Law Legal Studies · Commerce Accountancy

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

Which of the following presumptions regarding negotiable instruments is not correct?

  1. Every negotiable instrument bearing a date was made or drawn on such date.

  2. Every transfer of a negotiable instrument was made before its maturity.

  3. A lost promissory note, bill of exchange or cheque was not duly stamped.

  4. Every accepted bill of exchange was accepted within a reasonable time after its date and before its maturity.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Presumptions regarding negotiable instruments are a lost promissory note, bill of exchange or cheque was duly stamped.

Multiple choice

Which of the following is a valid promissory note?

  1. “A, I owe you some amount.”

  2. “A, I owe you Rs. 1000.”

  3. “I promise to pay A or order Rs. 1000."

  4. “I promise to pay the bearer Rs. 1000."
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A valid promissory note is a signed document containing a written promise to pay a stated sum to a specified person or the bearer at a specified date or on demand. “I promise to pay A or order Rs. 1000” is a valid promissory note. 

Multiple choice

Where an instrument may be construed either as a promissory note or a bill of exchange,

  1. it will be treated as a promissory note

  2. it will be treated as a bill of exchange

  3. the holder may, at his election, treat it as either a bill of exchange or a promissory note

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

Where an instrument owing to its faulty drafting may be construed either as a promissory not or a bill of exchange is known as an ambiguous instrument. The holder of such instrument may, at his election, treat it as either a bill of exchange or a promissory note.

Multiple choice

Where in a promissory note or a bill of exchange, the expressions “at sight” and “on presentment” are mentioned. It means that it is payable

  1. on demand

  2. after acceptance

  3. on non-acceptance

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In a promissory note or a bill of exchange, the expressions “at sight” and “on presentment” mean "on demand". The expression “after sight” in a promissory note means after presentment for sight, and in a bill of exchange after acceptance or noting for non-acceptance or protest for non-acceptance.

Multiple choice

A negotiable instrument made, drawn, accepted, indorsed or transferred without consideration creates ________ of payment between the parties to the transaction.

  1. no obligation

  2. an obligation

  3. a responsibility

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A negotiable instrument made, drawn, accepted, indorsed or transferred without consideration or for a consideration which fails, creates no obligation of payment between the parties to the transaction. But if any such party has transferred the instrument with or without indorsement to a holder for consideration, such holder, and every subsequent holder deriving title from him, may recover the amount due on such instrument from the transferor for consideration or any prior party thereto.

Multiple choice

Crossword competition is

  1. a wagering agreement

  2. a contingent contract

  3. an illegal agreement

  4. a valid agreement
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

It is nowhere provided as void in law.

Multiple choice

What is the nature of agreement to sell?

  1. Executory contract

  2. Executed contract

  3. Both executed and executory contract

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Any contract to be applicable at future date is executory. Sale is an executed contract.

Multiple choice

A policy can be surrendered only if it has acquired

  1. legal value

  2. money value

  3. policy value

  4. paid-up value
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Paid-up value is the reduced amount of sum assured paid by the insurer in case of discontinuation of the payment of premiums after paying the full premiums for the first three years. Surrender value is a percentage of paid-up value. Hence, a policy can be surrendered only if it has acquired paid up value.

Multiple choice

Which of the following is untrue as per IRDA’s regulations on non-par policies?

  1. The benefits shall be stated at the outset.

  2. The benefits shall be linked to some index.

  3. The additional benefit under these policies shall be laid out at the outset.

  4. The return shall be stated at the beginning of the contract itself.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The benefits of an insurance policy are not linked to any index. Hence, option (2) is the correct answer.