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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

Which among the following is incorrect with respect to a contract of guarantee?

  1. A liability which is incurred independently of a ‘default’ is not within the scope of guarantee.

  2. The existence of a recoverable debt is necessary.

  3. A guarantee without consideration is not void.

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

(3) In every contract there must be an offer containing a promise and every promise must have a consideration which is accepted or agreed upon.

Multiple choice

In special contracts, with respect to a contract of indemnity,

  1. the party to be indemnified shall never be called upon to pay

  2. all insurance contracts are contracts of indemnity

  3. the promise of indemnity may be express or implied

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

(2) Fire and marine insurance contract, in general, are contracts of indemnity, that is, they provide for compensating the insured for loss or damage sustained. A contract of life insurance forms an exception to the general rule. A life insurance contract does not resemble a contract of indemnity because the insurer does not undertake to indemnify the assured for any loss on maturity or death of the assured but promises to pay sum assured in that event.

Multiple choice

Which section of the Specific Relief Act deals with 'contracts not specifically enforceable'?

  1. Section 9

  2. Section 14

  3. Section 11

  4. Section 10
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Option (1) is incorrect: Section 9 of Specific Relief Act provides for defense respecting suits for relief based on contract. Option (2) is correct: Section 14 of Specific Relief Act deals with 'contracts not specifically enforceable'. Option (3) is incorrect: Section 11 of Specific Relief Act deals with cases in which specific performance of contracts is connected with trust enforceable. Option (4) is incorrect: Section 10 of Specific Relief Act deals with cases in which specific performance of contract is enforceable.

Multiple choice

Interpleader suit cannot be instituted

  1. for any property which relates to two persons, but which is being held by a third person for the time being

  2. for determining the relationship between a property and the persons claiming it

  3. for getting himself absolved from the liability to keep the property which is not being held by him

  4. where a suit is pending in which the rights of all parties can properly be decided
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

It is a suit where the plaintiff holds the property in which he has pecuniary interest. There are many defenders pleading against each other. Section 88 says that such a person can claim against all the claimants. It further says if any suit is pending in which rights of all parties can be properly decided, no such interpleader suit shall be instituted. Thus (4) is the correct option.

Multiple choice

What is/are the presumption(s) under Section 137 of the Negotiable Instruments Act 1881?

  1. A negotiable instrument drawn in a foreign country is genuine.

  2. The law of any foreign country regarding promissory notes, bills of exchange and cheque is same as that of India.

  3. Both (1) and (2)

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

The presumption under section 137 of the Negotiable Instruments Act, 1881 is the law of any foreign  country regarding promissory notes, bills of exchange and cheque is same as that of India.

Multiple choice

Directions: Read Assertion (A) and Reason (R) and answer using the codes given below:

Assertion (A): Where under a contract of sale the property in the goods has passed to the buyer and the buyer wrongfully neglects to pay for the goods according to the terms of the contract, the seller may sue the buyer for the price of the goods. Reason (R): The seller is entitled to get the contractual price.

  1. Both (A) and (R) are correct, and (R) is the correct reason for (A).

  2. Both (A) and (R) are wrong.

  3. (A) is wrong, but (R) is right.

  4. (R) is wrong, but (A) is right.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The seller is entitled to get the contractual price in such case.

Multiple choice

Which of the following statements is correct?

  1. If the contract is inconsistent with the public documents, the person contracting will not be prejudiced by irregularities that may set the outdoor working of the company.

  2. If the contract is consistent with the public documents, the person contracting will not be prejudiced by irregularities that may set the indoor working of the company.

  3. The doctrine of indoor management seeks to protect the company against an outsider.

  4. The doctrine of ultra vires seeks to protect the outsider against internal irregularities of the company.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

If the contract is consistent with the public documents, the person contracting will not be prejudiced by irregularities that may set the indoor working of the company.

Multiple choice

For a valid contract, acceptance should be

  1. absolute and qualified

  2. partial but unqualified

  3. absolute and unqualified

  4. absolutely qualified
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Whether the acceptance is expressed or implied, the main point is that it must be absolute (final) and unqualified in order to be effective.

Multiple choice

According to Explanation 2 to Section 25 of the Indian Contract Act, which of the following statements are correct?

i. An agreement to which the consent of the promisor is not freely given is valid because consideration is adequate. ii. An agreement to which the consent of promisor is freely given is valid even if consideration is inadequate. iii. Consideration must be legal. iv. Consideration can be illegal.

  1. i and ii

  2. ii and iii

  3. iii and iv

  4. i and iv

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

According to Explanation 2 to Section 25 of the Indian Contract Act, an agreement to which the consent of the promisor is freely given is not void merely because the consideration is inadequate; but the inadequacy of the consideration may be taken into account by the Court in determining the question whether the consent of the promisor was freely given. 

Multiple choice

Directions: Read the following statements and give the correct explanation with the help of the codes given below.

Assertion (A): Agreement is void when both parties are under mistake as to the matter of law. Reason (R): Parties entering into a contract are legally obliged to know the law relating to the contract.

  1. (A) and (R) are correct and (R) is the correct reason for (A).

  2. (A) is correct, but (R) is wrong.

  3. (R) is correct, but (A) is wrong.

  4. Both (A) and (R) are wrong.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Section 21 says that a contract is not voidable if it was caused by mistake as to law in India. However, mistake as to law outside India has the same effect as mistake of fact. Parties entering into a contract are not legally obliged to know the law relating to the contract.  

Multiple choice

Section 10 of the Contract Act renders some important ingredients of a contract. Which of the following is incorrect according to the Act?

  1. Free consent

  2. Parties must be competent to contract.

  3. Consideration

  4. Lawful object

  5. Terms of the agreement must not be vague or uncertain.
Reveal answer Fill a bubble to check yourself
E Correct answer
Explanation

Section 10 defines what agreements are contracts. There are five essentials for a valid contract and those are free consent, competency of parties, lawful consideration, lawful object and not declared to be void. 'Terms of the agreement must not be vague or uncertain' is no such requirement.

Multiple choice

Past consideration means

  1. money received in the past without even making a proposal

  2. the price that is more than the promisor’s expectation

  3. the price paid or service rendered at the desire or request of the promisor, followed by a subsequent promise

  4. consideration and promise take place simultaneously

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

Consideration is a price for a promise and it is usually given in response to and as an inducement for the promise.

Multiple choice

A breach of contract occurs when

  1. a party renounces his liability under the contract

  2. a party by his own act makes it impossible that he should perform his obligations under the contract

  3. a party totally or partially fails to perform his part of the contract

  4. All of the above

  5. None of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A contract is said to be broken if a party to it refuses to perform it or when a party to a contract disables himself from performing his promise or fails to perform his part of contract either totally or partially.

Multiple choice

Which one is not a property of a transaction?

  1. Atomicity

  2. Isolation

  3. Durability

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

Exchanging is not a property of a transaction. The ACID properties of a transaction are:

  1. Atomicity
  2. Isolation
  3. Durability
  4. Consistency