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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

A contract contravening public policy is void. These cannot be a genera definition of public policy.

Which of the following derivation is correct?

  1. There cannot be a general definition of contract

  2. Since public Policy is uncertain, contract is also uncertain

  3. The impact of Public Policy on contract is to be judged in individual cases

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Public policy cannot be defined in absolute terms because it varies with social context and changing values. What violates public policy today may not tomorrow, so courts evaluate each contract individually based on contemporary standards. Options A and B incorrectly suggest uncertainty invalidates contracts, while D is wrong because C is legally sound.

Multiple choice

No minor can enter into a contract of work. Working in a shop can be done only by a contract.

Which of the following derivation is correct?

  1. A minor cannot work in a shop

  2. A shop cannot work in a shop

  3. There cannot be a contract to which minor is a party

  4. none of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Under Indian Contract Act, minors lack capacity to contract. A minor's contract is void ab initio - void from the beginning. Since shop work requires a contract, and minors cannot enter valid contracts, they cannot work in shops through contractual arrangements. Option A correctly states this legal principle.

Multiple choice

Fact: A who owns two cars, one maruti and the other Santro, offers to sell B one car. A intending it to be the Maruti car B accepts the offer thinking that it is the santro. Issue: Is A liable?

  1. A is not liable because there is no consensus and hence no contract.

  2. A is liable because once he had offered the contract is complete.

  3. It is upto the court to decide the liability
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

For a valid contract, there must be consensus ad idem (meeting of minds) on the same subject matter. Here A intends to sell Maruti but B thinks Santro - no consensus on which car. No valid contract was formed, so A is not liable. Option B is incorrect because offer+acceptance alone is insufficient without consensus.

Multiple choice

Fact: S intending to deceive Y, falsely represents that 500 maunds of indigo are made annually at x`s factory and thereby induces Y to buy the factory. Issue: Is it a valid contract?

  1. It is a valid contract.

  2. It is a contract voidable at the option of Y because he has been falsely misrepresentated

  3. It is void abinitio
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Fraudulent misrepresentation makes a contract voidable (not void ab initio) at the option of the deceived party. S's false statement about indigo production induced Y to buy. Y can choose to rescind (voidable) but contract was valid until Y exercises this option. Void ab initio would mean it never existed, which is incorrect for misrepresentation.

Multiple choice

Fact: Mr. Balfour was employed in Ceylon. Mrs Balfour owing to ill health had to say in England and could not accompany him to Ceylon. Mr. Balfour promised to send her £30 per month while he was abroad. But Mr. Balfour failed to pay that amount. So Mrs Balfour filed a suit against her husband for breach of contract? Issue: Is Balfour liable for breach of contract?

  1. Mr Balfour is not liable because the intention not to create a legal obligation was clear from the conduct of the parties.

  2. Mr Balfour is liable for breach of contract.

  3. No conclusive decision can be drawn as it is a private affair of husband and wife
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Balfour v Balfour established that domestic agreements between spouses are presumed NOT to create legal intentions. The key question is whether a reasonable person would believe the parties intended to be legally bound. Here, the husband's promise to pay £30 monthly during his absence was a domestic arrangement with no indication of legal intent.

Multiple choice

Fact: Two firms entered into a written contract for the sale and purchase of tissue paper. The agreement contained a clause to the effect that “this agreement is not entered into, nor is this memorandum written, as a formal or a legal document, and shall not be subject to legal jurisdiction in the law courts”. Since the goods were not delivered, the buyers brought an action for non-delivery. Issue: Are the sellers liable?

  1. The sellers are liable as they had entered into a written agreement.

  2. The sellers are not liable as there was no contract as the parties never intended to create legal relationship because they had clearly mentioned that their agreement is not a legal document nor a memorandum nor subject to the jurisdiction of law courts.

  3. The firms may make mutual adjudication.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Jones v Vernon: When parties EXPLICITLY state in writing that their agreement is not a legal document and not subject to court jurisdiction, this conclusively shows lack of intention to create legal relations. Such clauses are binding and prevent enforcement of the agreement.

Multiple choice

Fact: A, a person of week intelligence made a gift of his entire property to B, who was in a position to dominate him. the gift having been obtained by undue influence is voidable at the option of A. Issue: Is this contract valid?

  1. The contract is valid as A voluntarily made a gift.

  2. The contract is not valid because A made a gift under influence so it is voidable at the option of A.

  3. It is void abinitio.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Contracts obtained through undue influence are voidable at the option of the influenced party. Undue influence occurs when one party, by virtue of dominant position, exploits the other's weakness (here, 'weak' intelligence). The gift is valid until A chooses to avoid it.

Multiple choice

Fact: X borrows Rs 50, 000 from Y for the purpose of smuggling goods. Y knows of the purpose of the loan. Issue: Is this agreement valid?

  1. The agreement is valid

  2. The agreement between X and Y is collateral to the main agreement which is illegal so the agreement is also illegal because anything done which is unlawful, immoral against public policy can never result into a valid agreement.

  3. Nothing conclusive can be said
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Agreements collateral to an illegal purpose are themselves illegal. When Y lends money specifically for smuggling (knowing the illegal purpose), the loan agreement is tainted by illegality. Courts will not enforce agreements supporting unlawful acts under the doctrine of ex turpi causa.

Multiple choice

Fact : A purchased a horse from B and promised that if the horse was lucky to him, he would give Rs 50 more or he would purchase another horse. Issue: Is there a valid contract between A and B?

  1. Yes, there is a valid contract and B will be liable if the horse didn't prove lucky.

  2. There is no valid contract as the terms of contract are so vague and loose.

  3. it is voidable contract at the option of A.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Contracts require certainty of terms. 'If the horse proves lucky' is hopelessly vague - what does 'lucky' mean? How is it determined? When parties leave essential terms to indefinite future determination, no valid contract exists. The agreement lacks the certainty required for enforceability.

Multiple choice

Fact: A agreed to take B's house on rent for three years at the rent for three years at the rent of £ 85 per annum provided the house was put to thorough repair and the drawing rooms were decorated “according to present style” Issue: Is there a valid contract between A and B?

  1. There is not valid contract because it is a vague term, because the term “present style” may mean one thing to A and another B. Hence, the agreement was void on the ground that the terms of offer were vague and uncertain.

  2. There is a valid contract because there is an offer from the side of A and acceptance from the side of B.

  3. It is voidable contract at the option of A.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Contract terms must be sufficiently certain. 'Decorated according to present style' is unacceptably vague - different people may have completely different understandings of 'present style.' When key terms are left to subjective interpretation without objective standard, the agreement fails for uncertainty and cannot be enforced.

Multiple choice

Fact: D sent his servant P to trace his missing nephew. D in the meantime announced a reward for providing information about the missing boy. P, in ignorance of the announcement traced the boy and informed D.P later on came to know and he claimed it. Issue: Is the servant entitled to reward?

  1. Servant is entitled to claim.

  2. Servant is not entitled to claim because he was ignorant of the offer of reward so there was no agreement because there was no acceptance.

  3. The contract is voidable at he option of the servant.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

For reward contracts, acceptance requires knowledge of the offer. The servant traced the boy before learning about the reward, so there was no meeting of minds. One cannot accept an offer they don't know exists. No contract formed, hence no entitlement to reward.

Multiple choice

Fact: offered to purchase a lodge owned by P for Rs 6,000. He wrote to P's agent asking whether his offer was accepted. He also added that he was ready to accept any higher price if found reasonable. The agent replied,” Would not accept less than Rs. 10, 000 “. D accepted this and brought a suit for specific performance. Issue: Is P liable for specific performance?

  1. P is liable for the specific performance of the contract entered into D and P.

  2. P is not liable because there is only offer or counter offer but no formal/legal offer and acceptance. Hence no valid contract, hence P not liable.

  3. The contract is voidable at the option of D.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The agent's statement 'Would not accept less than Rs 10,000' is a counter-offer, not an acceptance. A counter-offer terminates the original offer. When D accepted the counter-offer, there was no original offer left to accept, so no valid contract was formed.

Multiple choice

Fact: A writes to B, “I offer to sell my house for Rs 40 000. if I do not receive a reply by Monday next, I shell assume that you have accepted the offer”. Issue : Is there a valid contract between A and B ?

  1. yes, there is a valid contract.

  2. No, there is no valid contract because A made a offer but didn't accept it.

  3. Because A had made an offer so the contract is voidable at the option of A.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Silence cannot constitute acceptance of an offer. The offeror (A) cannot unilaterally impose a condition that silence will be construed as acceptance. B's silence does not create a binding contract.

Multiple choice

Fact: A offered to sell a farm for £ 1, 000, x said he would give £ 950. A refused and x than said he would give £ 1,000, and when A declined to adhere to his original offer tried to obtain specific performance. Issue: Is there a valid contract between A and x ?

  1. There is not valid contract as x' s offer to pay £ 950 is a refusal of the offer and a counter offer.

  2. There is a valid contract and A is liable for specific performance.

  3. It is voidable contract at the option of x

Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

X's offer of £950 was a counter-offer, which terminated A's original offer of £1,000. When X later tried to accept the original terms (£1,000), the offer no longer existed. A counter-offer acts as a rejection of the original offer.

Multiple choice

Fact: D sent an offer to a firm with whom he had accounts. P who had just taken over the said firm got the letter addressed to the old firm, accepted the offer and sent the goods. P sued for the price of the goods. The court held that there was no contract since the order was to the held firm and the acceptance was by the new firm. An offer may also be made to the world at large, as the instance by an advertisement in the newspaper. In such a case only person or persons with notice of the offer can come forward and accept the offer. Issue: Are the claims of P genuine?

  1. D is liable for all the claims made by P because D was an old customer of the firm.

  2. As there is no contract between P and D so no liability.

  3. The contract is voidable at the option of D.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

D's offer was made to the old firm, not to P who had just taken over. P is a different legal entity. An offer must be accepted by the same person to whom it was made. Since P was not the offeree, there could be no valid acceptance and no contract.