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All questions of Unit 3: Other Essential Elements of a Contract for CA Foundation Exam

 X offers to sell a painting to Z which X knows is the copy of a well-known master piece. Z thinking that the painting is original decides to buy it at a very high price. Is this a valid contract?
  • a)
    Yes, price is not the criteria for setting aside the contract 
  • b)
    No, X is guilty of fraud. 
  • c)
    Yes, Z has an erroneous belief as to the value of the painting 
  • d)
    No X is guilty of misrepresentation 
Correct answer is option 'C'. Can you explain this answer?

Poonam Reddy answered
Section to which the given problem relates: Explanation to Section 20.
Decision:
This contract is valid.
Reason:
An erroneous opinion as to the value of the thing which forms the subject matter of the agreement is not treated as mistake relating to a matter of fact. Here, X will have to blame himself for ignorance of the true value of the painting. 

S, a seller of imitation jewellery, sells his business to B and promises, not to carry on business in imitation jewellery and real jewellery. The agreement is: 
  • a)
    Fully valid 
  • b)
    Valid with regard to imitation jewellery and void as regards real jewellery 
  • c)
    Void with regard to imitation jewellery, and valid as regards real jewellery 
  • d)
    Wholly void 
Correct answer is option 'A'. Can you explain this answer?

Explanation:
The given agreement is a restrictive covenant, which means that the seller is restricted from carrying on a similar business after selling his business to the buyer.

Validity of the Agreement:

The agreement is fully valid as it meets the following conditions:

- The agreement is made in connection with the sale of a business - The seller has sold his business of imitation jewellery to the buyer. The restrictive covenant is made in connection with the sale of this business.

- The restriction is reasonable in terms of time and geographical area - The agreement does not specify the time duration or geographical area of the restriction. However, it can be inferred that the restriction is reasonable as it applies only to imitation jewellery and real jewellery.

- The restriction is necessary to protect the goodwill of the business - The restriction is necessary to protect the goodwill of the business as the seller has sold his business of imitation jewellery to the buyer. If the seller carries on a similar business, it may lead to confusion among customers and harm the reputation of the buyer's business.

Therefore, the agreement is fully valid as it meets all the necessary conditions for a restrictive covenant.

An agreement caused by mistake of Indian Law is : 
  • a)
    A void agreement 
  • b)
    A voidable agreement 
  • c)
    A valid agreement 
  • d)
    None of the above 
Correct answer is option 'C'. Can you explain this answer?

Srsps answered
Answer :
According to Section 20, “Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void”.

A mortgage was executed in favour of a minor. Can the minor get a Decree for the enforcement of the mortgage?
  • a)
    Yes
  • b)
    No
  • c)
    Can’t say
  • d)
    Mortgage is invalid
Correct answer is option 'A'. Can you explain this answer?

Arun Khanna answered
Beneficiary : A minor can be a promisee or a beneficiary in a contract and he can opt to enforce the contract to his advantage.
Ex. A mortgage is executed in favour of a minor. The minor can get a decree for enforcement of mortgage.

Parents or guardians shall _________ for breach of contract by minor:
  • a)
    Be held liable
  • b)
    Not be held liable
  • c)
    Be imprisoned
  • d)
    Not be questioned
Correct answer is option 'B'. Can you explain this answer?

Kavita Joshi answered
The guardian or parents of a minor is not liable for the acts of the minor, even if the contract is for the supply of necessaries to the minor. However, if a minor acts as an agent of the guardian or parents, the guardian can be held liable for the acts of the minor.

A minor can do which of the following things?
  • a)
    Plead minority 
  • b)
    Can act as an agent 
  • c)
    Enter contract of apprenticeship 
  • d)
    All of the above 
Correct answer is option 'D'. Can you explain this answer?

Ipsita Rane answered
Minor's Rights and Restrictions:

Minors are individuals who have not yet reached the age of majority, which is 18 years in India. As per the Indian Contract Act, minors are not competent to enter into a contract, except in certain cases. The following are the rights and restrictions of minors:

Rights of Minors:

1. Plead Minority: A minor can plead minority as a defense in any legal proceedings against them.

2. Enter Contract of Apprenticeship: A minor can enter into a contract of apprenticeship, which is a type of contract that allows the minor to learn a particular trade or profession while working under the guidance of a skilled person.

3. Enjoy Property Rights: A minor can own and enjoy the property, and any income generated from it.

Restrictions of Minors:

1. Cannot Enter into a Contract: A minor cannot enter into a contract, except in certain cases, such as contracts of apprenticeship.

2. Cannot Act as an Agent: A minor cannot act as an agent or represent someone else in a contract.

3. Cannot Sue or Be Sued: A minor cannot sue or be sued in their own name. However, their guardian can sue or defend on their behalf.

Conclusion:

In conclusion, a minor can plead minority, enter into a contract of apprenticeship, and enjoy property rights. However, they cannot enter into a contract, act as an agent, or sue or be sued in their own name. It is important to understand the rights and restrictions of minors before entering into any legal agreement with them.

 If mistake is unilateral then the contract is: 
  • a)
    Void 
  • b)
    Voidable 
  • c)
    Valid 
  • d)
    Illegal
Correct answer is option 'C'. Can you explain this answer?

Nandini Iyer answered
In other words, a unilateral mistake occurs when only one party is mistaken as to the subject matter or the terms contained in the contract agreement. This type of mistake is generally more common than other types of contract mistakes, such as a mutual mistake (an error that is shared by both parties).

An agreement in restraint of legal proceedings is void. It does not cover an agreement which : 
  • a)
    Cuts short the period of limitation 
  • b)
    Restricts absolutely the parties from enforcing their legal rights 
  • c)
    Discharges a party from liability or extinguishes the rights of a party 
  • d)
    Provides for a reference to arbitration instead of court of law
Correct answer is option 'D'. Can you explain this answer?

Jayant Mishra answered
Agreements in restraint of legal proceedings, void
11[Every agreement,-

(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights; or

(b) which extinguishes the rights of any party thereto, or discharges any party thereto from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights, is void to that extent.]

Exception 1 : Saving of contract to refer to arbitration dispute that may arise: This section shall not render illegal contract, by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subject shall be referred to arbitration, and that only the amount awarded in such arbitration shall be recoverable in respect of the dispute so referred . 12[* * *]

Exception,2 : Saving of contract to refer questions that have already arisen : Nor shall this section render illegal any contract in writing, by which two or more persons agree to refer to arbitration any question between them which has already arisen, or affect any provision of any law in force for the time being as to references to arbitration.

Mistake relating to the identity of subject matter by both the parties is called ________.
  • a)
    Unilateral Mistake
  • b)
    Bilateral Mistake
  • c)
    Not a mistake
  • d)
    Misrepresentation.
Correct answer is option 'B'. Can you explain this answer?

Priya Patel answered
 A bilateral mistake of fact occurs when both parties to the contract are operating under a mistaken reality. Bilateral mistakes are also known as mutual mistakes or common mistakes.

Which contracts are not Wagering Contract ?
  • a)
    Bull & Bear Activities 
  • b)
    Lottery 
  • c)
    Speculative Activities 
  • d)
    All of these 
Correct answer is option 'C'. Can you explain this answer?

Rajat Patel answered
A contract by which a promisor agrees that upon the occurrence of an uncertain event or condition he or she will render a performance for which there is no agreed consideration exchanged, and under which the promisee or the beneficiary of the contract is not made whole for any loss caused by such occurrence

 Which of the following agreements are expressly declared void by the Indian Contract Act?
  • a)
    Agreement made without consideration 
  • b)
    Agreement by a minor or a person of unsound mind 
  • c)
    Agreement in restraint of marriage 
  • d)
    Agreement of which the consideration and object are unlawful 
Correct answer is option 'C'. Can you explain this answer?

Srsps answered
Certain agreements have been expressly declared void by Indian contract Act, 1872.According to section 2(g) of Indian contract Act, 1872, “a void agreement is an agreement which is not enforceable by law”. Such an agreement does not give rise to any legal consequence and is void ab initio.

1. Agreements in Restraint of Marriage:
Every individual enjoys the freedom to marry and so according to Section 26 of the Contract Act “every agreement in restraint of the marriage of any person, other than a minor, is void.”

The restraint may be general or partial but the agreement is void, and therefore, an agreement agreeing not to marry at all, or a certain person, or a class of persons, or for a fixed period, is void. However, an agreement restraining the marriage of a minor is valid under the Section.

It is interesting to note that a promise to marry a particular person does not imply any restraint of marriage, and is, therefore, a valid contract.

A person who enters into a contract with a minor is _____.
  • a)
    Responsible for Losses arising out of contract.
  • b)
    Not responsible for all the losses.
  • c)
    Responsible for giving compensation granted to a suit
  • d)
    Cannot sue the minor.
Correct answer is option 'D'. Can you explain this answer?

Arun Khanna answered
A minor cannot disaffirm part of a contract and agree to another part of a contract; the contract is considered in its entirety.
Ratification. A contract can only be disaffirmed while the individual is a minor. After the person reaches maturity, if the contract continues, the former minor is considered to have ratified the contract and is now bound by the contract terms. A person may ratify by signing something, or by continuing to abide by the contract (making payments, for example).so Cannot use the minor.

Which of the following is not expressly declared void?
  • a)
    Wagering agreement 
  • b)
    Agreement to pay time barred debt. 
  • c)
    Agreement the meaning of which is certain 
  • d)
    Consideration unlawful in part. 
Correct answer is option 'B'. Can you explain this answer?

Vivek Vivek answered
Agreement to pay time barred debt is valid if the following conditions are satisfied.
1) the agreement must be time barred
2) the agreement must be in written and signed by debtor.
3) the agreement must be to pay part or whole amount.

Remaining all are void in nature.

A Contract which is created without the consent of the party is ______.
  • a)
    Void
  • b)
    Voidable
  • c)
    Valid
  • d)
    All of the above.
Correct answer is option 'B'. Can you explain this answer?

Nandini Iyer answered
A voidable contract is a formal agreement between two parties that may be rendered unenforceable for a number of legal reasons. Reasons that can make a contract voidable include failure by one or both parties to disclose a material fact; a mistake, misrepresentation or fraud; undue influence or duress; one party's legal incapacity to enter a contract; one or more terms that are unconscionable; or a breach of contract.

A person who had the means of discovering the truth with ordinary diligence can avoid the contract on the ground of misrepresentation this statement is ________
  • a)
    True
  • b)
    False 
  • c)
    Partly true 
  • d)
    Can’t say
Correct answer is 'B'. Can you explain this answer?

Vijay Mani answered
FALSE STATEMENT OF FACT....If a person is avoiding the contract on ground of misrepresentation. it means first he has believed that it was true. and later entering Into contract only he come to knew about this it is false statement. But in this case he alredy discovered it is fault before entering into contract. Avoiding the contract (before contract is entered) is different from cancelling the contract(after contract is made) .

Ram, a minor got injured his left leg in a football match. He engaged a doctor for the treatment of the leg. The doctor wants to claim for his services from the minor’s property. The claim of the doctor is _______ under the Indian Contract Act, 1872. 
  • a)
    Valid 
  • b)
    Invalid 
  • c)
    Void 
  • d)
    Illegal 
Correct answer is option 'A'. Can you explain this answer?

Nikita Singh answered
As per sec 68 of Indian contract act ,1872 , Necessities provided to Incapable persons or their dependents can be claimed from the property of such persons.  Here  the facilities provided to ram by the doctor is necessities to him . so the claim by the doctor is valid.

 An illiterate old woman made a gift deed for practically her entire property to her nephew who managed her affairs. The gift can be set aside on the grounds of : 
  • a)
    Mistake
  • b)
    Coercion 
  • c)
    Fraud 
  • d)
    Undue Influence 
Correct answer is option 'D'. Can you explain this answer?

Jayant Mishra answered
In jurisprudence, undue influence is an equitable doctrine that involves one person taking advantage of a position of power over another person. This inequity in power between the parties can vitiate one party's consent as they are unable to freely exercise their independent will.

The concept of Duress under English Contract Law is similar to: 
  • a)
    Undue Influence 
  • b)
    Misrepresentation
  • c)
    Coercion 
  • d)
    Fraud 
Correct answer is option 'C'. Can you explain this answer?

Duress and undue influence essentially means that a person or party has been forced into a contract. The contract cannot be considered to be a valid agreement under these circumstances. Under common law, there are two doctrines to consider: duress and undue influence.

Atul contracted to make and deliver 350 pairs of shoes to Bansi by 1st January. A strike of Atul’s employees prevented him from fulfilling his contract. In a suit by Bansi for breach of contract, Atul claimed that the contract was terminated by impossibility of performance. Was his defence good?
  • a)
    No, Atul is liable to Bansi for damages
  • b)
    Yes, doctrine of supervening impossibility applies
  • c)
    Yes, doctrine of frustration will apply
  • d)
    Option (b) but not (c)
Correct answer is option 'A'. Can you explain this answer?

Disha Joshi answered
's workers delayed production, so he was only able to make and deliver 250 pairs of shoes by the deadline. Bansi was understandably upset and demanded compensation for the missing 100 pairs of shoes.

Atul apologized for the delay and offered to either refund the cost of the missing 100 pairs of shoes or to deliver them as soon as possible with no extra charge. Bansi was satisfied with the offer of the refund and agreed to it.

Atul learned from this experience and made sure to plan for potential delays in future contracts. He also made a point to communicate with his clients throughout the process to avoid any surprises or misunderstandings.

If the illegal part of a contract is inseparable from legal part of the contract, the contract becomes :
  • a)
    Void 
  • b)
    Voidable 
  • c)
    Valid 
  • d)
    Unenforceable 
Correct answer is option 'A'. Can you explain this answer?

Kalyan Ghoshal answered
Understanding Contract Legality
A contract is an agreement between parties that creates legal obligations. However, for a contract to be enforceable, it must be lawful in its entirety. When an illegal part of a contract is inseparable from its legal components, the entire contract is deemed void.
Why the Contract Becomes Void
- Definition of Void Contract: A void contract is one that is not legally binding from the moment it is created. It lacks enforceability due to its illegal nature.
- Inseparability of Illegal and Legal Parts: If the illegal provisions cannot be removed without altering the essence of the agreement, the contract fails. The court cannot enforce any part of it as it would be against public policy.
Legal Implications
- Public Policy Concerns: Contracts involving illegal activities undermine the law and can harm societal interests. Courts will not assist in enforcing agreements that promote illegal acts.
- No Legal Recourse: Parties to a void contract cannot seek legal remedies for breach, as the contract is treated as if it never existed.
Conclusion
In summary, if a contract contains an illegal component that cannot be separated from its legal parts, it renders the entire contract void. This principle protects the integrity of the legal system and ensures that agreements uphold the law and public policy.

Which of the following will stand under fiduciary relationship as per Indian Contract Act, 1872?
  • a)
    Father and Son
  • b)
    Advocate and Client 
  • c)
    Doctor and Patient 
  • d)
    All of the above
Correct answer is option 'D'. Can you explain this answer?

Arun Khanna answered
The Indian Contract Act, 1872 defines what we mean by “Agreement”. In its section 2 (e), the Act defines the term agreement as “every promise and every set of promises, forming the consideration for each other”.

A contract made by mistake about the Indian Law, is: 
  • a)
    Valid 
  • b)
    Void 
  • c)
    Voidable
  • d)
    Illegal 
Correct answer is option 'A'. Can you explain this answer?

Nandini Iyer answered
A mistake of India law if is regarded as a valid contract since ignorance of the law is not a good enough excuse. But a mistake of foreign law is considered as a mistake of fact, and if such a mistake is bilateral it will lead to a void contract.

The contract of “Uberrimae Fidei” means a contract:
  • a)
    Of Good Faith
  • b)
    Of Good will
  • c)
    Guaranteed by a surety
  • d)
    Of Utmost Good Faith
Correct answer is option 'D'. Can you explain this answer?

Kavita Joshi answered
An uberrimae fidei contract is a legal agreement requiring the highest standard good faith.Uberrimae fidei or uberrima fides is Latin for utmost good faith. Insurance contracts are the most common type of a 
uberrimae fidei contract.

 Mistake as to a law not in force in India makes the contract ________.
  • a)
    Void 
  • b)
    Valid 
  • c)
    Voidable
  • d)
    Illegal 
Correct answer is option 'A'. Can you explain this answer?

Priya Patel answered
“A contract is not voidable because it was caused by a mistake as to any law in force in India; but a mistake as to a law not in force in India has the same effect as a mistake of fact." ... Ignorantia juris haud excusat i.e, ignorance of law is no excuse.

If both the parties are under a mistake as to matter of fact essential to a contract, then contract is________:
  • a)
    Void-ab-initio
  • b)
    Voidable
  • c)
    Void
  • d)
    None of the above
Correct answer is option 'A'. Can you explain this answer?

Rajat Patel answered
Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement, the agreement is void.
Explanation: 
An erroneous opinion as to the value of the things which forms the subject-matter of the agreement, is not be deemed a mistake as to a matter of fact.
Illustrations
(a) A agrees to sell to B a specific cargo of goods supposed to be on its way from England to Bombay. It turns out that, before the day of the bargain in the ship conveying the cargo had been cast away and the goods lost. Neither party was aware of these facts. The agreement is void.
(b) A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of bargain, though neither party was aware of the fact. The agreement is void.
(c) A, being entitled to an estate of the life of B, agrees to sell it to C, B was dead at the time of the agreement, but both parties were ignorant of the fact. The agreement is void.

 All agreement in restraint of trade are void does not apply to : 
  • a)
    The admission of a new partner
  • b)
    Sale of goodwill 
  • c)
    Both (a) and (b)
  • d)
    None of these 
Correct answer is option 'B'. Can you explain this answer?

Rajat Patel answered
The article basically deals with the exceptions to the agreement in restraint of trade provided in Sec. 27 of the Indian Contract Act, 1872.
Exceptions of agreement in restraints of trade with reference to Indian and English case laws
“And while the law of competition may be sometimes hard for the individual, it is best for the race, because it ensures the survival of the fittest in every department.”

A non-compete clause or a covenant not to compete is a term used in contracts under which the employee agrees to not pursue a similar profession, trade or business in competition against the employer. Apart from the regular employment agreements, such covenants are also at times included in the agreements relating to sale of goodwill of business or professional practice, employment exit and other exclusive dealings and service arrangements.

The Indian Contract Act, 1872, which provides a framework of rules and regulations, governing the formation and performance of a contract in India deals with the legality of such non-compete covenants. It stipulates that an agreement, which restrains anyone from carrying on a lawful profession, trade or business, is void to that extent. Under section 27 of the Indian Contract Act, 1872 agreements in restraint of trade are void.

Agreement in restraint of trade is defined as the one in which a party agrees with any other party to restrict his liberty in the present or the future to carry on a specified trade or profession with other persons not parties to the contract without the express permission of the latter party in such a manner as he chooses. Providing for restraint on employment in the employment contracts of the employees in the form of confidentiality requirement or in the form of restraint on employment with competitors has become a part of the corporate culture.

However, the researcher in his paper will be dealing with the exceptions for the same, which has also been provided in the later part of the same section i.e. 27 of the Indian Contract Act, 1872.

SECTION 27;
Every agreement by which anyone is restrained from exercising a lawful profession or trade or business of any kind, is to that extent void.

EXCEPTION: One who sells goodwill of a business with a buyer to refrain from carrying on a similar business, within specified local limits so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein provided that such limits appear to the Court reasonable, regard being had to the nature of business.

When parties enters into a contract under a mutual mistake of fact the contract is_________ :
  • a)
    Valid 
  • b)
    Voidable 
  • c)
    Void 
  • d)
    None of these 
Correct answer is option 'C'. Can you explain this answer?

Aarya Sharma answered
Mistake of Fact in Contract Law

In contract law, a mistake of fact occurs when one or both parties to a contract misunderstand the essential elements of the agreement at the time it was made. Such a mistake can affect the validity of a contract.

Void Contracts

A void contract is one that is legally unenforceable from the start. A void contract can arise when the subject matter of the contract is illegal or when one of the parties lacks the capacity to enter into the agreement. In the case of a mutual mistake of fact, the contract is void if the mistake relates to a fundamental aspect of the transaction.

Mutual Mistake of Fact

A mutual mistake of fact occurs when both parties to a contract are mistaken about the same essential fact. If the mistake is material, meaning it would have a significant impact on the agreement, then the contract may be voidable or void.

Void Contracts vs. Voidable Contracts

A voidable contract is one that is valid and enforceable but may be rescinded, or canceled, by one or both parties in certain circumstances. For example, a contract may be voidable if one party was coerced into signing it or if one party was under duress.

In the case of a mutual mistake of fact, the contract is void if the mistake relates to a fundamental aspect of the transaction. As such, the contract is not enforceable by either party and is considered void ab initio, or void from the beginning.

Gopalaswami proposed to Raman to give 1 kg. of opium if he destroys the property of Swami Nathan, In this case_______.
  • a)
    Consideration is unlawful 
  • b)
    Object of consideration is unlawful
  • c)
    Consideration is unlawful and object of consideration is partly unlawful
  • d)
    Consideration and its object both are unlawful
Correct answer is option 'D'. Can you explain this answer?

Bhavadharini answered
The object of the above contract is destroying the property of Swaminathan. Any contract in which the object involves injury to a person or his property is unlawful

Similarly, the consideration here is 1 kg of opium. The consideration is unlawful when it opposes social policy.

Marriage brokerage contracts are: 
  • a)
    Void 
  • b)
    Valid 
  • c)
    Legal 
  • d)
    Illegal 
Correct answer is option 'A'. Can you explain this answer?

Rajveer Yadav answered
Marriage Brokerage Contracts are Void

Marriage brokerage contracts refer to an agreement between two parties, where one party (the broker) agrees to find a suitable partner for the other party (the client) in exchange for a fee. While these contracts were prevalent in the past, they are now considered void under the law for several reasons.

1. Against Public Policy

Marriage is a sacred union between two individuals and cannot be treated as a mere business transaction. Therefore, any contract that treats marriage as a commodity is against public policy and cannot be enforced by law.

2. Violation of Fundamental Rights

Marriage brokerage contracts can lead to the violation of fundamental rights, such as the right to privacy and dignity. The personal information of the clients is often shared without their consent, and they may be subjected to unwanted advances or proposals. This can cause mental trauma and emotional distress, violating their fundamental rights.

3. No Legal Standing

Marriage brokerage contracts are not recognized under Indian law. The Indian Contract Act, 1872, does not provide for any specific provisions regarding such contracts. Therefore, any agreement made between the brokerage and the client is not legally enforceable.

4. No Regulation

Marriage brokerage is an unregulated industry in India. There are no specific laws or regulations that govern the functioning of these agencies. Therefore, clients may be subjected to fraudulent practices, including misrepresentation, false promises, and exploitation.

Conclusion

In conclusion, marriage brokerage contracts are void under Indian law. These contracts are against public policy, violate fundamental rights, and have no legal standing. As a result, individuals should avoid entering into such agreements and instead seek traditional methods of finding a suitable partner, such as through family or friends, or online matrimonial portals.

A contract caused by coercion is 
  • a)
    Void 
  • b)
    Voidable 
  • c)
    Valid
  • d)
    Illegal 
Correct answer is option 'B'. Can you explain this answer?

Naveen Garg answered
It is voidable at the option of aggrieved party because of the voilation of free consent which is an essential of valid contract

 In a contract both the parties believe that the subject matter of the contract is in existence but which is infect not in existence. Agreement shall be:
  • a)
    Valid
  • b)
    Void
  • c)
    Void due to bilateral mistake
  • d)
    Void due to unilateral mistake
Correct answer is option 'C'. Can you explain this answer?

Devanshi Rane answered
Validity of a Contract

A contract is an agreement between two or more parties that creates a legal obligation to perform some duties or obligations. For a contract to be valid, it must have the following elements:

1. Offer - An offer is a proposal made by one party to another to enter into a contract.

2. Acceptance - Acceptance is the agreement by the other party to the terms of the offer.

3. Consideration - Consideration is the exchange of something of value by both parties.

4. Competent parties - The parties to the contract must be legally competent to enter into the contract.

5. Legal purpose - The object of the contract must be legal.

Void Due to Bilateral Mistake

When both parties to the contract misunderstand the subject matter of the contract, the agreement is known as a bilateral mistake. In such a case, the contract is voidable. It means that either party can request the contract to be rescinded or cancelled. The reason for this is that there is no meeting of the minds between the parties. The contract is based on a mutual misunderstanding of the subject matter.

Void Due to Unilateral Mistake

When one party to the contract misunderstands the subject matter of the contract, the agreement is known as a unilateral mistake. In such a case, the contract is still valid. However, the party that made the mistake may have the right to rescind or cancel the contract if the other party knew or should have known of the mistake.

In the given scenario, since both parties believed that the subject matter of the contract was in existence but it was actually not in existence, it is a case of bilateral mistake. Therefore, the agreement shall be void due to bilateral mistake.

A fraudulently informs B that his house is free from encumbrances. B thereupon, buys the house. The house is subject to a mortgage. What are the rights of B? 
  • a)
    The contract is voidable at the option of B
  • b)
    He may avoid the contract and get back his money
  • c)
    Both (a) and (b)
  • d)
    Either (a) or (b)
Correct answer is option 'C'. Can you explain this answer?

Rights of B in a Fraudulent Transaction

When A fraudulently informs B that his house is free from encumbrances, and B buys the house, the house is subject to a mortgage. In such a case, the rights of B are as follows:

1. The Contract is Voidable at the Option of B

B has the right to declare the contract voidable at his option. This means that B can choose to either continue with the contract or avoid it, depending on his choice. If B chooses to continue with the contract, he must accept the encumbrances on the house and fulfill his obligations as a buyer.

2. He May Avoid the Contract and Get Back His Money

B also has the right to avoid the contract and get back his money. This means that B can choose to cancel the contract and ask for a refund of the amount paid by him to A. In such a case, A must return the entire amount to B, along with any interest or other charges that may have been paid by B.

3. Both (a) and (b)

B has the right to either declare the contract voidable or avoid the contract and get back his money. He can choose either option based on his preference and the circumstances of the case. Therefore, option (c) is the correct answer.

In conclusion, when A fraudulently informs B that his house is free from encumbrances, and B buys the house that is subject to a mortgage, B has the right to either declare the contract voidable or avoid it and get back his money.

Y sold some goods to X which Y believes to be of superior quality where as they are of inferior quality. It is a case of:
  • a)
    Misrepresentation 
  • b)
    Coercion 
  • c)
    Mistake 
  • d)
    Fraud
Correct answer is option 'A'. Can you explain this answer?

Suvi answered
Misrepresentation means during the course of action the person is doing something and he believes it to be true but he didn't knew that it is not true.
for example in the Question Y sold some goods to X and he believes that, that goods are of superior quality but the reality was that goods were of inferior quality so he misrepresnet or we can say he misunderstood and it is the case of misrepresentation..
hope u get it
Thankyou

A tells B that he will file a case against him for theft. B tells to A that he will give the half of the market price of the theft. This offer is: 
  • a)
    Void
  • b)
    Voidable
  • c)
    Valid 
  • d)
    None of these 
Correct answer is option 'A'. Can you explain this answer?

Anjana Sharma answered
An empty space; emptiness: He disappeared into the void. something experienced as a loss or privation: His death left a great void in her life. a gap or opening, as in a wall.

Which of the following is not true in case of a minor?
  • a)
    Rule of estoppel
  • b)
    Ratification of terms on attaining majority
  • c)
    Contract with a minor is valid 
  • d)
    All the above.
Correct answer is option 'D'. Can you explain this answer?

Jayant Mishra answered
Minors (those under the age of 18, in most states) lack the capacity to make a contract. So a minor who signs a contract can either honor the deal or void the contract. There are a few exceptions, however. For example, in most states, a minor cannot void a contract for necessities like food, clothing, and lodging.

A boy of 21 years for whose property a guardian has been appointed enters into a contract with B in respect of that property. The contract is:
  • a)
    Valid
  • b)
    Voidable
  • c)
    Void
  • d)
    Invalid
Correct answer is option 'A'. Can you explain this answer?

I think the option C is the correct answer because According to Indian Majority Act ,A minor attains majority at age of 18 but there are 2 exception cases when they attains majority at age of 21 one of them is when guardian is appointed by court to look after the minor or his property or both . in question the boy has attain the age of 21 so guardian has no right on the property of that boy .. let me know if I am wrong .

 A sum of money was agreed to be paid to the father in consideration of his giving her daughter in marriage. The agreement is void on ground’s of being: 
  • a)
    Restraint of marriage 
  • b)
    Marriage brokerage contract 
  • c)
    Restraint of personal liberty 
  • d)
    Restraint of legal proceedings
Correct answer is option 'B'. Can you explain this answer?

Aditya Das answered
That it violates the principles of equality, freedom, and human rights. In many countries, the practice of paying dowry or bride price is considered discriminatory and degrading towards women. It perpetuates the idea that women are commodities to be bought and sold, rather than individuals with their own rights and agency.

Furthermore, paying a sum of money in exchange for marriage can lead to financial exploitation and abuse. It can create power imbalances within the relationship, where the husband or his family may feel entitled to mistreat or control the wife based on the amount of money paid. This can also prevent women from leaving abusive or unhappy marriages, as they may feel financially trapped.

In order to promote gender equality and protect the rights of individuals, many countries have enacted laws to prohibit or regulate dowry or bride price. These laws aim to ensure that marriages are based on free will and mutual consent, rather than financial transactions.

Therefore, any agreement that involves the exchange of money for marriage is considered void and against the principles of equality and human rights.

Chapter doubts & questions for Unit 3: Other Essential Elements of a Contract - Business Laws for CA Foundation 2025 is part of CA Foundation exam preparation. The chapters have been prepared according to the CA Foundation exam syllabus. The Chapter doubts & questions, notes, tests & MCQs are made for CA Foundation 2025 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests here.

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