Test: Other Essential Elements Of A Valid Contract- 1 - CA Foundation MCQ

Expressly declared void agreements under the Indian Contract Act:


There are certain agreements that are expressly declared void under the Indian Contract Act. These agreements are considered legally unenforceable and have no legal effect. One such agreement is:
Agreement in restraint of marriage:
- An agreement that restrains any person from marrying is expressly declared void under the Indian Contract Act.
- Such agreements are considered against public policy and are not allowed to be enforced by law.
- The reason behind this provision is to protect the freedom of individuals to marry according to their own will and choice.
Other agreements that are not expressly declared void but are also unenforceable include:
Agreement made without consideration:
- An agreement without consideration is generally considered unenforceable, except in certain specific cases mentioned in the Indian Contract Act.
- Consideration refers to something of value exchanged between the parties to a contract.
- Without consideration, an agreement lacks the essential element required for a valid contract.
Agreement by a minor or a person of unsound mind:
- Agreements made by minors (persons below the age of 18 years) or persons of unsound mind are voidable at the option of the minor or the person of unsound mind.
- This provision is aimed at protecting the interests of minors and persons who are not capable of understanding the consequences of their actions.
Agreement of which the consideration and object are unlawful:
- Any agreement that involves unlawful consideration or object is considered void.
- Unlawful consideration refers to something that is illegal or against public policy.
- Unlawful object refers to an agreement that involves an act that is illegal or against public policy.
In conclusion, the Indian Contract Act expressly declares an agreement in restraint of marriage as void. Additionally, agreements made without consideration, agreements by minors or persons of unsound mind, and agreements with unlawful consideration or object are also unenforceable. It is important to note that there might be exceptions or specific circumstances where these agreements may be valid or enforceable, but in general, they are considered void.

Minor's Abilities and Limitations
A minor, who is someone under the age of majority (usually 18 years old), has certain abilities and limitations when it comes to legal matters. Here are the details regarding what a minor can and cannot do:
1. Can plead minority: A minor can claim the defense of minority in legal proceedings. This means that they can argue that they are not legally responsible for their actions due to their age. However, this defense may not always be successful, especially for certain serious offenses.
2. Cannot act as an agent: Generally, a minor does not have the legal capacity to act as an agent. An agent is a person who has the authority to act on behalf of someone else. Since a minor is not considered to have the full legal capacity of an adult, they are generally not able to enter into contracts or agreements on behalf of others.
3. Can enter a contract of apprenticeship: A minor can enter into a contract of apprenticeship, which is an agreement to learn a trade or profession under the guidance of a skilled individual. This type of contract is typically enforceable and binding on both parties involved.
4. Cannot legally engage in certain activities: There are several activities that minors are not legally allowed to engage in, such as purchasing alcohol, tobacco, and firearms. They may also have restrictions on driving, voting, and entering certain establishments.
In conclusion, while a minor has some limitations and restrictions, they do have certain abilities and rights. They can plead minority in legal proceedings and enter into a contract of apprenticeship. However, they generally cannot act as an agent and have limitations on engaging in certain activities.

Explanation:
A minor's estate is liable for the "necessaries" supplied to him. Here's a detailed explanation:
1. Definition of Necessaries: In legal terms, "necessaries" refer to goods or services that are reasonably required for a person's well-being or support.
2. Responsibility of a Minor's Estate: When a minor receives necessaries, their estate (i.e., their assets and liabilities) becomes responsible for paying for those goods or services.
3. Reasoning behind the Liability: The law holds the minor's estate liable for necessaries because minors are generally seen as lacking the legal capacity to enter into contracts or make binding agreements. Without this liability, it would be difficult for minors to obtain the goods and services they need for their well-being.
4. Examples of Necessaries: Necessaries can include things like food, clothing, shelter, medical care, education, and other essential items or services that contribute to the minor's basic needs and welfare.
5. Exceptions: There may be certain circumstances where a minor's estate may not be liable for necessaries. For example, if the minor has already received support from another responsible party, such as a parent or guardian, the estate's liability may be limited or non-existent.
In conclusion, a minor's estate is responsible for the necessaries supplied to them, ensuring that they receive the essential goods and services needed for their well-being and support.

Undue influence involves moral pressure.

Undue influence refers to the exertion of pressure or control over someone to make them act in a manner that goes against their free will or best interests. In this context, moral pressure plays a significant role in influencing the decision-making process of an individual.

Explanation:

Undue influence can be understood by examining the various forms of pressure that can be exerted on an individual:

• Physical pressure: This involves the use of physical force, threats, or intimidation to manipulate someone's decisions. However, physical pressure is not directly related to undue influence.


• Financial pressure: Financial influence refers to the use of economic power or control to manipulate someone's decisions. It can include withholding financial support, threatening financial consequences, or exploiting someone's financial vulnerability. While financial pressure can be a factor in undue influence, it is not the sole or defining characteristic.


• Moral pressure: Moral influence involves appealing to an individual's sense of right and wrong, their moral values, or their emotional attachment to certain beliefs or principles. It can include guilt-tripping, emotional manipulation, or playing on someone's sense of duty or loyalty. Moral pressure is often considered a key element of undue influence as it targets the internal motivations and beliefs of an individual.

Therefore, the correct answer is C: Moral pressure.

Explanation:
The correct answer is D: Option (b) is correct whereas (c) is an exception.
Reasoning:
Here is the detailed explanation for the answer:
- In general, a wagering transaction is considered void and unenforceable by law.
- In this case, S instructed T to enter into a wagering transaction on his behalf.
- T, as an agent, entered into the transaction and lost, resulting in him paying from his own pocket.
- Now, T is suing S for reimbursement of the amount he paid.
- S can raise the plea of wager, which means he can argue that the transaction was a wagering transaction and hence void.
- However, there is an exception to this rule. According to the Indian Contract Act, wagering agreements are void, except in the states of Maharashtra and Gujarat.
- Therefore, S can raise the plea of wager, except in the states of Maharashtra and Gujarat.
Conclusion:
In this case, S can raise the plea of wager, as the transaction was a wagering transaction. However, this plea is not applicable in the states of Maharashtra and Gujarat.

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”.

Explanation:
When a contract contains both legal and illegal parts, it is important to determine the effect of the illegal part on the overall contract. In this case, if the illegal part of the contract is inseparable from the legal part, the contract becomes void.
Reasoning:
To understand why the contract becomes void, we need to consider the following points:
1. Severability: The first step is to determine whether the illegal part of the contract is separable from the legal part. If the illegal part can be separated without affecting the rest of the contract, then the legal part may still be enforceable.
2. Public Policy: However, if the illegal part is inseparable from the legal part and enforcing the contract would be against public policy or the law, the contract becomes void.
Impact:
The consequences of a void contract are as follows:
- No Legal Effect: A void contract is considered legally invalid from the beginning. It has no legal effect, and the parties are not bound by its terms.
- No Remedies: Since the contract is void, the parties cannot seek remedies or enforce any rights or obligations under the contract through legal means.
- Restitution: In some cases, the law may allow for restitution, which means returning any benefits or property exchanged under the void contract. This is done to restore the parties to their original position before entering into the contract.
Conclusion:
When the illegal part of a contract is inseparable from the legal part, the contract becomes void. This means that the contract is considered legally invalid, and the parties are not bound by its terms. It is important to ensure that contracts comply with the law and do not contain any illegal provisions to avoid such situations.

Answer:

Can a person who is usually of unsound mind, but occasionally of sound mind, make a contract?

Explanation:
Yes, a person who is usually of unsound mind but occasionally of sound mind can make a contract. However, there are certain conditions that need to be met:
1. Test of Sound Mind: The person must be of sound mind at the time of making the contract. This means that during the specific period when the contract is being made, the person should have the mental capacity to understand the nature and consequences of the contract.
2. Capacity to Understand: The person should be capable of understanding the terms and conditions of the contract. They should have the ability to comprehend the rights and obligations involved in the agreement.
3. Consent: The person should give their consent to enter into the contract willingly and without any undue influence or coercion.
4. Legal Competency: The person should have the legal competency to enter into a contract. This means that they should not be disqualified by law from entering into contracts, such as being a minor or being declared bankrupt.
It is important to note that the burden of proving the soundness of mind lies on the person making the contract. If it can be proven that the person was of sound mind at the time of making the contract, then the contract would be considered valid. However, if it is later proven that the person was of unsound mind during that period, the contract may be deemed voidable.
In conclusion, a person who is usually of unsound mind but occasionally of sound mind can make a contract, provided they meet the necessary conditions of being of sound mind at the time of making the contract and having the capacity to understand and consent to the terms of the agreement.

When the consent is obtained by coercion, the contract is considered voidable. Here's a detailed explanation:
Coercion:
Coercion refers to the act of forcing someone to do something against their will by using threats, intimidation, or other forms of pressure.
Effects of Coercion on Contracts:
When consent to a contract is obtained through coercion, it affects the validity of the contract. The following are the effects of coercion on contracts:
1. Voidable Contract:
A contract obtained through coercion is considered voidable. This means that the innocent party has the option to either enforce the contract or reject it. They have the right to void the contract if they can prove that their consent was obtained through coercion.
2. Rescission of the Contract:
The party who was coerced can choose to rescind the contract, which means to cancel or terminate it. By doing so, they are released from their obligations under the contract.
3. Time Limit:
It's important to note that the innocent party must exercise their right to void the contract within a reasonable time. If they delay in taking action, they may lose their right to rescind the contract.
4. Damages:
In certain cases, the innocent party may also be entitled to claim damages for any losses they suffered as a result of the coercion.
Summary:
In conclusion, when consent is obtained by coercion, the contract is considered voidable. The innocent party has the option to either enforce or reject the contract, and they can choose to rescind it within a reasonable time. They may also be entitled to claim damages for any losses incurred.

Possible
Marriage brokerage contracts are:
- Void: Marriage brokerage contracts are considered void.

Undue Influence
Undue influence refers to a situation where one party takes advantage of their superior position to obtain the consent of a weaker party in a contract. Here is a detailed explanation of why the answer is B:
1. Definition: Undue influence occurs when one party uses their power or authority over another to manipulate or exert pressure on the weaker party's decision-making process.
2. Power imbalance: In this scenario, one party has a dominant position over the other, which enables them to influence the weaker party's decision-making.
3. Consent obtained: The dominant party uses their position of power to obtain the consent of the weaker party in the contract. The weaker party may agree to the terms of the contract due to fear, coercion, or manipulation.
4. Exploitation: Undue influence involves exploiting the vulnerability or dependence of the weaker party, making it difficult for them to make an independent and informed decision.
5. Unfair advantage: The dominant party takes unfair advantage of their superior position to ensure that the contract is formed in their favor, often to the detriment of the weaker party.
6. Legal implications: Contracts obtained through undue influence are generally considered to be voidable by the weaker party. The weaker party can seek legal remedies to rescind or modify the contract based on the grounds of undue influence.
In conclusion, when one party uses their superior position to obtain the consent of a weaker party in a contract, the contract is said to be obtained by undue influence. This demonstrates the importance of ensuring that contracts are entered into freely and voluntarily, without any form of coercion or manipulation.

Answer:

A contract caused by coercion is voidable.

Explanation:

Coercion refers to the act of forcing someone to do something against their will, usually through threats, intimidation, or physical force. When a contract is entered into under coercion, it means that one party has been forced or pressured into agreeing to the contract.

Here's why a contract caused by coercion is considered voidable:

• Void: A void contract is one that is considered to have never existed in the first place. It is completely invalid and has no legal effect. However, a contract caused by coercion is not automatically void.


• Voidable: A voidable contract is one that is initially valid and enforceable, but can be voided or canceled by the party who was coerced. The coerced party has the option to affirm or disaffirm the contract, depending on the circumstances.


• Coercion as a defense: Coercion can be used as a defense to void a contract. If the coerced party can prove that they were forced or threatened into entering the contract, they can seek to have the contract declared voidable.


• Legal remedies: If a contract is voidable due to coercion, the coerced party may have legal remedies available to them, such as seeking restitution or damages from the party who coerced them.

In summary, a contract caused by coercion is not automatically void, but it is considered voidable, meaning that the coerced party has the option to affirm or disaffirm the contract.

Explanation:
The correct answer is B: Quasi contract.
A quasi contract is a legal concept that allows for the creation of a contract-like obligation when there is no formal contract in place. It is based on the principle of equity and is used to prevent unjust enrichment.
In this scenario, the person providing necessary goods or services to a minor is entitled to be reimbursed from the minor's property. This is because of the application of a quasi contract. Here's how it works:
1. Minor's incapacity: Minors are generally not allowed to enter into legally binding contracts. As a result, any contract with a minor is considered voidable.
2. Necessary goods or services: If a person provides necessary goods or services to a minor, such as food, clothing, or medical care, they are entitled to be reimbursed for the value of those goods or services.
3. Quasi contract: In the absence of a formal contract, the law recognizes a quasi contract to prevent unjust enrichment. A quasi contract is an implied-in-law contract, meaning that it is based on the principle of equity rather than the parties' actual intent.
4. Reimbursement from minor's property: Under a quasi contract, the person providing the necessary goods or services can seek reimbursement from the minor's property. This allows them to recover the value of their contribution.
In conclusion, the person providing necessary goods or services to a minor is entitled to be reimbursed from the minor's property because of the application of a quasi contract. This legal concept helps prevent unjust enrichment and ensures fairness in situations where a formal contract is not possible.

Explanation:
The question asks about the conditions under which X, a patient in a lunatic asylum, can enter into a contract. The correct answer is option B, which states that X can enter into a contract during intervals when he is of sound mind.
Reasoning:
Here is the reasoning behind why option B is the correct answer:
- A contract requires the parties involved to have the legal capacity to enter into an agreement. This means that they must be of sound mind and have the ability to understand the terms of the contract.
- Option A is incorrect because it states that X can enter into a contract at any time, which includes intervals when he is not of sound mind. This would mean that X does not have the legal capacity to enter into a contract during those intervals.
- Option C is incorrect because it states that X can enter into a contract during the course of his unsoundness of mind. Again, this would mean that X does not have the legal capacity to enter into a contract during those intervals.
- Option D is incorrect because it states that X can enter into a contract when he is discharged but of unsound mind. This would also mean that X does not have the legal capacity to enter into a contract at that time.
- Option B is the only option that specifies that X can enter into a contract during intervals when he is of sound mind. This is the correct condition for X to have the legal capacity to enter into a contract.
Therefore, the correct answer is option B: During intervals when he is of sound mind.

Meaning of the term 'Consensus-ad-idem':
The term 'Consensus-ad-idem' is a legal Latin phrase that refers to an agreement between two or more parties. It is commonly used in contract law to determine whether a valid contract has been formed. The term translates to "agreement to the same thing" or "meeting of the minds."
Explanation:
- Consensus-ad-idem signifies that there is a meeting of minds or a mutual understanding between the parties involved in a contract.
- It implies that the parties have a clear and common understanding of the terms and conditions of the contract.
- Here, "consensus" means agreement, and "ad-idem" means to the same thing or in the same sense.
- In order for a contract to be valid, the parties must agree upon the same thing in the same sense.
- This means that both parties must have a shared understanding of the essential terms and intentions of the contract.
- If there is a misunderstanding or lack of agreement on any material terms, then consensus-ad-idem is not achieved, and the contract may be deemed invalid or unenforceable.
- Consensus-ad-idem is crucial in contract law to ensure that parties are bound by the terms they have agreed upon and to prevent disputes arising from misunderstandings or different interpretations of the contract.
In conclusion, the term 'Consensus-ad-idem' refers to two persons agreeing upon the same thing in the same sense. It is an essential requirement for a valid contract.

The answer is B: Agreement to pay time-barred debt.
Explanation:

• Wagering agreement: A wagering agreement is an agreement where two parties bet on the outcome of a future event. These agreements are considered void as they are based on chance and involve gambling, which is prohibited in many jurisdictions.


• Agreement the meaning of which is certain: For an agreement to be valid, the meaning of the terms and conditions must be certain and not vague or ambiguous. If the meaning of the agreement is uncertain, it may be considered void.


• Consideration unlawful in part: If the consideration in an agreement is partially unlawful, the agreement may be void. However, if the unlawful part can be separated from the lawful part, the agreement may still be enforceable to the extent of the lawful part.


• Agreement to pay time-barred debt: A time-barred debt refers to a debt that is beyond the statute of limitations, which is the legal time limit for bringing a lawsuit to collect a debt. In many jurisdictions, an agreement to pay a time-barred debt is not expressly declared void. However, the creditor may not be able to legally enforce the payment of such a debt.

Therefore, the correct answer is B: Agreement to pay time-barred debt.

Explanation:

The statement "All agreements in restraint of trade are void" refers to the general rule that agreements that restrict trade or competition are considered void and unenforceable. However, there are certain exceptions to this rule, and one of those exceptions is the sale of goodwill.

Sale of goodwill:

• Under the Indian Contract Act, the sale of goodwill is an exception to the general rule.


• Goodwill refers to the reputation and customer base associated with a particular business.


• When a business is sold, the seller can include the goodwill of the business in the sale.


• This means that the buyer acquires not only the physical assets of the business but also the intangible assets such as the reputation and customer base.


• Agreements that restrict the buyer from carrying on a similar business in the same area or for a specific period of time are allowed in the context of the sale of goodwill.


• Such agreements are considered valid and enforceable.

Therefore, the statement "All agreements in restraint of trade are void" does not apply to the sale of goodwill.

Conclusion:

The correct answer is option B: Sale of goodwill. This exception allows agreements that restrict trade in the context of the sale of goodwill to be valid and enforceable.