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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

Directions: Go through the problem and encircle the most appropriate answer.

A contract without consideration is void. When at the desire of one party, the other party does something, the consideration is said to flow from the latter to the former. A house was on fire and a child was trapped inside the house. Everyone was shouting for help. A brave onlooker, hearing the shreikhs of child, went inside the house and brought it out. The grateful father of the child promised to pay the rescuer Rs. 10,000/-. Subsequently, he reneged the promise. The rescuer sused the promise for the breach.

  1. The father of the child must pay for the service rendered by the rescuer.

  2. The rescuer is not entitled to the payment, since he acted on his own.

  3. Commercial considerations cannot be applied to humanitarian instincts.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

(2) The rescuer did not carry out the rescue in pursuance of a promise to pay by the father. He did the act on his own and not in exchange for any promise. The subsequent promise does not amount to a contract since for a contract an act, just be done at the desire of another, as is clearly not the case here.

Multiple choice

Directions: Go through the problem and encircle the most appropriate answer.

Agreements, the meaning of which are not certain or capable of being made certain, are void. A lease agreement between the landlord and tenant would spend his own money in renovating the house and adjust it against the monthly rent of Rs. 4000/-. The tenant in the course of renovation covered the courtyard which was open; and for covering the courtyard, spent Rs. 1 lakh. When he sought to adjust it against the monthly rent, the landlord argued that the renovation did not include covering the courtyard. The landlord's submission was that the contract was void on account of uncertainty.

  1. The clause concerning renovation is valid, because the cost incurred was clearly identified.

  2. The clause concerning renovation is void, because the landlord and tenant had different perceptions thereof.

  3. The landlord must have taken care to define renovation; and for his oversight, he cannot blame the tenant.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The landlord could not have contemplated an expensive task such as the covering of the courtyard within the definition of renovation. Clearly, both the parties had different conception of what actually amounted to renovation.

Multiple choice

What are the essentials of a valid contract?

  1. Free consent between all the parties of a contract

  2. Acceptance of offer

  3. There should be an offer

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A valid contract must have: Offer and acceptance Lawful consideration Capacity of parties Free consent Lawful object 

Multiple choice

A contract is

  1. an agreement enforceable by law

  2. a set of promises

  3. a communication of intention to do something or abstain from doing

  4. a promise to do something or abstain from doing something
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

A contract is an agreement enforceable by law.  An agreement must meet certain criteria in order to be enforceable by law and qualify as contract.

Multiple choice

Minor’s contract is

  1. void

  2. voidable

  3. voidable at the option of the minor

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

An agreement by a minor involves a promise on his part and he is incapable of giving a promise imposing a legal obligation. Indian Contract act declares that a minor is not competent. Therefore, the agreement with the minor is void ab initio i.e void from the beginning.

Multiple choice

Prima facie means

  1. in contract

  2. in confidence

  3. things seen at first

  4. in the face of

  5. None of these

Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The term prima facie is used to describe the apparent nature of something upon initial observation. Prima facie is a Latin expression meaning 'on its first encounter or at first sight'.

Multiple choice

Illegality renders a contract

  1. punishable

  2. void

  3. illegal

  4. All of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

An agreement to carry out an illegal act is an example of a void agreement. Neither party can go to court to enforce the contract. A void agreement is void ab-initio, i.e from the beginning whereas a voidable contract can be voidable by one or all of the parties.

Multiple choice

A contract by a minor is

  1. void ab initio

  2. illegal

  3. voidable

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

Option (1) is correct: Under Indian Contract Act, a minor is not competent to enter into a contract. So from the words, it is clear that a contract with a minor is void ab initio, that is void from the beginning.

Multiple choice

‘A’ has lent money to ‘B’ under a written agreement containing an arbitration clause. The agreement does not specify the time of repayment. Rather the money was repayable on demand by ‘A’. ‘A’, after five years of the date when the loan was made, demanded the money which was not repaid by ‘B’. The parties could not arrive at a consensus on the appointment of arbitrator also. ‘A’ filed an application under section 11 of the Arbitration and Conciliation Act, 1996 before the chief justice of the high court for appointment of an arbitrator. ‘B’ in response to the said application contends that the claim of ‘A’ is stale and barred by time and thus, arbitrator be not appointed. The chief justice

  1. is bound to appoint the arbitrator leaving the plea of limitation open for decision in arbitration award

  2. is bound of dismiss the application for appointment of arbitrator since the claim adjudication whereof is sought by arbitration is barred by time

  3. is required to make ‘B’ deposit the money in court and then appoint the arbitrator and refer the parties to arbitration

  4. is required to require ‘A’ to furnish security for actual costs of arbitration to be incurred by ‘B’ and then appoint the arbitrator and refer the parties to arbitration
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

(1) The chief justice is bound to appoint the arbitrator leaving the plea of limitation open for decision in arbitration award.

Multiple choice

Which of the following statements is correct about ratification?

  1. It allows a principal to accept the acts of an agent after a contract has been negotiated for which the agent lacked authority.

  2. It occurs when the agent negotiates a contract on a principal's behalf.

  3. It allows the correction of an incorrect term of a contract.

  4. It means that the agent and not the principal is responsible for the contract.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

(1) Ratification allows a principal to accept the acts of an agent after a contract has been negotiated for which the agent lacked authority.

Multiple choice

A and B agree that A shall pay B Rs. 500 for which B shall afterwards deliver to A one quintal wheat or a smuggled pistol. Which of the following is correct?

  1. The whole agreement is void.

  2. The whole agreement is valid.

  3. The whole agreement is unlawful.

  4. The agreement to deliver wheat is valid, but the agreement is void as fpr the pistol.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Option (1) is incorrect as a part of the contract is valid. Option (2) is incorrect as a part of contract is void.  Option (3) is incorrect as the whole contract is not unlawful. Option (4) is correct answer: The agreement to deliver wheat is valid, but the agreement is void as for the pistol. 

Multiple choice

Which of the following essentials of a contract does not find place in the Indian Contract Act, 1872?

  1. Competency of parties

  2. Real consideration

  3. Intention of contract

  4. Lawful object
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Option (3) is correct as the intention of contract is not mentioned in contract act. Section 11 is concerned with competency of parties. As per contract act, the consideration should be real, not illusory. The object should be lawful.

Multiple choice

Agency by conduct arises

  1. when a person knowingly permits another to act on his or her behalf

  2. when a contract is entered to allow the agent to act in a certain manner

  3. when a contract is negotiated with a third party

  4. when a principal makes it clear that an agent does not have authority to act on their behalf
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

(1) Agency by conduct arises when a person knowingly permits another to act on his or her behalf.