Test: Contract Of Law - 1


35 Questions MCQ Test Legal Reasoning for CLAT | Test: Contract Of Law - 1


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QUESTION: 1

Which one of the following element is not necessary for a contract ?

Solution:

A supplier must not offer to enter into an agreement to supply any goods or services at a price or on terms that are unfair, unreasonable or unjust, and must not negotiate an agreement for the supply of any goods or services in a manner that is unfair, unreasonable or unjust.

QUESTION: 2

Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is called:

Solution:

A void contract cannot be enforced by law. An agreement to carry out an illegal act is an example of a void agreement. 

Example, a contract between drug dealers and buyers is a void contract simply because the terms of the contract are illegal. In such a case, neither party can go to court to enforce the contract.

QUESTION: 3

Patricia’s employer fired her after only three months in the job, in breach of a twelve-month employment contract. Patricia is entitled to recover as damages

Solution:

She already worked three months so those three months salary is obligatory for the employer to provide in addition to the salary of the rest of the nine months of employment provided in the contract.

This measure of damages reflects the effect of her so-called “duty” to mitigate.

QUESTION: 4

Principle: Parties to a contract have absolute freedom to decide the terms of the contract provided there is approximate equality of bargaining power. If this is not the case, the contract is void.

Facts: In Delhi, there is a big cycle market with lots of cycle sellers. A goes to that market and to B’s store. B’s store is biggest in the market. He sees a cycle that he really likes. B says the price of the cycle is Rs. 100000/- A and B enter into a contract for purchase of the cycle. Is this contract legally enforceable?

Solution:

It is clearly mentioned in the principle,  Parties to a contract have absolute freedom to decide the terms of the contract provided there is approximate equality of bargaining power.

QUESTION: 5

Principle: If a party to the contract offers to fulfill his part of the contract and the other party declines, the first party is freed from his obligations.

Facts: A contracts with B to deliver 100 bales of cotton to him. The scheduled delivery date is 19.10.2014. A rings up on 1.10.2014 and tells him he is bringing the cotton to his house for delivery. B tells him he can’t accept the delivery because he doesn’t have the space to store it. Is A free from his contractual obligations?

Solution:

The agreed date for delivery is 19th and hence he cannot bring the order beforehand

QUESTION: 6

An agreement enforceable by law is called

Solution:

According to Section 2(h), an agreement enforceable by law is a contract.
In other words, a contract is a legally enforceable agreement or legally binding promises between two or more parties to do or not to do something.

QUESTION: 7

Which section of The Indian Contract Act, 1872 provides that where both parties to an agreement are under a mistake of fact, the agreement is void.

Solution:

Central Government Act, Section 20: In the Indian Contract Act, 1872 the agreement is void, where both parties are under mistake as to the matter of fact essential to the agreement.

Explanation: An erroneous opinion as to the value of the thing which forms the subject matter of the agreement, is not to be deemed a mistake as to a matter of fact.

QUESTION: 8

Principle: Agreement void where both parties are under mistake as to matter of fact.

Facts: 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 the ship conveying the cargo had been cast away and the goods lost. Neither party was aware of these facts.

Solution:

A void contract cannot be enforced by law. An agreement to carry out an illegal act is an example of a void agreement.
Example: A contract between drug dealers and buyers is a void contract simply because the terms of the contract are illegal.
In such a case, neither party can go to court to enforce the contract.

QUESTION: 9

Principle: The consideration or object of an agreement is lawful, unless -It is forbidden by law; or is of such nature that, if permitted it would defeat the provisions of any law or is fraudulent; of involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy.

In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.

Facts: A promises to obtain for B an employment in the public service and B promises to pay Rs. 1000 to A.

Solution:

Principle says that  The consideration or object of an agreement is lawful, unless -It is forbidden by law; or the Court regards it as immoral, or opposed to public policy. And in this case it is against public policy. As A promises to obtain for B an employment in the public service and B promises to pay Rs. 1000 to A.
Moreover,  Appointments in public service must be done only on the basis of merit and not on basis of extraneous considerations such as payment of money. Hence, the consideration involved is opposed to public policy due to which the agreement between  A and B is void.

QUESTION: 10

Principle: When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal. The expression of willingness/desire results in a valid proposal only when it is made/addressed to some person (s).  

Facts: ‘X’ makes the following statement in an uninhabited hall. ‘I wish to sell my mobile phone for Rs. 1000.

Solution:

It's a mere statement. Nobody heard him hence no proposal was made. It's not an offer to somebody either. It's a simple statement by X. It's 'I wish' not 'I will sell it to you for this amount.

QUESTION: 11

Principle: A proposal (offer) should be made with an intention that after its valid acceptance, a legally binding promise or agreement will be created. The test for the determination of such intention is not subjective, rather it is objective. The intension of the parties is to be ascertained from the terms of the agreement and the surrounding circumstance under which such an agreement is entered into.    

As a general rule, in the case of arrangements regulating social relations, it follows as a matter of course that the parties do not intend legal consequences to follow. On the contrary, as a general rule, in the case of arrangements regulating business affairs, it follows as a matter of course that the parties intend legal consequences to follow. However, the above rules are just presumptive in nature and hence can be rebutted.

Facts: One morning while having breakfast, ‘X’, the father, says to ‘Y’ (X’s son), in a casual manner, ‘I shall buy a motorbike for you if you get through the CLAT’.

Q. 

Which of the following derivations is correct?  

Solution:

Personal relationship are not subject to matter of agreements.

QUESTION: 12

Which of the following principles would you identify as central to the classical law of contract?

Solution:

Freedom of contract, meaning the freedom to enter into and decide the content of agreements, was one of the central concepts of contract law as conceptualised in the 19th Century. 

QUESTION: 13

Principle: Acceptance (of offer) must be communicated by the offeree to the offeror so as to give rise to a binding obligation. The expression ‘by the offeree to the offeror’ includes communication between their authorized agents.

Facts: ‘X’ made an offer to buy Y’s property for a stipulated price. ‘Y’ accepted it and communicated his acceptance to ‘Z’, a stranger.

Solution:

It's true that Y has accepted the proposal and has communicated it to Z but here Z is a stranger and not an authorised agent . Moreover , if Z would have been an authorised agent he had to communicate the acceptance of proposal by Y to the Offeror X. But here it is not such case so the acceptance does not result in any agreement as the Offeror is unknown of the acceptance by Y. 

QUESTION: 14

Principle: Acceptance should be made while the offer is still subsisting. The offeror is free to retract his offer at any time before his offer gets accepted by offeree. Once the offer is withdrawn or is lapsed, it is not open to be accepted so as to give rise to a contract. Similarly, if a time is prescribed within which the offer is to be accepted, then the offer must be accepted within the prescribed time. And if no time is prescribed, then the acceptance must be made within a reasonable time. ‘What is a reasonable time’, is a question of fact which is to be determined by taking into account all the relevant facts and surrounding circumstances. 

Facts: ‘X’ makes an offer to ‘Y’ to sell his equipment for Rs.1000.00. No time is specified for the acceptance. ‘Y’ sends his reply two years after receiving the offer.

Solution:

The question “what is a reasonable time” is, in each particular case, a question of fact. So for every contract there is specified time, therefore option'B'

QUESTION: 15

Principle: Minor’s agreement is void from the very beginning. It can never be validated. It cannot be enforced in the court of law.
Facts: ‘A’, a boy of 16 yrs of age, agrees to buy a camera from ‘B’, who is a girl of 21yrs of age.

Solution:

Here A is minor so it is void from starting no matter whether B is major.

Hence, C is the correct answer because the contract with a minor is void abinitio i.e void from starting.

QUESTION: 16

Principle: The consideration of object of an agreement is unlawful if the court regards it as opposed to public policy. Every agreement of which the object or consideration is unlawful is void.

Facts: ‘X’ promises to obtain for ‘Y’ an employment in the public service and ‘Y’ promises to pay Rs. 500000 to ‘X’

Solution:

The "object of agreement" cannot be enforced by the court of law because it was "unlawful" since it somehow was regarded an "opposed to public policy" as stated by the legal principle

QUESTION: 17

Principle: Two or more person are said to consent if they agree upon the same thing in the same sense. Consent is said to be free when it is not caused by coercion, or undue influence, or fraud, or misrepresentation, or mistake.  

When consent to an agreement is caused by coercion, undue influence, fraud or misrepresentation, the agreement is a contract voidable (rescindable or terminable) at the option of the party whose consent was so caused, However, when consent to an agreement is caused by mistake as to a matter of fact essential to the agreement, the agreement is void.

Facts: ‘X’ threatens to gun down ‘Y’, if he (‘Y’) does not sell his property worth Rs. 2000000 for Rs. 100000 only. As a consequence ‘Y’ agrees to sell it as demanded by ‘X’. 

Solution:

Here the consent of Y was obtained by Coercion and hence by the principle, the contract is voidable 

QUESTION: 18

Principles:

a) A minor is a person who is below the age of eighteen. However, where a guardian administers the minor’s property, the age of majority is twenty-one.
b) A minor is not permitted by law to enter into a contract. Hence, where a minor enters into a contract with a major person, the contract is not enforceable. This effectively means that neither the minor nor the other party can make any claim on the basis of the contract.
c) In a contract with a minor, if the other party hands over any money or confers any other benefit on the minor, the same shall not be recoverable from the minor unless the other party was deceived by the minor to hand over money or any other benefit. The other party will have to show that the minor misrepresented her age, he was ignorant about the age of the minor and that he handed over the benefit on the basis of such representation.

Facts:
Animesh convinces Kumud, a girl aged 18 that she would sell her land to him. Kumud’s mother Parineeti is her guardian. Nonetheless Kumud, without the permission of Parineeti, sells the land to Animesh for a total sum of rupees fifty lakh, paid in full and final settlement of the price. Parineeti challenges this transaction claiming the Kumud is a minor and hence the possession of the land shall not be given to Animesh. Thus Animesh is in a difficult situation and has no idea how to recover his money from Kumud.

Q. Why is Parineeti justified in challenging the sale transaction?

Solution:

The principle clearly states that A minor is a person who is below the age of eighteen. However, where a guardian administers the minor’s property, the age of majority is twenty-one and a  minor is not permitted by law to enter into a contract. Hence, where a minor enters into a contract with a major person, the contract is not enforceable. 
In this case also kumud is a minor and parineeti is her guardian.

QUESTION: 19

Principles:
a)
 A minor is a person who is below the age of eighteen. However, where a guardian administers the minor’s property, the age of majority is twenty-one.
b) A minor is not permitted by law to enter into a contract. Hence, where a minor enters into a contract with a major person, the contract is not enforceable. This effectively means that neither the minor nor the other party can make any claim on the basis of the contract.
c) In a contract with a minor, if the other party hands over any money or confers any other benefit on the minor, the same shall not be recoverable from the minor unless the other party was deceived by the minor to hand over money or any other benefit. The other party will have to show that the minor misrepresented her age, he was ignorant about the age of the minor and that he handed over the benefit on the basis of such representation.

Facts:
Animesh convinces Kumud, a girl aged 18 that she would sell her land to him. Kumud’s mother Parineeti is her guardian. Nonetheless Kumud, without the permission of Parineeti, sells the land to Animesh for a total sum of rupees fifty lakh, paid in full and final settlement of the price. Parineeti challenges this transaction claiming the Kumud is a minor and hence the possession of the land shall not be given to Animesh. Thus Animesh is in a difficult situation and has no idea how to recover his money from Kumud.

Q. Animesh can be allowed to recover the money only if he can show that:

Solution:

As in this case, option B will be considered as a mistake of law that is not justified. Option C is also not suitable. Hence option A is best suitable.

QUESTION: 20

Principles:
a)
 A minor is a person who is below the age of eighteen. However, where a guardian administers the minor’s property, the age of majority is twenty-one.
b) A minor is not permitted by law to enter into a contract. Hence, where a minor enters into a contract with a major person, the contract is not enforceable. This effectively means that neither the minor nor the other party can make any claim on the basis of the contract.
c) In a contract with a minor, if the other party hands over any money or confers any other benefit on the minor, the same shall not be recoverable from the minor unless the other party was deceived by the minor to hand over money or any other benefit. The other party will have to show that the minor misrepresented her age, he was ignorant about the age of the minor and that he handed over the benefit on the basis of such representation.

Facts:
Animesh convinces Kumud, a girl aged 18 that she would sell her land to him. Kumud’s mother Parineeti is her guardian. Nonetheless Kumud, without the permission of Parineeti, sells the land to Animesh for a total sum of rupees fifty lakh, paid in full and final settlement of the price. Parineeti challenges this transaction claiming the Kumud is a minor and hence the possession of the land shall not be given to Animesh. Thus Animesh is in a difficult situation and has no idea how to recover his money from Kumud.

Q. Which of the following is correct?

Solution:

Direct from the principle: In a contract with a minor, if the other party hands over any money or confers any other benefit on the minor, the same shall not be recoverable from the minor unless the other party was deceived by the minor to hand over money or any other benefit. The other party will have to show that the minor misrepresented her age, he was ignorant about the age of the minor, and that he handed over the benefit on the basis of such representation.

QUESTION: 21

Principles:
a) 
A minor is a person who is below the age of eighteen. However, where a guardian administers the minor’s property, the age of majority is twenty-one.
b) A minor is not permitted by law to enter into a contract. Hence, where a minor enters into a contract with a major person, the contract is not enforceable. This effectively means that neither the minor nor the other party can make any claim on the basis of the contract.
c) In a contract with a minor, if the other party hands over any money or confers any other benefit on the minor, the same shall not be recoverable from the minor unless the other party was deceived by the minor to hand over money or any other benefit. The other party will have to show that the minor misrepresented her age, he was ignorant about the age of the minor and that he handed over the benefit on the basis of such representation.

Facts:
Animesh convinces Kumud, a girl aged 18 that she would sell her land to him. Kumud’s mother Parineeti is her guardian. Nonetheless Kumud, without the permission of Parineeti, sells the land to Animesh for a total sum of rupees fifty lakh, paid in full and final settlement of the price. Parineeti challenges this transaction claiming the Kumud is a minor and hence the possession of the land shall not be given to Animesh. Thus Animesh is in a difficult situation and has no idea how to recover his money from Kumud.

Q. Which of the following is correct?

Solution:

Fact provided the Ajay 'induced' Bandita to sell the land even though her mother was the guardian.

QUESTION: 22

Q. A proposes by a letter sent by post to sell his house to B. B accepts the proposal by a letter sent by post.

Solution:

A proposes by a letter sent by post to sell his house to B. B accepts the proposal by a letter sent by post.
A may revoke his proposal at any time before or at the moment when B posts his letter of acceptance, but not afterwards.

QUESTION: 23

"Reciprocal" Contracts means

Solution:

Bilateral Contract: A contract or agreement involving two or more parties, which binds all parties to reciprocal obligations.

QUESTION: 24

Principles:
(i) An agreement enforceable by law is a contract
(ii) In order for an agreement to be enforceable in a court of law, there must be a meeting of minds b/w both the parties
(iii) Parties to a contract should do something for the other party. The obligation to do something for the other party is mutual. This is called consideration and the absence of consideration renders the contract unenforceable.

Facts: A promised to take B out for a dinner in a restaurant. Even after two weeks, A did not fulfill the promise. B wants to sue A to enforce that promise. If B goes to court:

Solution:

Every contract is an agreement and enforceable by law but it is not necessary that each agreement is a contract. Because some of the agreements are done in love and affection
Example: A promised his son when he will get 98% Marks in 10th he will gift a Car. A brings 98% Marks but his father failed to buy Car.
Here Son can not sue on his Father A.

QUESTION: 25

Principle: If a party consent has been obtained by misrepresentation, the party to whom the misrepresentation has been made may reject the contract.

Facts: J is in need of a house for immediate occupation and hence approaches S, the owner of a house. The house is in a visibly precarious condition and requires a few repairs in order to make it habitable. However, S tells J that the house is good for lodging and J signs the leases agreement with S. J then finds out the actual state of the house and seeks to reject the contract

Solution:

The house is in a visibly precarious condition and requires a few repairs in order to make it habitable. However, S tells J that the house is good for lodging, and J signs the lease agreement with S. 

QUESTION: 26

Principle: For a contract an offer has to be made that is accepted and there is consensus ad idem.

Facts: A goes to a shop and asks the shopkeeper to deliver rice at his residence in their previous dealings of about 12 years; he had always ordered the Basmati variety of rice. The shopkeeper stores five varieties of rice. He delivers krishnakali variety. A had wanted basmati. Shopkeeper wants to enforce the contract.

Solution:

The contract is void because there was no consensus ad idem i.e agreeing on the same thing in same manner here buyer wants to buy basmati rice whereas shopkeeper delivers krishnakali hence it is void. There is no matter whether he is delivering rice from 12 years or last 12 days

QUESTION: 27

Principle: Imposition of total restraint on the liberty of a person without lawful justification constitutes false imprisonment.

Facts: R wished to enter a swimming pool but did not have passes for the same. The policeman at one gate did not allow him to enter. R claimed false imprisonment.

Solution:

Straight application of principle as in this case both the conditions of principles are not fulfilled as policeman have lawful justification in restraining R and there was no total restraint as he could have enter from another gate both b and c options are very close but C gives full explanation as principle is related to false imprisonment.

QUESTION: 28

When the consent to an agreement is obtained by undue influence, the agreement is at the option of

Solution:

Power to set aside contract induced by undue influence - When consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused. Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit there under, upon such terms and conditions as to the Court may seem just. 

QUESTION: 29

Mere silence is no fraud unless           

Solution:

Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech.

QUESTION: 30

A minor estate is liable for the ____________supplied to him.

Solution:

A minor’s estate is liable for necessaries supplied.

(Section 68): 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. Such claims arise not out of contracts but out of what are called ‘quasi-contracts’.
It is clear from the above Section that if a person supplied necessaries to a minor which he actually needs or to minor dependents, whom the minor is bound to support, the person who supplies such necessaries is entitled to be reimbursed from the property of such a minor. 

QUESTION: 31

Principle: A contract enters into by the use of misrepresentation is voidable at the option of the other party.

Facts: Lalit with an intention to deceive Rahul into buying his cement factory, falsely stated that his factory is capable of producing 2,000 kg of cement per day. However, in reality, the factory only has a production capacity of 500 kg/ day. Rahul gets induced and agrees to buy the factory. Is it a valid contract?

Solution:

In this instance situation, Lalit has misrepresented the production capacity of the cement factory to induce Rahul into buying the factory.
Thus, the contract is voidable at the option of Rahul due to misrepresentation of lalit. Section 18 of the Indian Contract Act, 1872 deals with it.

QUESTION: 32

Principle: Any contract made for an unlawful consideration is void in law.

Facts: Gagan enters into a contract with Nikhil to murder his wife, Preity for a sum of Rs. 5 lakhs. Gagan agrees to pay the amount to Nikhil in return of the murder. Is it a valid contract?

Solution:

In the present case, the contract is void as the consideration of the same i.e. murdering of Preity is unlawful. No obligations arise out of a void contract.
Section 24 of The Indian Contract Act, 1872 states that a contract whose object or consideration is unlawful is void.

QUESTION: 33

Principle: With the counter-proposal made by the party, the original offer ceases to exist.

Facts: Badal offered to sell his car to Pranav at the price of Rs. 3 lakhs. Pranav replies that he is ready to buy the car at Rs. 2.5 lakhs only. Badal refuses to sell at that price. Later, Pranav goes to Badal with Rs. 3 lakhs to buy the car. Is the offer to Rs. 3 lakhs still valid?

Solution:

In the present case, the offer to buy the car at Rs. 3 lakhs ceases to exit at the moment, a counter offer of Rs. 2.5 lakhs been made by Pranav i.e. buyer of the car. Thus, an original offer is not valid if a counter offer has been made subsequently for the same object.

QUESTION: 34

When goods are displayed in a show – window bearing price tags, it indicates:

Solution:

The display is always an invitation to offer,  NOT offer.
The customer goes to the counter to make an offer and the other party accepts it to that price. Any tags or displays are not offers.

QUESTION: 35

Section 5, of the Contract Act, deals with

Solution:

In the Indian Contract Act, according to section 5, a proposal may be revoked at any time, before the communication of its acceptance is complete as against the proposer, but no afterward.

There are different modes of revocation such as:
(i) By notice
(ii) By lapse of time
(iii) By failure to fulfill a condition
(iv) By death or insanity

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