Test: The Indian Contract Act, 1872- 4 - CA Foundation MCQ

Explanation:
The correct answer is option A: 1 & 2.
1. An agreement with or by a minor is void ab initio: This means that a contract entered into by a minor is void from the beginning. A minor does not have the legal capacity to enter into a contract and therefore any agreement they make is considered void.
2. A minor can be a beneficiary of a contract: While a minor cannot enter into a contract themselves, they can still benefit from a contract that is made by someone else. For example, if a parent purchases a life insurance policy with the minor as the beneficiary, the minor can receive the benefits of the policy.
3. The contracts involving a minor as a beneficiary may be enforced at the option of the third party: This statement is incorrect. Contracts involving a minor as a beneficiary cannot be enforced by the third party. Since a minor cannot enter into a contract, they do not have the legal capacity to enforce it.
4. A minor can ratify a contract on attaining majority: This statement is also incorrect. A minor cannot ratify a contract upon reaching the age of majority. The contract remains void ab initio and cannot be ratified later.
In conclusion, only statements 1 and 2 are true with respect to a minor entering a contract.

Explanation:
To determine who is competent to enter into a contract, we need to consider the following points:
1. A person of the age of majority:
- A person who has reached the age of majority is considered competent to enter into a contract.
- They are legally recognized as adults and are assumed to have the capacity to understand and fulfill the obligations of a contract.
2. A minor:
- A minor is not considered competent to enter into a contract.
- Minors are generally considered to lack the maturity and understanding necessary to fully comprehend the terms and implications of a contract.
- However, there are certain exceptions where minors may enter into contracts, such as contracts for necessities or contracts ratified after reaching the age of majority.
3. A person who is not capable of understanding the contract at the time of its making:
- A person who is unable to understand the terms and implications of a contract at the time of its making is not competent to enter into the contract.
- This may include individuals with mental disabilities or cognitive impairments that prevent them from comprehending the nature and consequences of the contract.
4. A lunatic during lucid intervals (period of soundness):
- A lunatic, or a person suffering from mental illness, is generally not competent to enter into a contract.
- However, if a lunatic has a period of soundness or lucidity where they are capable of understanding and consenting to a contract, then they may be considered competent during those intervals.
Based on the above points, the answer is:
- Option B: 2 & 3
- Minors (point 2) and individuals who are not capable of understanding the contract at the time of its making (point 3) are not competent to enter into a contract.

Statement 1: Even if a proposal is not accepted properly it becomes a valid contract.

• No, this statement is false. In order for a contract to be valid, there must be a valid offer and acceptance. If a proposal is not accepted properly, it does not become a valid contract.

Statement 2: The agreements which are against the public policy can be enforced if the parties are willing to contract.

• No, this statement is false. Agreements that are against public policy are considered void and unenforceable, regardless of the parties' willingness to contract.

Statement 3: For breach of contract a party can claim compensation for loss or damage.

• Yes, this statement is true. When a party breaches a contract, the non-breaching party can claim compensation for any loss or damage suffered as a result of the breach.

Statement 4: Two or more persons are said to consent when they agree upon the same thing in the same sense.

• Yes, this statement is true. In order for a contract to be valid, there must be a mutual consent between the parties. This means that they must agree upon the same thing in the same sense.

Therefore, the correct answer is C: 3 & 4 as both statements 3 and 4 are true.

1. Consideration must be real: This is true. Consideration must be something of value in the eyes of the law, meaning it must be real and not illusory.

2. Consideration can be inadequate: This is true. The law does not require the consideration to be adequate, meaning it does not need to be equivalent to the value of the promise. Courts typically do not inquire into the adequacy of consideration as long as it is real and lawful.

3. A promise to do something which one is already bound to do by law, will be treated as good consideration: This is false. A promise to do something that one is already legally obligated to do is generally not considered good consideration because the promisor is not providing any new benefit or detriment.

4. Consideration must be adequate: This is false. As mentioned earlier, the law does not require consideration to be adequate.

Conclusion:

• Statement 3 is false.
• Statement 4 is false.

The correct answer is Option 3: 3 & 4.

Essential Elements of a Valid Offer:

1. Offeror must have an intention to be bound by his offer:

• The offeror must have a genuine intention to create a legal relationship and be bound by the terms of the offer.


• If the offeror does not intend to be legally bound, the offer will be considered a mere expression of intent or invitation to negotiate, rather than a valid offer.

2. Offer must be made to a specific person/party and not to the public at large:

• An offer must be made to a particular individual or group of individuals and cannot be addressed to the public in general.


• If an offer is made to the public at large, it is considered an invitation to treat, which is not a valid offer.

3. Must be definite:

• An offer must have clear and specific terms, including the subject matter, price, and any other essential terms.


• If the terms of the offer are vague or uncertain, it may be considered incomplete and not capable of acceptance.

4. Offer cannot be vague:

• In contrast to the previous statement, an offer cannot be vague or uncertain in its terms.


• If the offer is not clear and definite, it may be considered too uncertain to form a valid contract.

Based on the above explanations, the correct answer is A: 1 & 3 as both statements 1 and 3 accurately reflect the essential elements of a valid offer.

Agreements that are void:
- Agreement in restraint of legal proceedings: This agreement restricts a party from initiating legal action or proceeding against another party. Such agreements are considered void as they go against public policy and the right to access justice.
- Agreement to stifle prosecution: This agreement aims to prevent the prosecution of a criminal offense. It is also void as it obstructs the course of justice and allows the guilty to avoid punishment.
Agreements that are valid:
- Agreement by an outgoing partner with his partners not to carry on any business within a specified period or within specified local limits: This agreement is valid as long as it is reasonable in terms of duration and geographical limits. It is a common practice to prevent the outgoing partner from competing with the partnership immediately after leaving.
- Contingent Contracts: These contracts are based on the occurrence of a future uncertain event. They are valid as long as the event is possible and not against the law. The parties involved have to fulfill their obligations once the event occurs.
Therefore, the correct answer is A: 1 & 2 as agreements in restraint of legal proceedings and to stifle prosecution are void.

Invalid Offers:
1. An auctioneer displaying a T.V. set before a gathering in an auction sale:
- This does not constitute a valid offer because the auctioneer is merely inviting bids and not making an offer to sell the T.V. set to a specific individual.
2. Ram saying "I will sell you a car" without specifying which car:
- This does not constitute a valid offer because Ram has not provided any specific details about the car he intends to sell. The offer lacks essential terms such as the type of car, price, and other relevant details.
3. A asking B, "Will you purchase my motor cycle for Rs. 20,000?":
- This constitutes a valid offer as A has clearly expressed their intention to sell their motorcycle to B for a specific price.
4. Ram communicating to Shyam that he will sell his car for Rs. 1,50,000:
- This constitutes a valid offer as Ram has clearly communicated his intention to sell his car to Shyam at a specific price.
Answer: Option A: 1 & 2 (The offers that do not constitute a valid offer are: 1. An auctioneer displaying a T.V. set before a gathering in an auction sale and 2. Ram saying "I will sell you a car" without specifying which car.)

Agreements that are void:

1. Agreements made under the unilateral mistake of fact:

• An agreement is considered void if one party makes a mistake about a material fact while the other party is aware of the mistake.


• In such cases, the mistaken party did not have a true understanding of the terms of the agreement, and therefore, the agreement is void.

2. Agreements made under the bilateral mistake of fact:

• An agreement is also void if both parties make a mistake about a material fact.


• If both parties are mistaken about the same fact, there is a lack of consensus and understanding, making the agreement void.

3. Agreements the consideration of which is unlawful:

• If the consideration (something of value exchanged between the parties) of an agreement is unlawful, the agreement is void.


• An agreement that involves illegal activities, such as drug trafficking or fraud, cannot be enforced by law.

4. Contingent agreement:

• A contingent agreement is one that depends on the occurrence or non-occurrence of a specific event.


• Unless the event specified in the agreement actually happens or does not happen, the agreement remains uncertain and unenforceable.

Conclusion:
Based on the given options, the correct answer is option B: 2 & 3. Agreements made under the bilateral mistake of fact and agreements the consideration of which is unlawful are void.

Misrepresentation Requirements:

1. Misrepresentation should relate to a material fact: The misrepresentation must involve a statement or action that pertains to a significant or essential aspect of the subject matter. It should be a fact that would likely influence the decision of the other party.

2. The person making a misrepresentation should believe it to be true: The individual making the misrepresentation must genuinely believe that the statement or action is accurate. This requirement ensures that the misrepresentation is not made intentionally or with malicious intent.

3. It must be made with an intention to deceive the other party: The person making the misrepresentation must have the intention to deceive or mislead the other party. There should be a deliberate effort to create a false perception or understanding.

4. The person making a misrepresentation should not believe it to be true: This is an incorrect requirement. The person making the misrepresentation should actually believe it to be true, as mentioned in point 2. If they do not believe it to be true, it would be considered a fraudulent misrepresentation.

Based on the above requirements, the correct answer is A: 1 & 2. Both of these conditions must be met for misrepresentation to exist.

 

Remedies available to Mr. J for the loss caused to him:
Option A: Mr. J can file a suit against his friends for not attending the dinner.
- This option suggests taking a legal action against his friends for not attending the dinner.
- However, it is important to note that attendance at a dinner is generally a voluntary act, and it may not be possible to legally compel someone to attend.
Option B: Mr. J cannot have any remedy.
- This option implies that Mr. J may not have any legal recourse for the loss caused to him.
- It suggests that there may not be any specific legal provision to address this situation.
Option C: Mr. J can recover the expenses incurred for the arrangements from his friends.
- This option suggests that Mr. J can seek reimbursement from his friends for the expenses he incurred for the dinner arrangements.
- However, the feasibility of recovering the expenses would depend on the specific circumstances and any agreements or arrangements made between Mr. J and his friends.
Option D: Mr. J can file a suit for the special damages.
- This option proposes that Mr. J can file a lawsuit seeking special damages for the loss caused to him.
- Special damages typically refer to specific, quantifiable financial losses that can be proven in court.
- However, it is important to consider whether the circumstances of the situation would meet the criteria for special damages and whether there is a legal basis for such a claim.
Conclusion:
Based on the given options, it appears that there may not be a clear and straightforward legal remedy available to Mr. J for the loss caused by his friends not attending the dinner. However, it is advisable for Mr. J to seek legal advice from a professional to fully understand his options and any potential legal recourse he may have in this situation.

Explanation:
The correct answer is B: The contract is void as it is opposed to public policy and G cannot recover.
Here's the detailed explanation:
1. The contract between G and H is considered to be against public policy because it involves bribery and corruption. Influencing a government official to obtain employment is illegal and unethical.
2. Contracts that are against public policy are considered void and unenforceable by law. This means that G cannot legally recover the amount paid to H.
3. Bribery and corruption are serious offenses that undermine the integrity of public institutions and the functioning of a fair and transparent society. Such actions are punishable by law and can lead to severe legal consequences for both the person offering the bribe (G) and the person accepting it (H).
4. It is important to uphold the principles of honesty, fairness, and meritocracy in employment practices. Offering bribes to secure employment not only disadvantages deserving candidates but also perpetuates a culture of corruption.
In conclusion, the contract between G and H is void and unenforceable as it is against public policy. G cannot recover the amount paid to H.

Remedies available to the manager of the theatre against M:
A: He is at liberty to put an end to the contract.
- The manager has the right to terminate the contract if M consistently fails to fulfill his obligations.
- Since M has been absent from the theatre from the sixth evening onwards, the manager can choose to end the contract.
B: He cannot put an end to the contract.
- This option is not applicable in this scenario because the manager has the right to terminate the contract due to M's consistent absence.
C: He is entitled to compensation for the damages sustained by him through M on his failure to sing from the sixth evening onwards.
- The manager can claim compensation from M for the damages caused by his absence.
- Since M was contracted to sing at the theatre two evenings a week for two months, his absence results in financial loss for the theatre.
D: Both (a) and (c) above.
- The manager has the option to both terminate the contract and seek compensation for the damages caused by M's absence.
In conclusion, the manager of the theatre has the right to terminate the contract and claim compensation for the financial damages caused by M's consistent absence.

To determine the correct statement, let's analyze the situation:
1. Ram, Rohit, and Kiran jointly borrowed Rs. 2,00,000 from Rahim by executing a promissory note.
2. Rohit and Kiran are not traceable.
3. Rahim wants to recover the entire amount from Ram.
4. Ram objects this move by saying he is liable to pay 1/3 of the debt only.
Now let's evaluate the options:
A: Rahim can recover the entire amount from Ram.
- This statement is incorrect because Ram is not solely liable for the entire debt. Joint borrowers are equally responsible for the repayment.
B: Rahim can only recover 1/3 of Rs. 2,00,000 from Ram.
- This statement is also incorrect because Ram is not solely liable for only 1/3 of the debt. Joint borrowers are equally responsible for the repayment.
C: Rahim cannot recover any amount from Ram.
- This statement is incorrect as well because joint borrowers are equally responsible for the repayment. Ram cannot escape his liability.
D: The promissory note is not executable against Ram as Rohit and Kiran are not traceable.
- This statement is also incorrect because Ram is still liable to pay his portion of the debt, regardless of the traceability of Rohit and Kiran.
Therefore, the correct statement is A: Rahim can recover the entire amount from Ram.

Issue:
B wants to sue A's father for the amount promised at the time of her marriage with A.
Relevant Law:
- Consideration is an essential element of a valid contract.
- The doctrine of privity of contracts states that only parties to a contract can sue or be sued under the contract.
- Contracts made at the time of marriage are generally enforceable by law.
Analysis:
A's father made a promise to B's parents to pay a certain amount of money every month after B's marriage with his son. To determine whether B can sue A's father for the promised amount, we need to consider the following:
1. Consideration:
- B's marriage with A can be considered as consideration for the promise made by A's father. Therefore, there is valid consideration for the promise.
2. Privity of Contracts:
- B is not a party to the contract between A's father and B's parents. However, the doctrine of privity of contracts may not apply in this case because B is seeking to enforce a promise made directly to her parents.
3. Enforceability of Contracts Made at the Time of Marriage:
- Contracts made at the time of marriage are generally enforceable by law. They are often considered to be social agreements and are given legal recognition.
Conclusion:
Based on the analysis of the relevant law and the facts of the case, the correct statement is:
- C: B can sue A's father for breach of contract.
Reasoning:
- There is valid consideration for the promise made by A's father.
- The doctrine of privity of contracts may not apply as B is seeking to enforce a promise made directly to her parents.
- Contracts made at the time of marriage are generally enforceable by law.

Explanation:


The correct answer is C: V cannot repudiate the contract. Here's why:

Fraud:

• Fraud occurs when a party intentionally misrepresents or conceals a material fact in order to deceive the other party.


• In this case, P did not intentionally misrepresent or conceal the fact that the computer was imported from the USA. It was simply a failure to disclose the information.


• Therefore, V cannot repudiate the contract on the ground of fraud.

Misrepresentation:

• Misrepresentation occurs when a party makes a false statement of fact that induces the other party to enter into a contract.


• In this case, P did not make any false statement of fact regarding the computer being imported from the USA.


• Therefore, V cannot repudiate the contract on the ground of misrepresentation.

Mistake:

• Mistake occurs when both parties are mistaken about a fundamental fact of the contract.


• In this case, the fact that the computer was imported from the USA is not a fundamental fact of the contract.


• Therefore, V cannot repudiate the contract on the ground of mistake.

Conclusion:

• Since V cannot repudiate the contract on the grounds of fraud, misrepresentation, or mistake, the correct answer is that V cannot repudiate the contract.

Background:
An auctioneer in Mumbai advertised a sale of office furniture to be held on December 23, 2003. A broker from Hyderabad traveled to attend the auction, but all the furniture was withdrawn. The broker sued the auctioneer for loss of his time and expenses.
Statement Analysis:
The correct statement can be determined by analyzing the given options:
A: The broker can get damages from the auctioneer for loss of his time and expenses.
This statement implies that the broker is entitled to receive compensation for his time and expenses. However, it is not clear whether the auctioneer is at fault for the withdrawal of the furniture.
B: The broker will not get damages from the auctioneer for loss of his time and expenses.
This statement suggests that the broker will not be able to claim damages for his time and expenses. This is a possible outcome if the auctioneer is not responsible for the withdrawal of the furniture.
C: An invitation to make an offer is a valid offer.
This statement is unrelated to the situation described and does not provide any information about the broker's claim for damages.
D: A declaration of intention by a person will give the right of action to another.
This statement is also unrelated to the situation described and does not provide any information about the broker's claim for damages.
Conclusion:
Based on the given options, the correct statement is B: The broker will not get damages from the auctioneer for loss of his time and expenses. This implies that the broker's claim for compensation is unlikely to be successful, possibly because the auctioneer is not responsible for the withdrawal of the furniture.

Explanation:
The agreement between Ankit and Praveen is Void ab initio as it is a contract with a minor. Here's why:
1. Minor's Capacity: Ankit is a minor, as he is only 17 years old. According to the Indian Contract Act, a minor is a person who has not attained the age of majority (18 years in most jurisdictions). Minors are not considered to have the legal capacity to enter into a valid contract.
2. Representation: Ankit falsely represents himself to be of 22 years in order to enter into the agreement. However, misrepresenting one's age does not change the fact that Ankit is still a minor and lacks the legal capacity to enter into a contract.
3. Property Transaction: Ankit agrees to sell his property to Praveen and receives a sum of Rs. 10,00,000 in advance. As a minor, Ankit does not have the authority to transfer or sell property. Any agreement related to the sale of property by a minor is void ab initio (void from the beginning) and holds no legal validity.
4. Disposal of Funds: Ankit uses a portion of the advance payment to buy an imported car and spends the rest on a pleasure trip. As a minor, Ankit's actions regarding the funds received are not legally binding. He does not have the capacity to make such transactions, and any disposal of the funds does not affect the void nature of the agreement.
5. Legal Consequences: As the agreement is void ab initio due to Ankit's status as a minor, Praveen has the right to sue for the refund of Rs. 10,00,000 and damages. Praveen is not bound by the agreement and can seek legal remedies to recover the amount paid.
In conclusion, the agreement between Ankit and Praveen is void ab initio as it involves a contract with a minor. Ankit lacks the legal capacity to enter into a valid contract, and Praveen has the right to seek a refund and damages.