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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

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.

Multiple choice

Fact: D wrote to P on 28 November 1971, offering to sell 800 tonnes of iron at Rs 6900 per ton. On the same day P wrote to D offering to buy 800 tonnes of iron Rs 6900 per ton. The two letters crossed in post and neither of them knew anything about the offer to the other. P contended that there was a good contract. Issue: What is the nature of contract and liabilities of the parties?

  1. There was no valid contract because an agreement results into a contract when there is an offer from one side and its acceptance from the other side so no question of any liability rises.

  2. It is a voidable contract at the option of P because P had offered to sell the product.

  3. It is a voidable contract at the option of P because P had offered to buy the product.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When offers cross in post, neither party knows of the other's offer at the time they send their acceptance. There is no meeting of minds - no consensus ad idem. Both parties made offers, but neither made an acceptance of the other's offer. No valid contract was formed.

Multiple choice

Legally a contract of sale includes

  1. agreement to sell

  2. sale

  3. none

  4. sale and agreement to sell
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The term 'contract of sale' is a generic legal term that encompasses both an actual sale (where property has passed) and an agreement to sell (where property will pass in future). Both are distinct types of contracts falling under the broader category of sale contracts.

Multiple choice

Mark the incorrect statement.

  1. A third party is not barred from bringing an action against an unregistered firm.

  2. A suit by an unregistered firm for the recovery of the price of goods obtained by fraud is maintainable under section 69.

  3. An action for the tort of passing off by an unregistered firm against a third party is not permissible.

  4. The right to file a suit for eviction of a tenant under the Transfer of Property Act is a statutory right and an unregistered firm can file an eviction suit.

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

If the action against a third party is not based on contract but on tort, fraud or any other wrongful act, the same is not hit by section 69 of the Partnership Act and the action for the same is maintainable.

Multiple choice

When the payment is made by a negotiable instrument it is usually a conditional payment, the condition being that the instrument shall be duly honoured.

  1. True

  2. False

  3. Partly true

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

Payment by negotiable instrument (cheque, bill of exchange, promissory note) is conditional payment - it's not final until the instrument is honored (cleared). If the instrument is dishonored, the original debt revives and the seller can sue on the original debt.

Multiple choice

The lien is revived on the dishonour of the bill.

  1. True

  2. False

  3. Partly true

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

If an unpaid seller accepts a negotiable instrument and it is dishonored, the seller's right of lien is revived. The seller can again exercise lien over the goods because the conditional payment failed and the original debt remains unpaid.

Multiple choice

A contract of sale has some special features which are uncommon to all contracts.

  1. True

  2. False

  3. Partly true

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

This is TRUE. A contract of sale is a specific type of contract with unique features: it transfers property in goods, creates implied conditions and warranties not found in general contract law, and has special rules about risk passing, acceptance of goods, and seller's remedies. These specialized provisions distinguish it from ordinary contracts under general contract law.

Multiple choice

Implied condition and warranties in a contract of sale may be neglected or varied by (i) express agreement between the parties, (ii) the course of dealing between them and (iii) the custom or usages of trade.

  1. True

  2. False

  3. Partly true

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

This is TRUE. Implied conditions and warranties in sale contracts can indeed be excluded or modified in three ways: by express agreement between parties, by established course of dealing between them, or by custom/usage of trade. These exceptions allow flexibility while protecting buyers where parties haven't clearly agreed otherwise. This balances contractual freedom with consumer protection.

Multiple choice

An agreement to sell is an executory contract.

  1. True

  2. False

  3. Partly true

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

This is TRUE. An agreement to sell is an EXECUTORY contract meaning the essential obligations remain to be performed - property hasn't passed yet. It becomes a sale (executed contract) when property transfers. This distinction matters for tax, insolvency, and rights of parties - in an agreement to sell, the seller still owns the goods and can resell, whereas in a sale, buyer owns them.

Multiple choice

Contract of sale includes both a sale and agreement to sell

  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 is a legal category encompassing both completed sales (where property has transferred) and agreements to sell (where property transfer is to occur in the future). This distinction is fundamental to sales law. A completed sale transfers ownership immediately, while an agreement to sell creates obligations for future transfer.