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Contract Law

1,497 Questions

Contract Law encompasses the rules and statutes governing legally binding agreements between parties. This hub provides practice questions on essential topics like legal obligations, breach of contract, and termination clauses. These concepts are frequently tested in law entrance tests and various other competitive government examinations.

Legal obligationsVoid contractsBreach of contractCommunication of acceptanceStatute of FraudsContract clauses

Contract Law Questions

Multiple choice

In case of a contract of guarantee

  1. there is only one contract

  2. there are two contracts

  3. there are three contracts

  4. there are actually only agreements and no contracts
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A contract of guarantee involves three distinct contracts: the principal contract between creditor and principal debtor, the contract of guarantee between surety and creditor, and the indemnity contract between surety and principal debtor. Each party has separate rights and obligations under these three agreements.

Multiple choice

Contracts may be classified on the basis of their validity, formation or performance. Contracts classified on the basis of performance are of which of the following types?

  1. executed contracts

  2. executory contracts

  3. partly executed or partly executory contracts

  4. all of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Contracts classified by performance fall into three categories: executed contracts (fully performed by all parties), executory contracts (yet to be performed by any party), and partly executed/partly executory contracts (some obligations fulfilled, others pending). Option D encompasses all valid classifications.

Multiple choice

A person employed to do any act for another or to represent another in dealings with the third parties is

  1. principal

  2. agent

  3. servant

  4. bailee
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

An agent is a person appointed to act on behalf of another (the principal) and represent them in dealings with third parties. This is the definition under Section 182 of the Indian Contract Act. A principal is the person being represented, a servant is for domestic service, and a bailee handles goods.

Multiple choice

Agreement to sale is an

  1. executed contract

  2. executory contract

  3. both of the above

  4. none of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

An agreement to sell is an executory contract because neither party has fulfilled their obligations - the seller hasn't transferred ownership, and the buyer hasn't paid. It becomes a sale (executed contract) only when property actually transfers.

Multiple choice

Contracting parties may not remain same in

  1. remission

  2. recission

  3. novation

  4. alteration
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Novation is the substitution of a new contract or party for an old one, discharging the original contract. The key feature is that contracting parties may change - either by substituting a new debtor or replacing the original contract entirely with a new one.

Multiple choice

Recission means

  1. substituting a new contract for the old one

  2. cancellation of the old contract

  3. modifying or altering the terms of contract such that it has the effect of substituting a new contract for the old one

  4. dispensing away the performance of the promise made by the other party
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Rescission means cancellation or abrogation of a contract, putting parties back in their original positions before the contract. It differs from noviation (substitution), alteration (modification), or remission (dispensing with performance). Option B correctly states it means cancellation.

Multiple choice

In case of an agreement to sell, the aggrieved party

  1. can sue for price

  2. can sue for damages

  3. can sue the buyer for injunction

  4. none of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In an agreement to sell (not a completed sale), ownership hasn't yet transferred. If either party breaches the agreement, the aggrieved party's primary remedy is to sue for damages - compensation for the loss suffered. The aggrieved party cannot sue for specific performance of the sale or for the price, as the contract is still executory. Damages compensate for the breach rather than forcing completion.

Multiple choice

A had offered B, a price of Rs.10, 00,000/- for B's flat. But B was not ready to sell the flat at all. A says to B that “I shall kill you if you don't agree to sell me your house for Rs.10, 00,000/-”. B thereafter did all that was the desire of A in order to save his life. What is the immediate answer?

  1. A can enforce the contract.

  2. B can enforce the contract.

  3. A has applied coercion.

  4. The contract is unenforceable.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

This is a textbook case of coercion under Section 15 of the Indian Contract Act. Coercion involves threatening or committing an act forbidden by the Indian Penal Code (like threatening to kill someone) to force a person into a contract. Contracts induced by coercion are voidable at the option of the coerced party (B), not the coercer (A). A's threat to kill B's life constitutes criminal coercion, making the agreement voidable at B's option.

Multiple choice

Which of the following are the characteristics of a contingent contract?

  1. The performance of a contingent contract depends upon the happening or nonhappening of a certain event in future.

  2. The event must be uncertain.

  3. The event must be collateral to the main contract.

  4. All of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A contingent contract has all three characteristics: its performance depends on a future event (collateral to the main contract), that event must be uncertain, and the contract is enforceable only if/when the event occurs. Examples include insurance contracts and contracts contingent on litigation outcomes.

Multiple choice

Which of the following agreements are void?

  1. An agreement to share the salary of a public officer.

  2. An agreement to sell a religious office.

  3. An agreement with the objective of procuring a public post.

  4. All of these.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

All three agreements are void under contract law as they are contrary to public policy. Sharing public officer salaries undermines governance, selling religious offices (simony) is illegal, and agreements to procure public posts through private arrangement corrupt the appointment process.

Multiple choice

A sold some land to B. At the time of sale both the parties believed to be in good faith that the area of the land sold was 10 hectares. It however, turned out that the area was 7 hectares only. How is the contract of sale affected?

  1. The agreement is void

  2. The agreement is illegal

  3. The agreement is impossible

  4. All of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A bilateral mistake (both parties mistaken) about a fundamental fact essential to the contract - here, the actual area of the land - can make the agreement void. Since both parties believed the area was 10 hectares when it was actually only 7 hectares, this mutual mistake about a material fact affects the contract's validity.

Multiple choice

Which one of the following is a legal requirement regarding consideration?

  1. Consideration should move at the desire of the promise.

  2. Consideration may move from promisee or any other person.

  3. Consideration may be past, present or future.

  4. All of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

All three statements correctly state legal requirements for consideration. Consideration must be given at the promisor's desire, can come from the promisee or any third party (not restricted to just the promisee), and may be past (executed), present (executory), or future consideration. These are foundational principles in contract law.

Multiple choice

Exceptions to the statement “No consideration, no contract” are the following.

  1. No consideration is required to create an agency as also in the case of completed gifts.

  2. A promise made without consideration is valid if it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt, which is barred by the Law of Limitation.

  3. A promise made without any consideration is valid if it is a promise to compensate wholly or in part a person who has already voluntarily done something for the promisor or something which the promisor was legally compellable to do.

  4. All of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The general rule 'no consideration, no contract' has several well-established exceptions. Agency creation and completed gifts require no consideration. Written promises to pay time-barred debts are enforceable under Section 25(3). Promises to compensate for past voluntary acts (Section 25(2)) are also valid without fresh consideration.

Multiple choice

The following are the essential elements which need to co-exist in order to make a valid contract.

  1. Lawful consideration

  2. Lawful agreement

  3. Free consent

  4. All of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A valid contract requires all essential elements: lawful consideration (what each party gives/receives), lawful agreement (offer and acceptance), and free consent (agreement without coercion/fraud/undue influence). All three must coexist for enforceability.