Law of Contract - 10 Mark Questions

and Answers
Group 1: Foundations of Contract Law
1. Q1. Explain the essential elements of a valid contract with relevant examples.

A: A valid contract must have the following elements:

1. Offer and Acceptance: One party must make a clear offer, and the other must accept it
unconditionally.
2. Lawful Consideration: Something of value must be exchanged between the parties.
3. Capacity of Parties: Parties must be competent to contract (not minors, insane, etc.).
4. Free Consent: Consent must be given freely, not under coercion or fraud.
5. Lawful Object: The purpose of the contract must be legal.
6. Certainty and Possibility: Terms must be clear and capable of performance.
Example: A agrees to sell his car to B for $5000. Both parties are competent, consent freely, and
the purpose is lawful, so the contract is valid.

2. Q2. Differentiate between an agreement and a contract, highlighting the legal

significance of each.

A: An agreement is a promise or set of promises between parties. A contract is an

agreement enforceable by law.
All contracts are agreements but not all agreements are contracts.
For example, a social agreement between friends is an agreement but not a contract as it
lacks intention to create legal relations.

3. Q3. Discuss the importance of communication in the formation of a contract.

A: Communication is vital as an offer must be communicated to the offeree, and

acceptance must be communicated to the offeror.
Without communication, there is no mutual assent, and no contract is formed.
For example, if A offers to sell goods but B is unaware of the offer, B’s acceptance is
ineffective.

4. Q4. How does the law treat proposals and acceptances? Explain with relevant case
laws.
A: The law requires that a proposal (offer) be clear, definite, and communicated.
Acceptance must be absolute and unconditional.
Case: Carlill v Carbolic Smoke Ball Co. established that a unilateral offer can be
accepted by performing the conditions.
Case: Hyde v Wrench showed that counter-offer amounts to rejection of original offer.

5. Q5. Explain the effect of a counter-offer on the original offer in contract formation.

A: A counter-offer is a rejection of the original offer and the making of a new offer.
It terminates the original offer, and the original offeror is no longer bound by it.
For example, if A offers to sell a bike for $1000 and B replies with $900, the original
offer is rejected.

Group 2: Offer and Acceptance

6. Q1. Describe the various modes of revocation of an offer and their legal implications.

A: An offer can be revoked:

1. By communication of revocation to the offeree before acceptance.
2. By lapse of time.
3. By failure of a condition precedent.
4. By death or insanity of the offeror.
Revocation is effective only when communicated to the offeree.
Legal implication: Once revoked, the offer cannot be accepted.

7. Q2. Discuss the rules regarding the communication of acceptance and explain the
exceptions to these rules.

A: Acceptance must be communicated to the offeror.

Exceptions include:
1. Unilateral contracts where acceptance is through performance.
2. Postal rule: acceptance is complete when posted.
3. Where the offer prescribes a mode of acceptance, deviation may invalidate acceptance.

8. Q3. What is the ‘postal rule’ in contract law? Analyze its rationale and limitations.

A: The postal rule states that acceptance is complete when the letter of acceptance is
posted, not when received.
Rationale: To protect the offeree from delays in communication.
Limitations: Does not apply if instantaneous communication is used or if the offer limits
acceptance by post.

9. Q4. Can silence be treated as acceptance?

A: Generally, silence is not acceptance.

Exceptions include:
1. Where parties have agreed silence signifies acceptance.
2. Where offeree takes benefit of offered services with knowledge.
Otherwise, silence cannot bind the offeror.

10. Q5. How is acceptance communicated in unilateral contracts? Discuss its legal
effects.

A: Acceptance in unilateral contracts is through performance of the requested act.

Once performance begins or is completed, the offeror is bound.
Example: In Carlill v Carbolic Smoke Ball, performance of specified acts constituted
acceptance.

Group 3: Consideration
11. Q1. Define consideration and explain its importance in contract law.

A: Consideration is something of value given in exchange for a promise.

It distinguishes contracts from gifts and ensures both parties have an obligation.
Without consideration, most contracts are not enforceable.

12. Q2. Examine the exceptions to the rule that an agreement without consideration is
void.

A: Exceptions include:
1. Natural love and affection between parties.
2. Compensation for past voluntary services.
3. Promise to pay time-barred debt.
4. Contracts made in writing and registered.

13. Q3. Differentiate between past, present, and future consideration with relevant
illustrations.
A: Past consideration: Something done before the promise – generally not valid.
Present consideration: Act or forbearance at the time of the promise.
Future consideration: Promise to do something in the future.

14. Q4. Explain the rule that consideration must move from the promisee with legal
reasoning.

A: The promisee must provide consideration to enforce the promise because they are the
party receiving the benefit.
This prevents third parties from enforcing contracts to which they are not parties.

15. Q5. Can consideration consist of an act or forbearance instead of money? Discuss
with examples.

A: Yes, consideration can be:

1. An act (doing something).
2. Forbearance (refraining from doing something).
Example: Agreeing not to sue in exchange for payment.