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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

An offer can be accepted within

  1. specified time

  2. reasonable time

  3. both (1) and (2)

  4. any time
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The offer must be accepted within the time specified or otherwise within reasonable time only.

Multiple choice

An agreement with a minor comes under

  1. void contract

  2. voidable contract

  3. valid contract

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

Agreements with minor are void ab initio, i.e. void agreements. Void contracts are those which were otherwise valid, but had become void due to certain event. If a contract fulfills all conditions, it is a valid contract. A contract is voidable if it is caused by fraud, coercion, etc.

Multiple choice

The agreement without free consent is _______.

  1. voidable contract

  2. void contract

  3. valid contract

  4. illegal agreement
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

When consent is not free, it is voidable at the option of aggrieved party. Void contracts are those which were otherwise valid but had become void due to certain event. If a contract fulfills all conditions, it is a valid contract.

Multiple choice

Mistake of fact in a contract may be ______.

  1. unilateral only

  2. bilateral only

  3. both unilateral and bilateral

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

Mistake made by both the parties of contract is bilateral, while mistake by one of the parties is unilateral mistake.

Multiple choice

An agreement with a minor comes under

  1. void contract

  2. voidable contract

  3. valid contract

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

Agreements with minor are void ab initio, i.e. void agreements. Void contracts are those which were otherwise valid, but had become void due to certain event. If a contract fulfills all conditions, it is a valid contract. A contract is voidable if it is caused by fraud, coercion, etc.

Multiple choice

Which of the following can make valid contract?

  1. Alien enemy

  2. Minors

  3. Professionals

  4. Person with permanently unsound mind
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A professional is eligible to make a valid contract. Alien enemies and minors are disqualified by law from making contracts.

Multiple choice

Mistake of fact in a contract may be ______.

  1. unilateral only

  2. bilateral only

  3. both unilateral and bilateral

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

Mistake made by both the parties of contract is bilateral, while mistake by one of the parties is unilateral mistake.

Multiple choice

A bill of exchange is a/an

  1. unconditional order to pay

  2. conditional order to pay

  3. unconditional promise to pay

  4. conditional promise to pay
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A bill of exchange is always an unconditional order to pay. A promissory note is an unconditional promise to pay.

Multiple choice

Minors can sign a loan document.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A minor is legally incompetent to enter into a contract. Therefore, a loan document signed by a minor is void ab initio.

Multiple choice

Assertion (A): Collateral transactions to wagering agreements are valid. Reason (R): Only wagering agreements are declared void under Section 30 of the Indian Contract Act.

  1. (A) is true, but (R) is false.

  2. (A) is false, but (R) is true.

  3. Both (A) and (R) are true, but (R) is not the correct explanation of (A).

  4. Both (A) and (R) are true, and (R) is the correct explanation of (A).
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Collateral transactions to wagering agreements are valid. Only wagering agreements are declared void under Section 30 of the Indian Contract Act.

Multiple choice

Expand FRA.

  1. Forward Rate Agreement

  2. Future Rate Agreement

  3. False Rate Agreement

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

In derivatives market, FRA is Forward Rate Agreement.

Multiple choice

Mr. A who is a civil contractor is a close relative of yours who has helped you on numerous occasions. He has applied for a public contract for the construction of a flyover. The tenders for the contract are to be examined by a committee in which you are also a member. You are not aware that Mr. A has applied for the contract till the day the name of the applicants was put before the committee. The tender is to be evaluated after a week. In such a situation you would

  1. try to influence the other member of committee so that contract gets awarded to Mr. A. This way you would repay Mr. A for all his favours

  2. inform the chairman of the committee about your close relationship with Mr. A and ask him to appoint some other person in your place in the committee. In this way there would be no charges of favouritism against you in case Mr. A eventually gets the contract

  3. ask Mr. A to withdraw his tender lest somebody accuses you of favouritism

  4. take no action and not inform the chairman or anybody about your relationship with Mr. A. Let the contract be awarded on merit
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Informing the chairman of the committee and seeking to be replaced is the best course of action (Option (2)). The committee should function in a transparent and unbiased manner. Besides it should not convey any impression of favouritism.

Principle/Value Tested   Desire to uphold transparency and probity in public life