the material facts, amounts to consent obtained by:

(a) Coercion (b) Misrepresentation (c) Mistake (d) Fraud

Coercion
Meaning of Coercion
According to Section 15, a contract is said to be caused by coercion
when it is obtained by—
(a) committing any act which is forbidden by the Indian Penal Code;
or
(b) threatening to commit any act which is forbidden by the Indian
Penal Code; or
(c) unlawful detaining of any property; or
(d) threatening to detain any property.
Note: The Indian Penal Code need not be in force in place where the

coercion is employed.

Against Whom/ By Coercion may proceed from any person, and may be directed against

Whom any person, even a stranger.

Effects of Coercion
1. Right of aggrieved party to Rescind the contract
2. Obligation of aggrieved party to restore benefit
3. Obligation of other party to repay or return

118. Unlawfully detaining or threatening to detain any property, to the prejudice of any
person making him to enter into an agreement amounts to:
(a) Threat (b) Coercion (c) Undue influence (d) Misappropriation

119. “Threatening to commit certain acts forbidden by Indian Penal Code” is associated with
which one of the following?
(a) Misrepresentation (b) Fraud (c) Coercion (d) Unenforceable

120. ‘A’ threatened to commit suicide if his wife did not execute a sale deed in favour of this
brother. The wife executed the sale deed. This transaction is:
(a) Voidable due to under influence (b) Voidable due to coercion

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Law Maven
(c) Void being immoral (d) Void being forbidden by law

Undue Influence

Meaning The term 'undue influence' means dominating the will of the other
person to obtain an unfair advantage over the other.

Presumption A person is deemed to be in a position to dominate the will of

another in the following three circumstances:

Circumstances
(a) Where he holds a real or apparent authority over the other
(b) Where he stands in a fiduciary relation to the other
(c) Where he makes a contract with a person whose mental
capacity is temporarily or permanently affected by reason of
age, illness or mental or bodily distress

Effect of Undue When Consent to an agreement is caused by undue influence, the

Influence agreement is a contract voidable at the option of the party whose
consent was so caused.

121. Lending money to a borrower, at high rate of interest, when the money market is
tight renders the agreement of loan:
(a) Void (b) Valid (c) Voidable (d) Illegal

122. A contract which is vitiated by undue influence is declared as which one of the
following by the Indian Contract Act?
(a) Invalid (b) Void (c) Illegal (d) Voidable

123. If a party stands in a fiduciary relation to the other:

(a) He cannot dominate (b) He can dominate the will of another
(c) The trust should be maintained (d) None of these

124. A person is deemed to be in a position to dominate the will of another if he:

(a) Holds real or apparent authority (b) Stands in a fiduciary relationship
(c) Both (a) and (b) (d) Either (a) or (b)

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Law Maven

Fraud

Meaning (a) Suggestion as a Fact, of something which is not true, by a

person who does not believe it to be true,
(b) Active concealment of a Fact by one having knowledge or belief
of the fact,
(c) Promise made without any intention of performing it,
(d) Any other act fitted to deceive,
(e) Any such act or omission as specifically declared by law to be
fraudulent.

Silence does not (a) General Rule According to explanation to Section 17, “Mere
amount to Fraud silence as to facts likely to affect the willingness of a person
to enter into a contract is not fraud”
(b) Exceptions to the General Rule
1. Where parties stand in fiduciary relationship like parent-child,
trustee-beneficiary.
2. Where the silence itself is equivalent to speech.

125. “Active concealment of fact” is associated with which one of the following?
(a) Misrepresentation (b) Undue influence (c) Fraud (d) Mistake

126. Consider the following:

1. Active concealment of fact.
2. Promise made without any intention of performing it.
3. Breach of duty which gains an advantage to the person committing it.
4. Inducing mistake as to subject matter. Which of the above amount to fraud?
(a) 1 and 2 (b) 2 and 3 (c) 3 and 4 (d) 1 and 4

127. B, having discovered a vein of ore on the estate of A, adopts means to conceal, and does
conceal, the existence of the ore from A. Owing to A’s ignorance B is enabled to buy the
estate at a low- price. The contract is
(a) Valid (b) Void (c) Voidable at the option of A (d) Invalid

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Law Maven

Misrepresentation
1. Positive false statement made without any basis for info
2. a beach of duty which brings advantage to person committing it
3. inducement of mistake about subject matter
128. Misrepresentation means:
(a) Unwarranted assertion (b) Any breach of duty without an intent to deceive
(c) Innocent mistake (d) All the above

129. A, while filling up the insurance application form, states his age as 25 believing it to be true. His
actual age was 27. The Life Insurance Corporation issued a policy in his favour charging a lower premium than
what it should have charged if the actual age had been given. This is a case of

(a) Fraud (b) Misrepresentation (c) Undue influence (d) Mistake of fact
Effects of Mistake
Type of Mistake Effect on Validity
1. Mistake of Indian Law The contract is not voidable because everyone is supposed
to know the law of his country.
2. Mistake of Foreign Law A mistake of foreign law is treated as mistake of fact, i.e.
the contract is void if both the parties are under a mistake
as to a foreign law because one cannot be expected to know
the law of other co0075ntry.
3. In case of Bilateral The agreement is void.
Mistake as to essential fact
(i.e., where both the parties
to an agreement are under
mistake to essential fact)
4. In case of Unilateral The agreement is valid.
Mistake (i.e. where one of the
parties to an agreement in
under mistake)
(i) as to the identity of the The agreement is void.
person contracted with
(ii) as to the nature of The agreement is void.
contract
(iii) as to other matter The agreement is not void.
130. An agreement made under mistake of fact, by both the parties, forming the essential
subject matter of the agreement is:
(a) Void (b) Voidable (c) Valid (d) Unenforceable

131. Factors vitiating consent are:

(a) Coercion, Undue influence (b) Fraud, Misrepresentation
(c) Mistake (d) All of these

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132. If both the parties to a contract believe in the existence of a subject, which infact
does not exist, the agreement would be
(a) Unenforceable (b) Void (c) Voidable (d) None of these

133. For a valid contract

(a) Both the parties should have given their consent (b) The consent should be free
(c) Both (a) and (b) (d) Either (a) or (b)

134. When both the parties to an agreement are under a mistake as to a matter of fact
essential to an agreement, the agreement is:
(a) Void (b) Valid (c) Voidable (d) Illegal

135. In Indian Contract Act, the term consensus ad idem means

(a) Parties under a mistake (b) Parties under the free consent
(c) Parties agreeing upon the same thing in same sense (d) None of these

136. To prove undue influence, the plaintiff has to prove that:

(a) The relations, subsisting between the parties are such that the defendant was in a
position to dominate the will of the plaintiff
(b) The defendant used that position to obtain an unfair advantage from the plaintiff
(c) Both (a) and (b) (d) None of these

137. The validity of contract is not affected by

(a) Mistake of fact (b) Mistake of Indian law (c) Misrepresentation (d) Fraud

Meaning and Examples of Void Agreements

Meaning A void agreement is an agreement which is not enforceable by law. The
agreements which are not enforceable by law right from the time when
they are made, are void-ab-initio.
Examples Agreements which have expressly been declared void:

1. Agreements by or with persons incompetent to contract (Sections 10

& 11).

2. Agreements entered into through a mutual mistake of fact between

the parties (Section 20).

3. Agreement, the object or Consideration of which is unlawful (Section

23).

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4. Agreement, the Consideration or Object of which is partly unlawful

(Section 24).

5. Agreement made without Consideration (Section 25).

6. Agreements in Restraint of Marriage of any person other than minor

(Section 26).

7. Agreements in Restraint of Trade (Section 27).

8. Agreements in Restraint of Legal Proceedings (Section 29).

9. Wagering Agreement (Section 30).

10. Impossible Agreement (Section 56).

11. An agreement to enter into an Agreement in the Future.

138. Unlawful agreements comprise

(a) Illegal agreements
(b) Immoral agreements only
(c) Agreements opposed to public policy only
(d) All the agreements mentioned above

139. The exceptions to the rule that an agreement in restraint of trade is void, are

contained in

(a) The provisions of Sec. 27 of the Contract Act only

(b) Secs. 11, 36, 54 and 55 of the partnership Act only

(c) Both the above mentioned provisions of the Contract Act & Partnership Act

respectively

(d) None of the above provisions

140. A contract to trade with an enemy is

(a) an immoral agreement (b) a valid agreement

(c) an agreement opposed to public policy (d) an enforceable agreement

141. An agreement will be unlawful if:

(a) There is no consent (b) Consent is not free

(c) There is no consideration (d) The object is forbidden by law

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142. A promised to marry none else than Miss B and in default to pay her a sum of `1,000.

Subsequently A married Miss C and Miss B sued for recovery of Rs.1,000. The contract is

(a) Valid (b) Void (c) Voidable (d) Enforceable

Agreements in Restraint of Trade – Exceptions

1. Agreement with seller of Goodwill

2. Agreements with Partners

(a) Restriction on Existing Partner to carry a any business other than that of firm

while he is a partner,

(b) Restrictions on outgoing Partner to carry on similar business within specified

period or local limits if restrictions are reasonable,

(c) Restriction on Partners on dissolution of firm to carry on similar business within

specified period or local limits if restrictions are reasonable,

(d) Restriction on Partners in case of sale of firm’s goodwill, to carry on similar

business within specified period or local limits if restrictions are reasonable.

3. Trade Combinations to regulate the business or to fix prices (but not to create

monopoly)

4. Service Agreements

143. A leaves a firm doing a particular business in Mumbai. He agrees with the other

partners of the firm not to start a similar business as that of the firm in and around Mumbai

for 3 years. This agreement is

(a) Valid (b) Immoral (c) Illegal (d) Void

Agreements in Restraint of Legal Proceedings

Restricting Agreements Restricting Enforcement of Rights is void to that

Enforcement of Rights extent.

Limiting Period of Agreements Limiting the Period of Limitation is void because its

Limitation object is to defeat the provisions of law.

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Meaning and Validity of Various Agreements
Type of Agreement Validity

Void
1. Uncertain Agreement
[An agreement the meaning of which is not certain or capable of being

made certain

2. Wagering Agreement Illegal

[An agreement between two persons under which money or money's Void
worth is payable, by one person to another on the happening or non-
happening of a future uncertain event is called a wagering event.]

3. Contingent Agreement based on Impossible Event Void

[An agreement to do or not to do anything if an impossible event

happens whether impossibility of the event is known or not to the

partner to the agreement at the time when it is made]

4. Agreement to do an Impossible Act Void

5. Contingent Contract
[A contract to do or not to do something if some event collateral to

such contract does or does not happen] [or A contract the performance

of which depends upon the happening or nonhappening of some future

uncertain event which is collateral to the contract]

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Law Maven
144. In a wagering agreement:

(a) Both the parties win (b) Both the parties loose

(c) None of the parties wins (d) One party wins and the other looses

145. Which one of the following statements is correct?

(a) Void agreements are always illegal (b) Illegal agreements are voidable

(c) Illegal agreement can be ratified by the parties (d) Illegal agreements are always

void

146. Which one of the following is not a wagering agreement?

(a) A lottery

b) An agreement to buy a ticket for a lottery

(c) Commercial transaction, the intention of which is not to deliver the goods but only to pay

the difference in price

(d) A contract of insurance

147. A wagering agreement in India is declared by the Contract Act as

(a) Illegal and void (b) Void but not illegal

(c) Voidable at the option of the aggrieved party (d) Immoral

148. Which one of the following is a void agreement?

(a) An agreement without consideration (b) An agreement in restraint of marriage

(c) An agreement in restraint of trade (d) All of the above

149. An agreement which restricts a person’s freedom to marry or to marry any person of

his choice is against public policy and is

(a) Lawful (b) Illegal (c) Void (d) None of these

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150. An agreement of service under which an employee agrees that he will serve a

particular employer for a certain duration and that he will not serve anybody else during that

period, is

(a) Valid agreement (b) Void agreement (c) Illegal agreement (d) None of these

151. If the seller agrees to supply all the goods produced by him to a certain buyer and to

nobody else, and the buyer also, in turn undertakes to accept the whole of the quantity, the

agreement is

(a) Void agreement (b) Solus agreement (c) Illegal agreement (d) None of these

152. M, who is a dealer in mustard oil only, agrees to sell to N ‘500 litres of oil’. This

agreement is

(a) Valid contract (b) Void contract

(c) Voidable contract (d)Unenforceable contract

153. A and B agree that A shall pay Rs. 1,000 for which B shall afterwards deliver to an

either rice or smuggled opium. In this case

(a) The first agreement is void and the second voidable

(b) The first is voidable and the second is void (c) The first is valid and the second

is void

(d) The first is void and the second is valid

154. A agrees to sell to B a ‘hundred tons of oil’. There is nothing whatever to show what

kind of oil was intended. The agreement is

(a) Valid (b) Void for uncertainty (c) Voidable (d) Illegal

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155. A agrees to sell to B ‘my white horse for Rs. 500 or Rs. 1,000’. There is nothing to

show which of the two prices was to be given. The agreement is

(a) Valid (b) Void (c) Voidable (d) Unenforceable

156. A promises B to pay Rs. 100 if it rains on Monday, and B promises A to pay Rs.100 if it

does not rain on Monday. This agreement is

(a) a valid agreement (b) avoidable agreement

(c) a wagering agreement (d) an illegal agreement

157. B let a cabin on hire to P a prostitute, knowing that it would be used for immoral

purposes. The agreement is

(a) Enforceable (b) Valid (c) Voidable (d) Void

158. A enters into an agreement with B who has robbed A of ` 10,000 to drop prosecution

against him (B) in consideration of B’s returning `8,000. Afterwards B refused to pay. A can

get from B

(a) ` 8,000 (b) ` 100 (c) Nothing (d) ` 10,000 plus damages

159. A agrees with B to discover treasure by magic for a consideration of Rs. 500. This is

(a) A void agreement (b) A void contract

(c) A valid agreement (d) An unenforceable contract

160. X, a tailor, employed Y as his assistant under an agreement that Y, on termination of

his employment shall not start the business of a tailor. This restraint is

(a) Void (b) Valid (c) Illegal (d) Voidable

161. X leaves a firm doing a particular business in Delhi. He agrees with other partners of

the firm not to start a similar business as that of the firm in Delhi for 2 years. This

agreement is

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(a) Void (b) Valid (c) Voidable at X’s option (d) Invalid

162. X promises to supply Y one tola of gold brought from the sun. This is

(a) a valid contract (b) an illegal contract

(c) a void agreement (d) a voidable agreement

163. A promises B not to carry on a similar business as that of B if B pays him a certain

amount. B pays the money but A continues to carry on the business. B can

(a) Do nothing (b) Compel A to stop the business

(c) Get him imprisoned for fraud (d) Sue A for damages

164. A purchases B’s business of selling neckties in Delhi. A can restrain B from

(a) Doing the business of selling neckties again in his life

(b) Doing any business in Delhi

(c) Doing the business of selling neckties in Delhi for a limited period

(d) None of the above

165. A promised to marry B and none else and promised her to pay a sum of `5,000 in

addition to what he gets from the other party if he marries someone else. A marries C and

gets Rs. 10,000 from C. B can get from A

(a) ` 15,000 (b) ` 10,000 (c) Nothing (d) ` 15,000 plus damages

166. A promised B to obtain an employment for him in a public office. B promised to pay `

2,000 to A for this. B gets a job through A but refuses to pay the money. A can

(a) Challenge B’s appointment on the ground of non-payment of money

(b) Sue B for ` 2,000 (c) Do nothing

(d) Do both given at (a) and (b) above

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(CS LLB LLM)
Law Maven
167. A, a Hindu already married with a living wife B, enters into a marriage agreement with a

widow of 30 years of age. This agreement is

(a) Void, because of being opposed to public policy

(b) Valid and can be enforced by either party

(c) Voidable, because A has obtained B’s consent by exercising undue influence against

her

(d) Void, because of being forbidden by law

168. Rajeev entered into a contract with Lata to marry her on a fixed date. However, before

the marriage date. Rajeev went mad. With reference to the Indian Contract Act which is

the valid response?

(a) Lata can’t marry till Rajeev dies

(b) The executers of Rajeev can enforce the contract against Lata

(c) The contract becomes void (d) All the statements are correct

169. A and B agree to deal in smuggled goods and share the profits. A refuses to give B’s

share of profit. In this case:

(a) B can enforce the agreement in the court.

(b) B can only claim damages.

(c) B has no remedy as the contract is illegal.

(d) B can enforce the contact or claim damages

170. A and B agree that law of limitation shall not apply to them. A debt becomes time

barred and A refuses to pay the amount. Can B recover the amount under the terms of the

agreement?

(a) yes, the agreement between them is valid and enforceable.

(b) yes, the agreement is not opposed to public policy.

(c) no, the agreement is a voidable agreement I and can be avoided by A.

(d) no, the agreement falls under section 23 and hence void

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(CS LLB LLM)
Law Maven

171. A borrows Rs. 5,000 from B to purchase a revolver to shoot C. Can B recover his loan

of Rs. 5,000.

(a) yes, the agreement between them is valid and enforceable.

(b) yes, the agreement is not opposed to public policy.

(c) no, the agreement is a voidable agreement and can be avoided by A.

(d) no, the agreement falls under section 23 and hence void

172. A borrows from B ` 500 to bet with C. Can B recover the amount of his loan?

(a) yes, the agreement between them is collateral to a wagering agreement and hence

enforceable

(b) yes, the agreement is not opposed to public policy

(c) no, the agreement is a voidable agreement and can be avoided by A

(d) no, the agreement is wagering agreement and falls under section 23 and hence void

173. A person contracted to deliver a part of a specific crop of potatoes. The potatoes were

destroyed by blight though no fault of the party. The contract is

(a) Valid (b) Voidable (c) Void due to frustration of contract (d) Illegal

174. A contracts to sing for B at a concert for ` 1,000 which are paid in advance. A is too

ill to sing. Which of the following options is correct?

(a) A is bound to make compensation

(b) A is not bound to make compensation to B for the loss of the profit which B would

have made if A had been able to sing, but must refund to B ` 1,000 paid in advance

(c) A is not liable to refund to B `1,000 paid in advance

(d) A is liable for loss of profit as well as for refund

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(CS LLB LLM)
Law Maven
175. A contractor entered into an agreement with Government to construct a godown and

received advance payments for the same. He did not complete the work and the Government

terminated the contract.

(a) The Government can claim damages

(b) The Government under sec. 65 could recover the amount advanced to the contractor

(c) The Government cannot claim damages (d) Both (a)&(b)

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 ARJUN CHHABRA TUTORIAL
Of Arjun Chhabra
(CS LLB LLM)
Law Maven
Meaning and types of Performance
Meaning of Performance A contract is said to have been performed when

the parties to a contract either perform or

offer to perform their respective promises.

Two Types of Performance 1. Actual Performance:

2. Attempted Performance (or Tender):

Who May Demand Performance And Who May Perform

Who may Demand Performance 1. Promisee

2. Legal Representative

3. Third Party

4. Joint Promisees

Who may Perform the Contract 1. Promisor

2. Promisor’s Agent

3. Legal Representatives

4. Third Party

5. Joint Promisors

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Of Arjun Chhabra
(CS LLB LLM)
Law Maven

Performance by Joint Promisors

(a) (i) Joint lives — all of them,
(ii) death of one promisor - Representative + others,
(iii) death of last survivor - representative of all promisors.

(b) Liability - joint and several. Default by 1 promisor - others to share the loss equally.

(c) Release of 1 joint promisor does not release others. Released promisor liable to other
promisors.
Joint Promisees
(a) (i) Joint lives - all of them,
(ii) death of one promisor - representative + others,
(iii) death of last survivor - representative of all promisors.
(b) Right - Joint Only.
Appropriation of Payment
(a) When a debtor owes several distinct debts to a Creditor and makes a payment insufficient
to satisfy the whole indebtedness, a question arises: To which debt should the payment be
appropriated? 3 rules -

• Debtor intimates the order - Creditor must do so.

• No intimation from the debtor - at the discretion of Creditor.
• No intimation from debtor and Creditor fails to appropriate - Discharge the debts in
chronological order.

(b) Creditors can apply the payment against Time Barred Debt. Apply the payment FIRST
against Interest and when fully paid off apply the payment against Principal.
DISCHARGE OF CONTRACT
Modes:
1. By performance
2. By lapse of time
3. By operation of law - death, insolvency, merger, unauthorized alteration of terms and
vesting of rights.
4. By mutual agreement - Novation (substitution), Rescission (termination), Alteration
(change in terms), Remission (accepting lesser fulfillment of promise) and Waiver
(relinquishment of right)
5. Impossibility of performance - initial impossibility (void ab initio), subsequent
impossibility - void. (English law it is called Doctrine of Frustration)

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(CS LLB LLM)
Law Maven
6. Not an impossibility - Partial impossibility, commercial impossibility, difficulty, default
of third party, strikes and lock out.
7. Actual Breach and Anticipatory Breach
176. Where a party to a contract fails to perform at or before a specified time and it was
the intention of the parties that time should be of the essence
(a) The contract becomes voidable
(b) The contract does not become voidable but the aggrieved party is entitled to
compensation
(c) The contract becomes void
(d) None of these

177. Reciprocal promises include

(a) Mutual and independent promises (b) Mutual and dependent promises
(c) Mutual and concurrent promises (d) All of these

178. A contracts with B to construct a building for a fixed price, B supplying the necessary
timber.
This reciprocal promise is
(a) Mutual and Independent (b) Mutual and Dependent
(c) Mutual and Concurrent (d) None of the above

179. Liability of the joint promisor is

(a) Joint (b) Several (c) Joint and several (d) None of the above

180. Where the order of performance is not fixed the contract will be performed as per
(a) The wish of the promisor (b) The wish of the promisee
(c) The wish of both the parties (d) The nature of transactions

181. If neither the debtor nor the creditor appropriates the payment, the payment will be
appropriated:
(a) As per the desire of the promisor, (b) As per the desire of the promisee,
(c) In order of time, (d) None of the above.
234. Agreement by way of wager are
(a) Valid and enforceable by law (b) Void
(c) Voidable at the option of party (d) Illegal
182. Which one of the following is correct about the essentials of a valid tender?

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Of Arjun Chhabra
(CS LLB LLM)
Law Maven
(a) The tender must be unconditional
(b) The tender must be made at proper time and place
(c) The promisee must be given an opportunity to ascertain that the goods are according
to the contract
(d) All of the above are correct

183. A, B and C jointly promise to pay D Rs. 3,000. D may compel

(a) A, B and C jointly to pay him Rs. 3,000
(b) A to pay him Rs.3,000
(c) A or B or C to pay him Rs. 3,000
(d) A, B and C jointly and separately to pay Rs. 3,000

184. A contract stands discharged :

(a) By performance of the contract (b) By breach of the contract
(c) By agreement and novation (d) All of these

185. Whereby the contract, a promisor is to perform his promise without application by
the promise and no time for performance is specified the engagement must be performed
within a reasonable time. The question “What is a reason able time” is in each particular case
is a :
(a) A question of fact (b) A question of law
(c) A question of general custom (d) All of these

186. When time is not the essence of contract:

(a) It is expected that the promisor would perform the contract within the time
(b) It must be performed within a reasonable time
(c) The promisor would perform the contract within the stipulated time
(d) None of these

187. Each party to a contract is bound to perform his part of the obligation. After the
parties have made due performance of the contract comes to an end. In such a case the
contract is said to be discharged :
(a) By breach of contract (b) By impossibility of performance

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Of Arjun Chhabra
(CS LLB LLM)
Law Maven
(c) By agreement and novation (d) By performance of contract

188. A, a singer enters into a contract with B, the manager of a theatre to sing at his
theatre two nights in every week during the next two months and B engages to pay her `100
for each night’s performance. On the sixth night, A willfully absents herself from the
theatre.
(a) B is at liberty to put an end to the contract (b) B cannot put an end to the contract
(c) The contract is left at the liberty of A (d) None of these

189. If a contract is based on personal skill or confidence of parties, the death of a party
in such a case:
(a) Puts an end to the contract (b) Does not put an end to the contract
(c) The representatives of the deceased can be made liable to perform such a contract
(d) None of these

190. Are rights under a contract assignable?

(a) Yes (b) No (c) Depends (d) Any of the above

191. Are rights under a contract assignable unless the contract is personal in its nature?
(a) Yes (b) No (c) Not in normal cases (d) Depends

192. Is offer of performance discharge of obligation?

(a) Yes (b) No (c) Depends (d) Any of the above

193. If the performance of contract becomes impossible because the subject matter of
contract has ceased to exist then :
(a) Both the parties are liable (b) Neither party is liable
(c) Only offerer is liable (d) Only acceptor is liable

194. A, B and C jointly promise to pay Rs. 3,000 to X. In the absence of express agreement
to the contrary, X can bring an action against:
(a) Any two of them only (b) All of them together
(c) Any one of them, at this choice (d) Either (b) or (c)

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(CS LLB LLM)
Law Maven

195. Which of the following is not a exception to the rule that the agreement in restraint of
trade is void :
(a) A partner can be prevented for carrying on similar business
(b) An outgoing partner can be restraint on carrying similar business
(c) On dissolution of firm, partners may agree not to carry on similar business
(d) The seller of goodwill of business can be prevented for carrying any kind of business
at any place

196. A doctor teaching in a medical college prevented from doing private practice, such a
restriction is:
(a) Valid (b) Partial lawful (c) Unlawful (d) Partial Unlawful

197. Agreement is restraint of trade is void. The restraint mentioned here is :

(a) Partial (b) Total (c) (a) & (b) (d) None of these

198. A valid tender or offer of performance must be:

(a) made at proper time (b) made at proper place
(c) made to the proper person (d) all the above

199. A contracts to sing for B for a consideration of ` 5,000 which amount is paid in advance.
A becomes unwell and is not able to perform. B suffers a loss of ` 10,000. A is liable to pay
B
(a) `15,000 (b) ` 10,000 (c) ` 5,000 (d) Nothing

200. A promises to paint a picture for B by a certain day at a certain price. A dies before
the promised day. Which one of the following is the correct legal position
(a) The agreement becomes unlawful (b) The agreement lapses for both the parties
(c) The agreement becomes voidable at the option of A’s legal representative
(d) None of these

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 ARJUN CHHABRA TUTORIAL
Of Arjun Chhabra
(CS LLB LLM)
Law Maven
201. A promises to deliver goods at B’s warehouse on the 1st January. On that day, A brings
the goods to B’s warehouse but after the usual hour for closing it and they are not received.
Which one of the following is correct?
(a) A has not kept his promise (b) A kept his promise as time was not specified
(c) A performs his duty as the time is not the essence of the contract (d) All of
these

202. ‘A’ promises to paint a picture for ‘B’ by a certain day at a certain price. ‘A’ dies before
that day. In this situation, the contract
(a) Cannot be enforced as it becomes void due to personal incapacity
(b) Will be performed by the legal representative of ‘A’, who is bound by law to perform
it
(c) Can be performed by an agent of ‘A’
(d) Can be performed by a third person on behalf ‘A’

203. X, Y and Z are under a joint promise to pay ` 8,000 to W. Z is unable to pay anything
and Y is compelled to pay the entire amount. What amount can Y successfully claim from X?
(a) Y can claim ` 8,000 from X by way of contribution
(b) Y can claim ` 4,000 from X by way of contribution
(c) Y can claim ` 6,000 from X by way of contribution
(d) Y cannot claim anything from X

204. A borrowed ` 1,000 from B. A dies before paying back the loan. Can B recover the
amount from A’s legal representative?
(a) No, B cannot recover (b) Yes, subject to any estate left by him
(c) B can recover even if no estate is left (d) None of the above
205. An anticipatory repudiation has the effect of
(a) Automatically putting an end to the contract
(b) Putting an end to the contract only on acceptance of the repudiation by the other
party
(c) Putting an end to the contract only on failure to perform when performance is due
(d) Not putting an end to the contract

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 ARJUN CHHABRA TUTORIAL
Of Arjun Chhabra
(CS LLB LLM)
Law Maven
206. The law regarding Novation, i.e., where a new contract is substituted in place of the
old one by means of an agreement between the parties to a contract or between them and a
third party, is contained in
(a) Sec. 62 (b) Sec. 52 (c) Sec. 64 (d) Sec. 65
207. In case of contractual obligations where the promisor dies before performance:
(a) The legal representatives of the promisor must perform the promise irrespective of the
promise
(b) The legal representatives of the promisor must perform the promise provided it is not
one
dependent on the personal qualifications of the promisor
(c) The legal representatives need not perform the promise
(d) The legal representative is not liable to pay damages for non-performance of the promise
208. Ordinary damages will be awarded in cases where
(a) The loss naturally flows from the breach of contract
(b) The loss is remotely connected with the breach of contract
(c) The loss is unusual and arises out of special circumstances peculiar to the contract
(d) None of these
209. Where the parties to a contract have agreed that a certain sum of money would be
paid in case of breach of contract, the Court will ensure that
(a) The exact amount mentioned in the contract is paid to the injured party
(b) An amount not exceeding the stipulated amount is awarded
(c) Reasonable compensation not exceeding the amount stipulated is awarded
(d) A sum exceeding the amount stipulated is awarded
210. A, dealing in baby foods, sends samples by train for being exhibited at a Consumer
Product’s Show which fact was made known to the rail way company. The goods reached the
destination after the show was over. A sued the railway company for damages. A will be
entitled to
(a) Ordinary damages (b) No damages
(c) Exemplary damages (d) Special damages

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 ARJUN CHHABRA TUTORIAL
Of Arjun Chhabra
(CS LLB LLM)
Law Maven

Remedies for breach

1. Recession of Contract
2. Suit for specific performance - when monetary compensation is not an adequate relief.
3. Suit for injunction - order of the court restraining a person from doing what he promised
not to do.
4. Quantum merit.
5. Suit for damages - Ordinary damages (Contract price - market price), special damages,
vindictive damages (nature of punishment), Nominal damages (only technical violation),
Liquidated damages (Reasonable damages), Penalty (disproportionate to loss).
6. English law recognizes liquidated damages only.

QUASI-CONTRACTS

• Not a contract at all. Obligation created by law due to absence of agreement.

• Doctrine of unjust enrichment

• Applicability –

➢ Supply of necessaries to minor: the person who has furnished such supplies is entitled
to be reimbursed from the property of such incapable person.
➢ Payment by interested party: If payment is made by interested person which another
is bound to pay is entitled to be reimbursed by the other.
➢ Person enjoying benefits under non gratuitous act
➢ Responsibility of finder of goods: a finder of lost goods has:
➢ to take proper care of the property as man of ordinary prudence would take
➢ no right to appropriate the goods and
➢ to restore the goods if the owner is found.
➢ Obligation of a person to whom money is paid by mistake.

Contingent Contract
Contract to do or not to do something if some event, collateral to such contract, does or does
not happen.

Essentials –

1. Happening or non happening of event,

2. Collateral event and

3. Uncertain event.

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Of Arjun Chhabra
(CS LLB LLM)
Law Maven

Happening Non- Future Happening of Non-Happening Impossible

of Happening Conduct of Specified of Specified Events
Uncertain of a living Uncertain Uncertain Event
Future Uncertain person Event within within Fixed [Sec. 36]
Event [Sec. Future Fixed Time Time
32] Event [Sec. 34] [Sec. 35] [Sec. 35]
[Sec. 33]

211. Which of the following is a contingent contract:

(a) A promises to pay B if he repairs his scooter
(b) A promises to pay B ` 10,000 if his scooter is stolen
(c) A promises to sell his car if his wife permits
(d) A promises to buy a car if his employer approves it

212. Which one of the following is not a characteristic of a contingent contract?

(a) Performance depends upon a future event (b) The event must be uncertain
(c) The event must be collateral to the contract (d) There must be reciprocal promises

213. Which one of the following is not an essential feature of a wagering agreement?
(a) Insurable interest (b) Uncertain event
(c) Mutual chances of gain or loss (d) Neither party to have control over the event

214. A makes a contract with B to buy his house for ` 50,000 if he is able to secure to
bank loan for that amount. The contract is
(a) Void for vagueness (b) Wagering contract
(c) Contingent contract (d) Voidable contract

215. Contingent contracts to do or not to do anything if a specified uncertain event does

not happen within a fixed time become
(a) Void, if before the time fixed, such event becomes impossible
(b) Valid, if before the time fixed, such event becomes impossible
(c) Voidable, if before the time fixed, the promisor becomes lunatic
(d) Illegal, if before the time fixed, the promisor dies

216. Which of the following statements is true in connection with the contingent contract:
(a) The collateral event is contingent
(b) The collateral event may be certain or uncertain
(c) The contingency event may be the mere will of the promisor
(d) The main event should be contingent

217. Which of the following statement is false in connection with the contingent contract:
(a) The event must be collateral (b) The event must be uncertain

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(CS LLB LLM)
Law Maven
(c) The event should not be mere will of the promisor (d) None of the above
218. The contingent contract dependent on the happening of the future uncertain event
can be enforced when such event:
(a) Happens (b) Does not happen
(c) Does not become a impossible (d) Both (a)&(c)

219. Contract contingent upon the happening of a future uncertain event becomes void.
(a) If the event becomes impossible (b) If the event happens
(c) If the event does not happen (d) None of the above

220. Contracts contingent upon the non-happening of the future uncertain event becomes void
when such event:-
(a) Happen (b) Does not happen
(c) The event becomes impossible (d) None of the above

221. Contract contingent upon the non-happening of the future uncertain event becomes
enforceable
(a) When the happening of that event becomes impossible and not before
(b) When the happening of that event becomes possible and not before
(c) When the event happens (d) None of the above

222. A promises to pay B a sum of money if a certain ship does not return within a year. The
ship is sunk within a year. The contract is
(a) Enforceable (b) Void (c) Voidable (d) Illegal

223. Contingent contract to do or not to do anything, if an impossible event happens are:-

(a) Valid (b) Void (c) Voidable (d) Illegal

224. Contingent contract dependent on the non-happening of the event within a fixed time can
be enforced, if the event:-
(a) Does not happen within the fixed time
(b) Before the time fixed such event becomes impossible
(c) Both (a) & (b)
(d) None of the above

225. In a contingent contract which event is contingent

(a) Main event (b) Collateral event (c) Both(a)&(b) (d) None of the above

226. Under section 70 of the Indian Contract Act, 1872, if a person who enjoys the benefit
of any other person’s work, the beneficiary must pay to the benefactor for the services
rendered, provided the intention of the benefactor was :
(a) Gratuitous (b) Non-gratuitous (c) To create legal relations (d) None of these

227. A finder of goods can:

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Of Arjun Chhabra
(CS LLB LLM)
Law Maven
(a) file a suit to recover his expenses (b) sell the goods if he likes
(c) can sue for a reward, if any (d) None of the above

228. Quasi-contracts or implied contracts are exceptional kinds of contracts by which:

(a) One party is bound to pay money in consideration of something done or suffered by the
other party
(b) No contractual relation exists between the parties
(c) No contract has been made by the parties (d) All of these

229. Which one of the following conditions must be satisfied for making claim under
‘Necessaries supplied to a person incapable of contracting?’
(a) The articles supplied should be necessaries
(b) The articles supplied should be necessaries at the time of sale and not delivery
(c) Necessaries must have been supplied gratuitously out of mere kindness
(d) Necessaries should be supplied only to person in competent to contract

230. Who is liable for necessaries supplied to a minor?

(a) The guardian of the minor (b) The minor (c) His property (d) None of the above

231. The term ‘quasi-contracts’ is:

(a) Defined by section 68 of the Indian Contract Act
(b) Named ‘implied in fact contract’ by Section 69 of the Indian Contract Act
(c) Found as ‘unjust’ enrichment’ is Section 70 only of the Indian Contract Act
(d) Conspicuous by its absence in the Indian Contract Act

232. Which of the following statement is true in connection with Quasi-contract.

(a) It is imposed by law
(b) A Quasi-contract is a revoking contract
(c) Damages cannot be claimed for breach of Quasi-contractual right.
(d) It arises out of an agreement

233. Which of the following statements regarding Quasi-contracts is incorrect

(a) It resembles a contract (b) It is imposed by law
(c) It is based on the doctrine of unjust enrichment (d) It is voluntarily created

234. Which of the following transactions cannot be described as Quasi-contracts

(a) Claims of necessaries supplied to incompetent person
(b) Right to recover money paid for another person
(c) Right to claim money if given under coercion or mistake
(d) Right to claim money if given under fraud or misrepresentation

235. Quasi-contracts are:

(a) not contracts in the real sense of the word

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Of Arjun Chhabra
(CS LLB LLM)
Law Maven
(b) relations which create certain obligations resembling those created by a contract
(c) implied contracts (d) unenforceable contracts

236. A finder can sell the goods if:

(a) the goods are ascertained. (b) the goods are un- ascertained,
(c) the goods are valuable, (d) the goods are perishable

237. An insurance company paid money by mistake on a policy which had lapsed. Though the
company was not ignorant of the fact of the lapse, this was overlooked at the time of payment.
Can the company recover the amount?
(a) The company cannot recover the amount
(b) The company can recover the amount
(c) The company once paid the money is estopped to demand back by virtue of ‘Doctrine of
Estoppel’
(d) The company can revive the lapsed policy and thus regularize the payment

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