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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 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 the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

An agreement to sell is not a completed sale, so ownership hasn't transferred. If the buyer breaches, the seller cannot sue for the price (which is only available in actual sale). The aggrieved party's remedy is damages for breach of contract. This reflects the intermediate nature of the agreement to sell.

Multiple choice

Conditions and warranties

  1. must be expressed

  2. must be implied if not expressed

  3. may either be expressed or implied

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

Conditions and warranties in contract law can be either expressed (explicitly written in the contract) or implied (read into the contract by law or custom). The Indian Contract Act recognizes both types. Option A is incorrect because terms need not always be expressed. Option B is incorrect because they are not automatically implied if not expressed - it depends on circumstances.

Multiple choice

If the buyer rejects the merchandise either because they are less than or in excess of the quantity contracted for, the seller has a right to tender again the contract quantity.

  1. True

  2. False

  3. Partly true

  4. Cannot say
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Under the Sale of Goods Act, if the buyer rejects goods because the quantity is less than or exceeds what was contracted, the seller has the right to make a new tender (offer) of the exact contract quantity. This protects both parties - the buyer gets the contracted quantity, and the seller gets another chance to fulfill the contract correctly rather than the contract being terminated immediately.

Multiple choice

Contract of sale may be either absolute or conditional

  1. True

  2. False

  3. Partly true

  4. Cannot say
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A contract of sale can be either absolute or conditional. An absolute sale transfers ownership immediately without any conditions attached, while a conditional sale makes the transfer of property dependent on some specified condition being fulfilled. This distinction is fundamental in sales law - for example, a sale on approval is conditional, whereas a regular cash sale is absolute.

Multiple choice

All contracts are agreements all agreements are accepted offers.

Which of the following derivation is correct?

  1. All accepted offers are contracts

  2. All agreements are contracts

  3. All contracts are accepted offers

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

This is a logical syllogism problem. Premise 1: All contracts are agreements (C subset of A). Premise 2: All agreements are accepted offers (A subset of O). By the transitive property of subsets: If C is subset of A, and A is subset of O, then C is subset of O. Therefore: All contracts are accepted offers. This is valid deductive reasoning.

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.