Test: Nature Of Contracts- 1 - CA Foundation MCQ

The juristic concept of contract comprises two constituent elements—'obligation' and 'agreement'. Obligation means a legal tie, which imposes upon a determinate person or persons, the necessity of doing, or abstaining from doing, a definite act or acts.

An agreement which loses its legal status is a void agreement. An illegal agreement is one which is not permissible under law. ... Conversely, collateral agreements of an illegal agreement cannot be enforceable by law as they are void ab initio.

Implied offer is one in which parties to contract do not clearly speak to each other but duty is formed by circumstances e.g;- here striking the hammer on the table by auctioneer shows that he is ready to accept his offer. that is why it is called implied offer.

A "voidable contract" is the correct answer because it refers to a contract that is legally valid and enforceable, but one or more parties involved have the option to void or cancel the contract under certain circumstances. This means that the contract is binding and can be enforced by law, but one party has the right to terminate the contract if they choose to do so.

The other options can be explained as follows:

Option A: A valid contract is a legally binding agreement that meets all the necessary requirements for enforceability. It does not give either party the option to void the contract.

Option B: An unenforceable contract is a contract that has legal validity but cannot be enforced in a court of law due to certain specific reasons, such as the statute of limitations.

Option D: A void agreement is an agreement that has no legal effect and is not a contract at all. It is invalid from the beginning and cannot be enforced by either party.

A consideration which consists of the performnance, it is "executed" i.e. an act done in response to a positive promise. Where it consists only of a promise it is executory. For example where A pays Rs. 5,000 to B to deliver certain quantity of rice, to which B agrees, here consideration for B is executed by 'A' as he has already paid Rs 5,000 where as B's promise is executory as he is yet to deliver the rice.

Option A. express agreement

Any term of offer the non compliance would amount to acceptance is not a valid offer.

Section 25 states Agreement without consideration, void, unless it is in writing and registered or is a promise to compensate for something done or is a promise to pay a debt barred by limitation law.—An agreement made without consideration is void, unless"
(1) it is expressed in writing and registered under the law for the time being in force for the registration of 1[documents], and is made on account of natural love and affection between parties standing in a near relation to each other; or unless
(2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless.
(3) It is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits. In any of these cases, such an agreement is a contract. 

• Explanation 1.—Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made. 
• Explanation 2.—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.

According to this option A is a promise which is enforceable.

Agreements to form valid contract must be certain and possible, it should not be uncertain vague or impossible. Therefore, an agreement to do something impossible is void under section 56 of the Indian Contract Act,1872.
Hence in the above case the contract between P and Q is a void contract since P and Q agree to do an impossible Act ; i.e. P agrees to pay Q a certain sum if Q brings on earth a star from sky which is an impossible task to be performed.

Answer is B because F was not knowing about the offer of reward for finding S's dog therefore he cant claim that.

According to Section 2(g), "Agreement not enforceable by law is said to be void." Such agreement are void as initio which means that they are enforceable right from the time they are made. Similarly according to Section 30 of the Indian Contract Act, 1872, a wagering agreement is an agreement between two persons under which money or money's worth is payable, by one person to another on the happening or non- happening of a future uncertain event is called a wagering agreement. Hence, in this case where A agrees to sell to B a horse for Rs. 25,000 if it wins a race and for Rs. 15,000 if does not. The horse wins the race. the agreement between A and B is void and wagering as the agreement between them is unenforceable and wagering because money is payable on the horse winning the race.

Under Section 5, of the Indian Contract Act,1872, a proposal may be revoked at any time, before the communication of its acceptance is completed against the proposer/ offeror. So in this case on the 5th of a month X makes an offer to Y, by a letter which reaches Y on 6th and on the 7th, Y posts his letter of acceptance. Meanwhile on the 6th, X posts a letter to Y revoking the offer, so as a result of X's revocation on 6th, the offer made by him earlier is revoked and there is no contract between X and Y.

According to Section 56 of the Indian Contract Act, 1872, "An agreement to do an impossible Act is void". hence in this case X promises to pay Z Rs 5,00,000 if Z can make his dead wife alive, such a contract is also void as X makes a promise to pay money's worth of Rs 5,00,000 for a task which is impossible to perform.

The person making the proposal is called the promisor, and the person accepting the proposal is called the 'promisee'

The revocation of acceptance is complete when it comes to the knowledge of X. Therefore, the correct answer is option 4, when the contents of the telegram come to the knowledge of X.

According to Section 4 of the Indian Contract Act, 1872, communication of an acceptance is complete when it is put in a course of transmission to the person making the proposal. However, communication of a revocation of acceptance is only complete when it comes to the knowledge of the person who made the proposal.

In this case, Y has accepted the proposal made by X, but before X comes to know about the acceptance, Y revokes his acceptance by telegram. The revocation of acceptance is complete only when it comes to the knowledge of X. This means that if X comes to know about the revocation of acceptance before he receives the acceptance itself, then the revocation will be complete and the contract will not be formed.

The correct answer is option C: General Offer

A general offer is an offer made to the public at large, rather than being directed to a specific individual or group. This type of offer is typically made through public advertisements, such as in newspapers, on television, or through social media. The offer is open for anyone to accept, and a contract is formed once someone takes the necessary action to accept the offer, such as purchasing a product at a discounted price or entering a contest.

An unenforceable contract or transaction is one that is valid but one the court will not enforce. Unenforceable is usually used in contradiction to void (or void ab initio) and voidable. If the parties perform the agreement, it will be valid, but the court will not compel them if they do not.

 Invitation to offer is an attempt to induce offer and precedes a definite offer, example an advertisement given to sell something. Such advertisements are offers to negotiate offers to receive offers. Hence, an offer made with an intention to have negotiation from other party is an invitation to offer.

Completed contracts are also called contracts with executed consideration i.e. the consideration for the promise in a contract is given or executed.

Agreements entered into between parties under the condition that money is payable by the first party to the second party on the happening of a future uncertain event, and the second party to the first party when the event does not happen, are called Wagering Agreements or Wager. There should be mutual chance of profit and loss in a wagering agreement. Generally wagering agreements are void.

The law of obligations is one branch of private law under the civil law legal system and so-called "mixed" legal systems. It is the body of rules that organizes and regulates the rights and duties arising between individuals. The specific rights and duties are referred to as obligations, and this area of law deals with their creation, effects and extinction.

An obligation is a legal bond (vinculum iuris) by which one or more parties (obligants) are bound to act or refrain from acting. An obligation thus imposes on the obligor a duty to perform, and simultaneously creates a corresponding right to demand performance by the obligee to whom performance is to be tendered. Obligations may be civil, which are enforceable by action in a court of law, or natural, which imply moral duties but are unenforceable unless the obligor consents.

Invitation to an offer is only a circulation of an offer as distinguished from offer. It is an attempt to induce people and precede a definite offer. Eg:- an advertisement given to sell something.Similarly, an advertisement of holiday packages is an invitation to offer and not an offer.

Executed Contract means acontract that has been fully performed by both parties. In other words, acontract whose terms have been completely fulfilled. Here the bookseller sold his book and at the same time the other party has paid the amount and hence both parties had performed in the contract so option C is correct answer

A contract is an agreement made by the parties who are competent to contract. So, option A is correct answer.

Explanation: A contract is a legally binding agreement between two or more parties that is enforceable by law. For a contract to be valid, it must be made by parties who are competent to contract, which means they have the legal capacity to enter into the agreement. Additionally, a valid contract requires free consent and consideration, which means that both parties willingly agree to the terms and provide something of value in exchange for the other party's performance. Option B, C, and D do not correctly define a contract as they include elements that make a contract invalid or unenforceable.

A cross offer occurs when two parties make identical offers to each other, but neither party is aware that the other has made the same offer. In this situation, there is no binding contract because neither party has accepted the other's offer. Instead, they have both made offers, which require acceptance to form a contract. In other words, one's offer cannot be construed as acceptance in the case of a cross offer, so no binding contract is formed.

Let me briefly explain the other options as well:

2. Standing offer: A standing offer is an open offer that can be accepted multiple times by different parties until the offer is either withdrawn or the specified time for acceptance has passed. A binding contract is formed each time someone accepts the standing offer.

3. Counter offer: A counter offer occurs when one party makes an offer, and the other party responds with a new offer that has different terms. This new offer effectively rejects the original offer and serves as a new offer that requires acceptance. If the counter offer is accepted, then a binding contract is formed.

4. Special offer: A special offer is a promotional offer that is usually available for a limited time or under specific conditions. Like any other offer, a special offer can lead to a binding contract if it is accepted by the offeree and all other necessary elements of a contract are present.

When offer is made to a definite person, it is known as specific offer and such offer can be accepted by that specified persons only.

The correct answer is: B’s statement is absolute but qualified.

Explanation:
- In this scenario, B has agreed to purchase A's house, but the agreement is subject to the approval of B's solicitors. This means that B's decision to purchase the house is not final until their solicitors approve the transaction.
- B's statement is absolute in the sense that they have shown their intention to purchase the house. They have not expressed any uncertainty or doubt about their desire to buy the property.
- However, B's statement is also qualified because the agreement is contingent upon the approval of their solicitors. This additional condition adds a qualification to B's intention to purchase the house, as their intention is dependent on the outcome of the solicitors' review.
- Thus, B's statement is both absolute (in terms of their intention to buy) and qualified (by the condition of solicitor approval).

If an offer contains a condition that offeree has to perform that condition as a token of acceptance and the offeree fails to fulfill the condition then, it amounts to non- acceptance on the part of offeree. In such a case, offer is said to have been lapsed.

The Indian Contract Act, 1872 prescribes the law relating to contracts in India and is the key act regulating Indian contract law. The Contract Act of 1872 was enacted on 25 April 1872.

As per Indian Contract Act 1872, section 10 contains option a,c and d except option b
Reasonable term and condition is not necessary to make a contract.