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 meaning and characteristics of negotiable instruments the negotiable instruments act, 1881 commerce

Introduction of Negotiable Instruments
If the day of maturity falls on a public holiday, the instrument is payable on the -.

  1. Preceding business day

  2. Next business day

  3. Next Monday

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

If the day of maturity falls on a public holiday, the instrument is payable on the next preceding business day. he expression “Public Holiday” includes Sundays and any other day declared by the Central Government, by notification in the Official Gazette, to be a public holiday. 

Multiple choice meaning and characteristics of negotiable instruments the negotiable instruments act, 1881 commerce

Classification of Negotiable Instruments
In the case of bill of exchange, the expression "after sight" means -.

  1. After acceptance

  2. After noting for non-acceptance

  3. After acceptance, or after noting for non-acceptance or after protest for non-acceptance

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

In a promissory note or bill of exchange the expressions "at sight" and "on presentment" means on demand. The expression "after sight" means, in a promissory note, after presentment for sight, and, in a bill of exchange after acceptance, or noting for non-acceptance, or protest for non-acceptance.In both the situations the payment cannot be demanded unless it is presented before the banker.

Multiple choice meaning and characteristics of negotiable instruments the negotiable instruments act, 1881 commerce

Classification of Negotiable Instruments
A promissory note or a bill of exchange payable after a fixed period, or after sight, or on specific day, or on the happening of an event which is certain to happen, is known as a/an -

  1. Time instrument

  2. Demand instrument

  3. Foreign instrument

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

The types of Negotiable instruments are largely determined based upon the scope of definition given to negotiable instruments and specification of the instruments legally recognized as negotiable in that country’s law. A time instrument is payable at a definite future time and the event is certain to happen. For instance, an instrument payable 3 months after date is payable 3 months after the date written on its face. 

Multiple choice meaning and characteristics of negotiable instruments the negotiable instruments act, 1881 commerce

Classification of Negotiable Instruments
An instrument, which in form is such that it may either be treated by the holder as a bill or as a note, is an -.

  1. Inchoate instrument

  2. Order instrument

  3. Incomplete instrument

  4. Ambiguous instrument
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Ambiguous Instruments is defined in Section 17 of Negotiable instruments Act, 1881. Ambiguous Instrument is an instrument, which in form is such that it may either be treated by holder as a note or as a bill.

Multiple choice meaning and characteristics of negotiable instruments the negotiable instruments act, 1881 commerce

Which of the following are examples of Quasi Negotiable Instruments?

  1. Govt. promissory notes

  2. Dividend warrants

  3. Share warrants

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

Quasi Negotiable Instruments are those Instruments which can be transferred by endorsement and delivery but the transferee does not get a better title that of the transferor. Therefore they cannot be classified as negotiable Instruments and hence the negotiable Instruments act is not applicable to them. It includes government promissory notes, railway receipts, bills of lading, dividend warrants and share warrants.

Multiple choice meaning and characteristics of negotiable instruments the negotiable instruments act, 1881 commerce

Which of the following is NOT the essential requirement for the endorsement as per Negotiable Instrument Act, $1881$?

  1. It should be on the instrument.

  2. It should be made by the holder on the maker.

  3. Signatures should be in ink and not by pencil or rubber stamp.

  4. It should contain unconditional order.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
In the words of Section 15, of the Negotiable Instruments Act, 1881 endorsement is defined as when the maker or the holder of a negotiable instrument signs the same otherwise than as such maker, for the purpose of negotiation, on the back or face thereof or on a slip of paper annexed thereto, he is said to endorse the same and is called the endorser and the person to whom the instrument is endorsed is called the endorsee. The requirements for endorsement under the act are:
  • It must be on the instrument. The endorsement may be on the back or the face of the instrument and if no space is left on the instrument, it may be made on a separate paper attached to it called along.
  • It must be an endorsement of the entire bill. A partial endorsement that is which purports to transfer to the endorse a part only of the amount payable does not operate as a valid endorsement.
  • It must be made by the maker or holder of the instrument. A stranger cannot endorse it.
  • It may be made either by the endorser merely signing his name on the instrument or by any words showing an intention to endorse or transfer the instrument to a specified person.
  • It must be signed by the endorser. It is not necessary to write the full name initial may be sufficient. Thumb- impression should be attested.
Multiple choice introduction of business laws business law and contract act business studies

Principle: The consideration or object of an agreement is unlawful if it is forbidden by law. Every agreement of which the object or consideration is unlawful is void.
Facts: 'X' promises to pay 'Y' $Rs. 50000$, if he ('Y') commits a crime, 'X' further promises to indemnify him ('Y') against any liability arising thereof. 'Y' agrees to act as per X's promise.
Which of the following derivations is correct?

  1. There is a contract between 'X' and 'Y'

  2. There is an agreement between 'X' and 'Y' which can be enforced by the court of law

  3. There is an agreement between 'X' and 'Y' which cannot be enforced by the court of law

  4. There is a voidable contract between 'X' and 'Y'
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Section $23$ of the Indian Contract Act $1872$, states that the consideration or object of an agreement is lawful, unless It is forbidden by law; or is of such nature that, if permitted it would defeat the provisions of any law or is fraudulent, of invalnes or implies, injury to the person or property of another, or the court regards it as immoral or opposed to public policy.
In the present scenario, X promises to pay Y $Rs. 50000$ if he (Y) commits a crime. Here both the object and consideration are unlawful and forbidden by law, So, the agreement between X and Y cannot be enforced by the court of Law.

Multiple choice introduction of business laws business law and contract act business studies

Choose the correct answer from the alternatives given.
Contracts made before war with an alien enemy which are against public policy are:

  1. suspended and are revived after the war is over.

  2. dissolved

  3. not affected at all

  4. void ab initio
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Contracts with an alien enemy that are against public policy are dissolved, as they cannot be performed during the war.

Multiple choice introduction of business laws business law and contract act business studies

Choose the correct answer from the alternatives given.
Who among the following is not disqualified by law to enter in to contract?
1. A major person    
2 . A lunatic    
3. Insolvent person 
4.  Diplomatic staff of foreign states

  1. 1 & 2

  2. 2 & 3

  3. 3 & 4

  4. 1 & 4
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A major person is competent to contract. Diplomatic staff of foreign states are generally immune from legal proceedings in domestic courts, making them effectively disqualified from being sued for breach of contract. Lunatics and insolvent persons are legally disqualified from entering into valid contracts.

Multiple choice introduction of business laws business law and contract act business studies

Choose the correct answers from the alternatives given
Claim for Quantum Meruit cannot arise in case of _________.

  1. Void Agreements

  2. Void Contracts

  3. Non-Gratuitous Act

  4. Gratuitous Act
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Quantum Meruit refers to payment for work done. It cannot arise in a gratuitous act because there is no expectation of payment or legal obligation to pay for services rendered voluntarily.

Multiple choice introduction of business laws business law and contract act business studies

Choose the correct answers from the alternatives given
The basis of quasi contractual relations is the________________.

  1. existence of a valid contract between the parties

  2. prevention of unjust enrichment at the expense of others

  3. Provisions contained in Section 10 of the Contract Act

  4. Existence of a voidable contract between the parties
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Quasi-contracts are not true contracts but are legal obligations imposed by law to prevent one party from being unjustly enriched at the expense of another. This principle is the foundation of quasi-contractual liability.

Multiple choice introduction of business laws business law and contract act business studies

Choose the correct answers from the alternatives given
Which of the following statements is not correct?

  1. Right of one party is the obligation of another party

  2. Every contract is an agreement, but every agreement is not contract

  3. Quantum meruit means void from the beginning

  4. Social agreements are not legally enforceable
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Quantum meruit means as much as is earned or deserved, referring to compensation for work performed. It does not mean void from the beginning, which is the definition of void ab initio.

Multiple choice introduction of business laws business law and contract act business studies

When an agreement is discovered to be void, any person who has received any advantage under such agreement ____________.

  1. is bound to restore it

  2. is not bound to return it

  3. may retain it

  4. both A and B
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Under section 65 of the Indian Contract Act, 1872, when an agreement is discovered to  be void or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make  good the compensation received if any, to the person from whom he received it.

Multiple choice business organisation introduction to financial markets concept of financial market meaning and definition of financial market concepts and functions of financial markets

An endorsement is said to be Partial endorsement, if it satisfies which of the following conditions?

  1. If the endorser sings his name only

  2. If the endorser adds a direction to pay the amount mentioned in the instrument to the order of a specified person

  3. If the endorse restricts or excludes the right to further negotiate the instrument

  4. If the endorser purports to transfer to the endorsee only a part of the amount payable
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

An endorsement is said to be Partial endorsement, if the endorser purports to transfer to the endorsee only a part of the amount payable. In simple terms, endorsement which allows transferring to the endorsee a part of the amount payable is known as partial endorsement.