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Contract Law

1,453 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

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.

Multiple choice

Total substitution of new contract in place of the old contract takes place in case of

  1. remission

  2. recission

  3. novation

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

Novation is the total substitution of a new contract for an old one, extinguishing all rights and obligations under the original contract. It requires consent of all parties. Remission reduces obligations, recission cancels the contract, and alteration modifies terms without full substitution.

Multiple choice

An agency coupled with interest does not come to an end in case of

  1. death of the principal

  2. insanity of the principal

  3. insolvency of the principal

  4. death or insanity or insolvency of the principal
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

An agency coupled with interest (where agent has vested interest in subject matter) survives the principal's death, insanity, or insolvency. The agent's interest makes the agency irrevocable and independent of the principal's personal status. Option D correctly combines all three circumstances.

Multiple choice

A contract to do or not to do something if some event, collateral to such contract does or does not happen is

  1. a contingent contract

  2. a wagering contract

  3. illegal

  4. void
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A contingent contract depends on a future uncertain event collateral to the contract itself (like insurance contracts). It differs from wagering (which is based on pure chance) and is not inherently illegal or void. The key is the collateral event and enforceability.

Multiple choice

Discharge by mutual agreement may involve

  1. novation

  2. recission

  3. alteration

  4. novation, recission and alteration
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Discharge by mutual agreement can take multiple forms: novation (replacing the original contract with a new one), rescission (canceling the contract by mutual consent), or alteration (modifying the contract terms). All three are valid methods for parties to end their contractual obligations by agreement.

Multiple choice

Quasi - contracts arise

  1. where obligations are created without a contract

  2. where obligations are created under a contract

  3. out of natural causes

  4. out of man-made causes
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Quasi-contracts are obligations created by law based on principles of justice and equity, not by any actual agreement between parties. They arise in specific situations like unjust enrichment (receiving a benefit you shouldn't keep), where obligations exist without a contract having been formed.

Multiple choice

The rule stated under Section 26 of the Sale of Goods Act, 1930 is subject to _________ exceptions.

  1. 1

  2. 2

  3. 3

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

Section 26 of the Sale of Goods Act, 1930 (condition that ownership transfers when goods are ascertained) is subject to 2 main exceptions. First, when there's a contract for unascertained goods where property transfers immediately. Second, by the parties' agreement - they can contract out of this rule. These are the recognized statutory exceptions.

Multiple choice

A contracts to pay B Rs. 5,00,000/- if B`s house is destroyed by fire. It is

  1. a wagering contract

  2. a contingent contract

  3. a wagering contract plus a contingent contract

  4. neither a contingent contract nor a wagering contract
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

This is a CONTINGENT contract, not a wagering contract. Contingent contracts depend on a future uncertain event (fire destroying the house) but are enforceable because they have a legitimate interest - protection of property. Wagering agreements involve betting on uncertain events without insurable interest and are void.

Multiple choice

H contracted with NIC Corporation for the erection of a number of houses. In calculating his price for the houses, H by mistake deducted a particular sum twice over. The corporation affixed its seal to the contract, which correctly represented its intention.

  1. The contract is now binding.

  2. The contract can be avoided by H.

  3. There is no contract at all, since there is no consensus ad idem.

  4. The contract is not binding.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The contract is BINDING because the corporation's acceptance of the contract created a valid agreement. H's unilateral mistake in calculation (deducting twice) does not prevent contract formation. Both parties were in agreement on the essential terms, and the corporation's acceptance properly reflected its intention. A unilateral mistake doesn't typically avoid a contract unless it's a fundamental mistake known to the other party.

Multiple choice

A intending to deceive B falsely represents that 750 tons of sugar is produced per annum at the factory of A and hereby induces B to buy the factory. The contract is avoidable at the option of

  1. B

  2. A

  3. congruence of A and B

  4. either party cannot avoid the contract
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When a party fraudulently misrepresents a material fact to induce another into a contract, the defrauded party (B) has the option to avoid the contract. Fraud makes a contract voidable at the option of the innocent party. A, having deceived B, cannot then claim protection from the contract's avoidance.