Test: The Indian Contract Act, 1872- 1 - CA Foundation MCQ

Indian Contract Act is describe that how to do contract with other perso and legal right,fraud,mistake and so many thing describe in this book in Indian Contrat Act social or domestic agreement is not considerd
It came into force on "1st september 1872"

therefore it is known as "Indian Contract Act 1872"

Section 2 (h) of the Indian Contract Act, 1872 defines a contract as an agreement enforceable by law.

A void agreement is defined under section 2(g) of Indian Contract Act, 1872, as an agreement which cannot be enforceable by law, i.e. such agreements cannot be challenged in the court of law. Such an agreement lacks legal consequences, and so, it does not confer any rights to the parties concerned. A void agreement is void from the day, it is created and can never turn into the contract.

(i) An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract;

(j) A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable

Offer should not contain a term the non-compliance of which would amount to acceptance: The offer should not impose on the offered an obligation to reply. While making an offer, the offer or cannot say that if the offer is not accepted before a certain date it will be presumed to have been accepted.

When a contract is entered into without the free consent of the party, it is considered a voidable contract. The definition of the act states that a voidable contract is enforceable by law at the option of one or more parties but not at option of the other parties.

The correct answer is (d) "May be presumed from silence of offeree."

Here's a detailed explanation:

An acceptance is an essential element in the formation of a contract. For a contract to be valid, there are certain requirements that must be met in the acceptance process. These requirements include:

• Must be communicated: Acceptance must be clearly expressed and communicated to the offeror, either in writing, orally, or through some other means of communication. The offeree must indicate their agreement to the terms and conditions of the offer.
• Must be absolute and unconditional: The acceptance must be a clear and unequivocal agreement to the terms of the offer. If the offeree proposes new terms or conditions, it is considered a counteroffer rather than an acceptance. A counteroffer effectively rejects the original offer and requires the offeror to accept the new terms for a contract to be formed.
• Must be accepted by a person having authority to accept: The offeree must have the legal capacity and authority to enter into the contract. This means that the person accepting the offer must be of sound mind, of legal age, and not acting under duress or undue influence.

However, the statement that "acceptance may be presumed from the silence of the offeree" is false because:

Silence is not acceptance: In general, silence or inaction does not constitute acceptance. The offeree must actively communicate their acceptance for a contract to be formed. There are some exceptions to this rule, such as when the parties have a previous course of dealing that establishes a pattern of silent acceptance or when the offeree takes benefit from the offered service without objection. However, these exceptions are not the norm, and acceptance should not be assumed from silence alone.

In conclusion, for a valid acceptance to occur, it must be communicated, absolute and unconditional, and accepted by someone with the authority to do so. Presuming acceptance from the silence of the offeree is generally not a valid way to form a contract.

In the case of illegal agreements, the collateral agreements are considered void.

Here is a detailed explanation:

Illegal Agreements
- An illegal agreement is a contract that involves the performance of an act that is against the law, public policy, or prohibited by legislation.
- These agreements are not enforceable by law, and the parties involved cannot seek legal remedies in case of a breach.

Collateral Agreements
- A collateral agreement is a secondary contract that is related to the primary contract.
- It is made to provide additional terms, conditions, or assurances to the primary contract.

Void Collateral Agreement
- In the context of illegal agreements, collateral agreements are considered void.
- This means that the collateral agreements are treated as if they never existed, and the parties involved have no legal obligations or rights under the agreement.
- The reason for this is that the collateral agreement is related to the primary illegal agreement, which is not enforceable by law. As a result, the collateral agreements are also considered invalid and unenforceable.

In summary, when the primary agreement is illegal, any associated collateral agreements are deemed void and unenforceable as they are directly related to the illegal agreement.

The correct answer is (d) All of these. An offer may lapse due to revocation, counter offer, or rejection of the offer by the offeree.

Here's a detailed explanation for each scenario:

Revocation:
- Revocation occurs when the offeror withdraws the offer before it is accepted by the offeree.
- An offer can be revoked at any time before acceptance, provided that the revocation is communicated to the offeree.
- Revocation can be either expressed (explicitly stated by the offeror) or implied (demonstrated by the offeror's actions).

Counter Offer:
- A counter offer occurs when the offeree responds to the original offer with a new offer that modifies or changes the terms of the original offer.
- A counter offer is considered a rejection of the original offer and replaces it with a new offer.
- If the original offeror accepts the counter offer, a new contract is formed based on the terms of the counter offer.

Rejection of Offer by Offeree:
- Rejection occurs when the offeree explicitly refuses to accept the offer or makes it clear that they do not intend to accept the offer.
- A rejection can be expressed through words, actions, or in writing.
- Once the offeree rejects the offer, it is no longer valid and cannot be accepted at a later time.

In conclusion, an offer may lapse due to any of these three scenarios: revocation, counter offer, or rejection of the offer by the offeree. Each scenario results in the original offer becoming invalid, and a new contract can only be formed through a new offer and acceptance process.

When a proposal is accepted, it becomes a contract.

Here are some key elements of a contract:

1.Offer: One party (the offeror) presents the terms and conditions of the agreement or transaction to the other party (the offeree).

2. Acceptance: The offeree agrees to the terms and conditions presented by the offeror.

3. Consideration: Something of value (e.g., money, goods, services) is exchanged between the parties involved in the contract.

4. Intention to create legal relations: Both parties must have the intention to enter into a legally binding agreement.

5. Capacity: Both parties must have the legal capacity to enter into the contract (e.g., they must be of legal age and sound mind).

6. Legality: The subject matter of the contract must be legal and not against public policy.

In summary, when a proposal is accepted, it becomes a contract, which is a legally binding agreement between the parties involved. The contract outlines the rights and obligations of each party and is based on the principles of offer, acceptance, consideration, and intention to create legal relations.

An agreement which is enforceable by law at the option of one or more parties but not at the option of the other party is known as a voidable contract. A voidable contract is a valid contract that can be affirmed or rejected by one or more of the parties involved. The party who has the option to enforce or reject the contract is typically the one who has been disadvantaged or misled in some way.

A promise that is unenforceable because of uncertainty or absence of commonality, where just one side will undoubtedly perform.  Consideration isn't official if the promise doesn't make an obligation or force a commitment, for example, with illusory promises. Illusory promises remember end provisions for agreements and yield and necessities contracts.

The false statement is: A verbal promise to pay a time barred debt is valid.
Explanation: According to the law, a promise to pay a time-barred debt must be in writing and signed by the person making the promise or his authorized agent. A verbal promise is not legally binding in this case.

Consideration is the doing or not doing of something which the promisor desires to be done or not done. Consideration must be at the desire of the promisor.

Correct Answer :- b

Explanation : There can be a stranger to a consideration but not a stranger to a contract signifies that a consideration may move from Promisee or any other person.

The correct answer is d. All of the above.

Past Consideration:
- Past consideration refers to an act or benefit that has already been provided before the agreement is made.
- It includes previous actions or events that have influenced the current situation or decision-making process.
- For example, if a person has already performed a service for another person and later asks for payment, the past service is considered as past consideration.

Present Consideration:
- Present consideration refers to the act or benefit that is being provided at the same time the agreement is made.
- It involves the immediate exchange of value between the parties involved in the agreement.
- For example, when a person buys a product from a store, the payment made by the person is present consideration for the product.

Future Consideration:
- Future consideration refers to an act or benefit that will be provided at a later date after the agreement is made.
- It may involve a promise to perform a particular action or provide a specific benefit in the future.
- For example, when a person signs a contract to work for a company, the company's promise to pay the person a salary in the future is considered as future consideration.

In conclusion, consideration can be past, present, or future based on the time when the act or benefit is provided in relation to the agreement. It is essential in forming legally binding contracts, as it represents the value exchanged between the parties involved.

consideration is a benefit which must be bargained for between the parties

both are essential for contract if a contract is only agreement and it does not create legal obligation then it would never be a contract.

The correct answer is (A): Void ab initio.

Explanation:
A minors agreement is a contract made by a person who has not yet attained the age of majority. In India, the age of majority is 18 years. According to Section 10 of the Indian Contract Act, 1872, a contract is an agreement enforceable by law. However, a minors agreement is not enforceable by law and is considered void ab initio.

Void ab initio means that the agreement was never valid from the beginning. This is because a minor does not have the capacity to enter into a contract. They are not legally competent to make decisions for themselves, and therefore, any contract made by them is invalid.

Consequences of a Void Agreement:
• The agreement is not enforceable by law.
• Neither party can sue the other for breach of contract.
• Any money or property exchanged under the agreement must be returned to the rightful owner.
• The agreement cannot be ratified by the minor once they attain majority.

Exceptions:
There are certain contracts that a minor can enter into which are enforceable by law. These include contracts for necessities such as food, clothing, and education. However, even in such cases, the minor is only liable to pay a reasonable price for the goods or services received.

Conclusion:
In conclusion, a minors agreement is void ab initio and cannot be enforced by law. It is important for individuals to be aware of this fact before entering into any agreement with a minor.

A minor is liable to pay out of his property for 'necessaries' supplied to him or to anyone whom he is legally bound to support.

According to the Indian Partnership Act, 1932, a minor cannot become a full partner in an existing firm. However, a minor can be admitted to the benefits of partnership in an existing firm. This means they can receive a share of the profits but are not liable for any losses. They can choose to become a full partner only upon reaching the age of majority. 

Let’s break down each option:

Option A: A contract with a minor is voidable at the option of the minor. This is false. A contract with a minor is generally void and cannot be enforced, rather than being voidable at the option of the minor.

Option B: An agreement with a minor can be ratified after he attains majority. This is false. A contract made with a minor is void from the beginning, and it cannot be ratified once the minor attains majority.

Option C: A person who is usually of an unsound mind cannot enter into contract even when he is of a sound mind. This is false. If a person is temporarily of sound mind, they can enter into a contract. Being usually of unsound mind does not mean that they cannot contract when they are of sound mind.

Option D: A person who is usually of a sound mind cannot enter into contract when he is of unsound mind. This is true. A person who is usually of sound mind cannot enter into a contract if they are temporarily of unsound mind because the contract would not be valid due to lack of mental capacity at that moment.

Thus, the correct answer is D: A person who is usually of a sound mind cannot enter into contract when he is of unsound mind.

 According to Section 10 of the Indian Contract Act, 1872, to constitute a valid contract, parties should enter into the contract with their free Consent. Consent is said to be free when it is not obtained by coercion, or undue influence or fraud or misrepresentation or mistake.

A voidable contract is where one party has the right to enforce or cancel the contract. If a party does not cancel the contract, then it remains as a valid contract and has to be performed like a valid contract. An agreement when found to be caused by coercion, fraud or misrepresentation becomes voidable at the option of the party whose consent was caused. On the other hand, if consent is caused by a bilateral mistake, the agreement becomes void, and there is ‘no consent’.

Threat to commit suicide is an act forbidden by Indian Penal Code under the provision of Indian Contract Act,1872.Hence it comes under coercion.

The correct answer is (b) Undue Influence. Let me explain in detail why moral pressure is involved in the case of undue influence.

Undue Influence
- Undue influence refers to a situation where one person takes advantage of a position of power over another person, manipulating them to make decisions that they might not have made otherwise.
- It often involves moral pressure, where the person in the position of power uses their authority or influence to get the other person to agree to something, even if it is not in their best interest.
- Undue influence can occur in various contexts, such as in contracts, wills, and other legal agreements.

Here is a brief overview of the other options mentioned:

Coercion
- Coercion involves the use of force or threats to compel someone to do something against their will.
- While coercion may involve some form of pressure, it typically involves physical or legal threats rather than moral pressure.

Misrepresentation
- Misrepresentation occurs when one party provides false or misleading information to another party to induce them to enter into a contract or other legal agreement.
- This does not involve moral pressure but rather deception and dishonesty.

Fraud
- Fraud is an intentional act of deception, typically involving the use of false information or misrepresentation to gain an unfair advantage or benefit.
- Like misrepresentation, fraud does not involve moral pressure, but instead focuses on intentional deception and dishonesty.

In summary, undue influence is the option that involves moral pressure, as it refers to the manipulation of one person by another who is in a position of power or authority. The other options – coercion, misrepresentation, and fraud – involve different forms of pressure or deception but do not specifically involve moral pressure.

The correct answer is Misrepresentation.

Misrepresentation can be defined as a false statement of fact made by one party to another, which has the effect of inducing that party into a contract. Here is a detailed explanation:

Misrepresentation: This occurs when a party presents false information to another party without the intention to deceive. It may lead to the contract being voidable, meaning the harmed party can choose to either enforce the contract or end it. Misrepresentation differs from fraud in that it does not involve a deliberate intention to deceive.

Innocent Misrepresentation: This type of misrepresentation occurs when a party believes that the information being presented is true, even though it is not. The party making the innocent misrepresentation is not aware that the information is false.
Negligent Misrepresentation: This occurs when a party ought to have known that the information they presented was false, but failed to exercise reasonable care to verify its accuracy.

It is important to distinguish misrepresentation from the other options provided:

• Coercion: This involves the use of force or threats to make someone enter into a contract. It renders the contract voidable, as the party being coerced did not enter the contract willingly.
• Undue Influence: This occurs when one party takes advantage of their position of power or trust to unfairly influence the other party into entering a contract. Like coercion, undue influence also renders the contract voidable.
• Fraud: This is a deliberate act of deception, where a party knowingly makes false representations to induce another party into a contract. Fraud makes the contract voidable and may also result in criminal charges and liability for damages.

In conclusion, a wrong representation made without any intention to deceive the other party amounts to misrepresentation. This can lead to the contract being voidable, but it does not involve the malicious intent or power imbalance found in coercion, undue influence, or fraud.

The correct answer is: Ignorance of law is no excuse.

Ignorance of law is no excuse:

• This principle, also known as "ignorantia legis neminem excusat," is a longstanding legal doctrine that holds individuals accountable for their actions even if they are unaware of the specific laws governing their conduct.
• The rationale behind this principle is to encourage individuals to familiarize themselves with the laws and regulations applicable in their jurisdiction and to promote a general sense of law-abiding behavior within society.
• It is considered a fundamental principle in most legal systems, and individuals are expected to know and understand the laws that govern their actions, regardless of whether they have actually studied or been informed about them.
• Exceptions to this principle may exist in certain circumstances, such as when a law is particularly obscure, or when an individual has been misled or misinformed by an authoritative source. However, these exceptions are generally rare and apply only in specific situations.

The other statements provided are incorrect for the following reasons:

• A threat to commit suicide does not amount to coercion: This statement is false because, in many jurisdictions, a threat to commit suicide can be considered a form of coercion, particularly in the context of contract law or criminal law. This is because such a threat can create undue pressure on another party to comply with demands or enter into an agreement against their will.
• Undue influence involves the use of physical pressure:This statement is false because undue influence typically refers to the improper use of mental or emotional pressure, manipulation, or persuasion, rather than physical force. It is a legal concept used to describe situations where one party takes advantage of their position of power or influence to persuade another party to act in a way that is not in the latter's best interest.
• Silence always amounts to fraud: This statement is false because silence does not always amount to fraud. In some cases, silence can be considered fraudulent if there is a legal duty to disclose information, and the failure to do so results in harm or loss to another party. However, there are many situations where silence does not constitute fraud, particularly when there is no legal obligation to disclose information or when the information withheld is not material to the situation.

Collateral agreements of an illegal agreement cannot be enforceable by law as they are void ab initio.

As per section 2(g) an agreement which is unenforceable is void. Thus in an agreement the object or consideration of which is unlawful makes it unenforceable and becomes void agreement.