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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

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.

Multiple choice

In case of anticipatory breach of contract, the seller repudiates the contract before the date of delivery and the buyer may treat the contract as subsisting and wait till the date of delivery and/or treat the contract as rescinded and sue for damages for the breach.

  1. True

  2. False

  3. Partly true

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

Anticipatory breach occurs when one party clearly indicates they will not perform when performance is due. The injured party has two options: (1) treat the contract as still valid and wait for performance date, or (2) treat the contract as rescinded immediately and sue for damages. This gives flexibility in responding to repudiation.

Multiple choice

The conditions and warranties may be in the form of

  1. express

  2. implied

  3. either (1) or (2)

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

Conditions (essential terms) and warranties ( subsidiary promises) in contracts can be either express (explicitly stated in the contract) or implied (automatically included by law or custom). The law recognizes both forms, giving parties flexibility in specifying terms or relying on default legal provisions.

Multiple choice

An agreement to sell creates jus in personam which means that a right of the buyer against the seller to sue for damages.

  1. True

  2. False

  3. Partly true

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

An agreement to sell creates jus in personam (a right in personam), which is a right against a specific person rather than against the world at large (jus in rem). The buyer has the right to sue the seller specifically for damages if the agreement is breached.

Multiple choice

In case of breach of contract by the seller, the following are the rights of the buyer (i) suit for non delivery, (ii) suit for specific performance and (iii) suit for damages for breach of warrant.

  1. True

  2. False

  3. Partly true

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

When the seller breaches the contract, the buyer can: (i) sue for non-delivery of goods, (ii) sue for specific performance (forcing delivery of unique goods), and (iii) sue for damages for breach of warranty (not 'warrant' - likely a typo). These are key buyer remedies.

Multiple choice

A warranty is a stipulation which is collateral to the main purpose of the contract as per section 12(3) of the sale of goods Act.

  1. True

  2. False

  3. Partly true

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

A warranty is a stipulation collateral to the main purpose of the contract - meaning it's secondary to the primary objective. Breach of warranty gives rise to a claim for damages only, not rejection of goods. This distinguishes warranties from conditions.

Multiple choice

What type of consideration is required in a valid contract?

  1. Unlawful consideration

  2. Lawful consideration

  3. Consideration does not matter

  4. Any type of consideration
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

It means that consideration which is enforced by law and also relevant for making a valid contract under Section 10 of the Contract Act, 1872.