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Contract Act 1872 MCQs – Bare Act

An agreement must be made between parties by free consent. In other words, the consent must not be obtained from Coercion, Undue influence, Fraud,

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Contract Act 1872 MCQs

An agreement must be made between parties by free consent. In other words, the consent must not be obtained from Coercion, Undue influence, Fraud, Misrepresentation, Mistake. Here on MCQs.club we have written useful Multiple-Choice Questions (MCQs) on Indian contract act 1872 that fully cover MCQs on Indian contract act 1872 bare act, law of contract 1872, ica 1872. These MCQs on introduction to Indian contract act 1872 useful for Competitive exams, Business management exams, Professional Accountancy exams.

Introduction to the law of contract

Contract – An agreement enforceable by law is a contract.

1. The above definition is correct
2. The above definition is incorrect

Agreement – Every promise and every set of promises forming the consideration for each other is an agreement.

1. The above definition is correct
2. The above definition is incorrect

Essentials of a valid contract include:

1. 1. Offer and acceptance
  2. Competency of parties
  3. Lawful consideration
  4. Made with Free Consent
  5. Lawful Object
  6. Not declared as void

1. All of the above
2. (I) (III) and (V) only
3. (I) (IV) and (VI) only
4. None

Competency of parties means the person must be of:

1. The age of majority
2. Person of sound mind
3. Not declared as disqualified from contracting by any law to which he is subject.
4. All of the above

An agreement must be made between parties by free consent. In other words, the consent must not be obtained from:

1. Coercion, Undue influence
2. Fraud
3. Misrepresentation, Mistake
4. All of the above

The object of an agreement must be lawful. An object is said to be unlawful when:

1. It is forbidden by law
2. Is of such a nature that if permitted would defeat the provisions of any law
3. It is fraudulent
4. It involves an injury to the person or property of another
5. All of the above

An agreement which is not enforceable by law is called void agreement. There are certain agreements which have been expressly declared as void such as:

1. Agreement, the consideration or object of which is partly unlawful
2. Agreement made without consideration
3. Agreement in restraint of marriage
4. Agreement in restraint of legal proceedings
5. All of the above

Offer and acceptance

Proposal / offer – 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.

1. The above definition is correct
2. The above definition is incorrect

Essentials of an offer include:

1. For a valid offer there needs to be two persons.
2. Certain and definite
3. The offer must be communicated to the offeree.
4. An offer cannot be in the form of negative confirmation i.e. if it is not accepted within a specific time then it will be presumed to have been accepted.
5. All of the above

Types of offer include:

1. Specific
2. General
3. Cross
4. Standing, Open, Continuing offer, Tender
5. All of the above

Essentials of acceptance include:

1. Absolute and unconditional
2. A valid acceptance is when it is accepted within the time specified or within a reasonable time where no time is specified.
3. The acceptor must be aware of the proposal at the time of acceptance of the proposal.
4. All of the above

An offer is lapsed by:

1. Revocation, Lapse of time, Death or insanity
2. Non-fulfilment of condition precedent
3. Subsequent illegality or destruction
4. All of the above

Capacity of parties

Which of the following is correct for the position of agreements by a minor?

1. 1. An agreement with a minor is void.
  2. Where an infant / minor represents fraudulently or otherwise that he is of the age of majority and induces another to enter into a contract with him, he will not be liable
  3. If a minor enters into an agreement jointly with a major person then such agreement can be enforced against the major person who has jointly promised to perform.
  4. A minor can be agent but cannot be a principal but if anyone acts on behalf of minor principal, he will be personally liable.
  5. A minor cannot be declared insolvent because he is incompetent to contract.
  6. A minor can file a suit but cannot be sued.

1. All of the above
2. (II) (III) and (IV) only
3. (I) (V) and (VI) only
4. None

Which of the following is correct for an agreement with a person of unsound mind?

1. If a lunatic enters into a contract while he is of unsound mind, an agreement during this period is void.
2. If a lunatic enters into a contract while he is of sound mind, an agreement during this period is valid.
3. A person of unsound mind can enforce a contract for his benefits
4. All of the above

There are some disqualifications imposed by the Act on certain persons in respect of their capacity to contract, such person includes:

1. Alien enemies
2. Foreign sovereigns and ambassadors
3. Convicts and Insolvent
4. All of the above

Consideration

Consideration – When at the desire of the promisor, the promisee or any other person who has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing something, such act or abstinence or promise is called a consideration for the promise.

1. The above definition is correct
2. The above definition is incorrect

Essentials elements of consideration include:

1. Consideration may be past, present or future
2. Consideration to have some value
3. Consideration must be real
4. All of the above

If a party of a single consideration for one or more objects, or any one or any part of any one of several conditions for a single object, is unlawful, the agreement is void.

1. True
2. False

Which of the following are the exceptions to the rule that a stranger to a contract cannot sue?

1. When an arrangement is made in connection with marriage, partition or other family arrangements and a provision is made for the benefit of a person, he may sue although he is not a party to the contract.
2. The person who becomes an agent of third party by acknowledgement or estoppel, may be sued by such third party.
3. Where a benefit under a contract has been assigned (other than one involving personal skill), the assignee can enforce the contract subject to all equities between the original parties to the contract.
4. All of the above

Agreements made on account of natural love and affection without consideration will be valid if it is:

1. expressed in writing
2. registered under the law
3. made on account of natural love and affection
4. between parties standing in a near relation to each other.
5. All of the above

A promise to pay time barred debt is enforceable if:

1. it is made in writing
2. it is signed by the debtor or his agent
3. it relates to a debt which could not be enforced by a creditor because of law of limitation.
4. All of the above

Free consent

The effect of absence of free consent is that the contract becomes voidable if the consent is obtained by coercion or undue influence or fraud or misrepresentation at the option of the party whose consent was so caused but if the consent is obtained by mistake then agreement may be void-ab-initio or contract is not voidable depending upon the nature of the mistake.

1. The above is correct
2. The above is incorrect

Coercion is the_____________ Any property with an intention of causing any person to enter into an agreement.

1. committing or threatening to commit any act which is forbidden
2. unlawful detaining or threatening to detain
3. Both A&B
4. None

The effects of coercion include:

1. The contract becomes voidable at the option of the party whose consent was so caused. The burden of proof lies on the party who rescinds the contract.
2. The party rescinding a voidable contract shall, if he has received any benefit from another party, restore such benefit i.e. restitution.
3. A person to whom money has been paid or anything delivered by coercion must repay or return it.
4. All of the above

Undue influence – A contract is said to be induced by undue influence where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain unfair advantage over the other.

1. The above definition is correct
2. The above definition is incorrect

A contract is said to be induced by undue influence where the relations between the parties are such that:

1. one of them in a position to dominate the will of the other
2. uses that position to obtain an unfair advantage over the other.
3. Both A&B
4. None

A person is in a position to dominate the will of another where he:

1. holds the real or apparent authority over the other e.g. parent and child
2. stands in a fiduciary relation to the other e.g. already indebted
3. makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness or mental or bodily distress
4. All of the above

In which of the following relationship there is no presumption that a person is in a position to dominate the will of another person:

1. Landlord and tenant
2. Creditor and debtor
3. Husband and wife
4. All of the above

The presumption of undue influence can be rebutted by showing that the:

1. Dominant party has made a full disclosure of all the facts to the weaker party before making the contract
2. Price was adequate
3. Weaker party was in receipt of competent independence advice before entering into the contract.
4. All of the above

Fraud means and includes acts committed by:

1. a party to a contract, or with his connivance
2. by the agent
3. Both A&B
4. None

Essentials of fraud include:

1. The fraud must be committed by a party to a contract or by anyone with his connivance or by his agent
2. A mere opinion does not amount to fraud. A representation must relate to a fact than it amounts to fraud.
3. A deceit, which does not deceive is not fraud.
4. All of the above

A party cannot rescind the contract entered by way of fraud where:

1. silence amounts to fraud and the aggrieved party had the means of discovering the truth with ordinary diligence
2. the party gave the consent in ignorance of fraud
3. the party after becoming aware of the fraud takes a benefit under the contract
4. All of the above

Misrepresentation means and includes –

1. Unwarranted statement
2. Breach of duty
3. Inducing mistake about subject matter (Innocent misrepresentation)
4. All of the above

Types of mistakes include:

1. Mistake of national law
2. Mistake of foreign law
3. Bilateral mistake, Unilateral mistake
4. All of the above

Which of the following is the exception where agreement is void on the basis of unilateral mistake?

1. Mistake relating to the identity of the person
2. Mistake relating to the nature of the contract
3. Both A&B
4. None

Legality of object, consideration and agreements opposed to public policy

The consideration or object of an agreement is lawful unless:

1. It is forbidden by law
2. Is of such a nature that if permitted would defeat the provisions of any law
3. It is fraudulent
4. It involves an in injury to the person or property of another
5. All of the above

A contract may contain several distinct promises or a promise to do several distinct acts of which some are legal and others illegal, or a part of which is legal and a part of which is illegal. In case of an agreement containing the promise, some part of which is legal and other part(s) illegal, the legal position is:

1. If the illegal part cannot be separated than the whole agreement is illegal.
2. If the illegal part can be separated than court will enforce the legal part and will reject illegal party.
3. Both A&B are correct
4. None

An agreement is said to be unlawful if the court regards it as opposed to public policy. Which of the following are the agreements which are held to be opposed to public policy?

1. 1. Trading with enemy
  2. Stifling prosecution
  3. Maintenance and champerty
  4. Sale of public offices
  5. Restraint of parental rights
  6. Restraint of personal liberty
  7. Agreement to create monopoly
  8. Marriage brokerage agreement

1. (I) (III) (IV) (VIII) only
2. (I) (II)(V) (VIII) only
3. All of the above
4. None

Void agreements

An agreement not enforceable by law is said to be void. All agreements may not be enforceable by law. The agreements which are not enforceable by law right from the time when they are made are called:

1. Invalid
2. void-ab-initio
3. void
4. None

When an agreement is void, other agreement which is collateral to it is also void and is not enforceable by law if the other party has knowledge about it.

1. True
2. False

Contract Act 1872 declares certain agreements to be void. Examples of such agreements are:

1. Agreement, the object or consideration of which is unlawful
2. Wagering agreement
3. Agreement to enter into an agreement in future
4. All of the above

Every agreement by which anyone is restricted from exercising a lawful profession, trade or business of any kind, is to that extent void. Exceptions of agreements in restraint of trade include:

1. One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business within specified local limits.
2. Subject to contract between partners, a partner may not carry on any business competing with that of the firm while he is a partner.
3. Both A&B
4. None

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:

1. Agreement to enter into an agreement in future
2. Agreement made without consideration
3. Uncertain agreement
4. Wagering event

The effects of wagering agreements are:

1. Such agreements are void
2. No suit can be filed to recover the amount won on any wager.
3. Transactions which are collateral to wagering agreements may also be void.
4. All of the above

Every agreement by which any party is restricted from enforcing his right under a contract by the usual legal proceedings or which limits the time within which he may enforce his right is void. Exceptions to this rule are:

1. An agreement between two or more persons who agree that any dispute which may arise between them shall be referred to arbitration, is valid.
2. An agreement whereby parties agree not to file an appeal in upper court of law, is valid.
3. Parties making extract to select one court of law between two courts equally competent.
4. All of the above

Contingent agreements to do or not to do anything, if an impossible event happens are void whether the impossibility of the event is known or not to the parties to the agreement at the time when it is made.

1. The above rule is correct
2. The above rule is incorrect

Contingent contracts

Contingent contract – A ‘contingent contract’ is a contract to do or not to do something if some event, collateral to such contract does or does not happen.

1. The above definition is correct
2. The above definition is incorrect

Example of contingent contracts are:

1. Insurance contracts
2. Contracts of indemnity and guarantee
3. Both A&B
4. None

Which of the following are the characteristics of contingent contracts?

1. the performance of a contingent contract depends upon the happening or non-happening of some future event.
2. the event must be collateral to the contract
3. the event must be uncertain
4. All of the above

A contract of performance of which is contingent on the non-happening of a specified uncertain event within a fixed time may be enforced by law:

1. When the time fixed has expired and such event has not happened
2. If (before the expiry of the time fixed) it becomes certain that such event will not happen.
3. Both A&B
4. None

Which of the following is CORRECT for Contingent contracts?

1. It is a valid contract.
2. Parties have real interest in the occurrence or non-occurrence of the event
3. The future uncertain event is merely collateral.
4. It consists of reciprocal promises.
5. All of the above

Which of the following is CORRECT for Wagering agreement?

1. It is void and illegal
2. Parties are not interested in the occurrence or non-occurrence of the event except for the winning or losing the amount.
3. The uncertain event is the sole determining factor of the agreement.
4. It may or may not consist of reciprocal promises.
5. All of the above

Quasi contracts

Which of the following is correct for Quasi contract?

1. A Quasi contract is an obligation imposed by law in absence of any agreement between the parties.
2. A quasi-contract is not an actual contract, but is a legal substitute formed to impose equity between two parties.
3. The concept of a quasi-contract is that of a contract that should have been formed, even though in actuality it was not.
4. All of the above

The other name for Quasi contracts is constructive contracts.

1. True
2. False

The types of Quasi contracts are:

1. Supply of necessaries
2. Payment by interested person
3. Person enjoying benefit of non-gratuitous act / goods
4. Payment by mistake or under coercion
5. All of the above

A person, who is interested in the payment of money which another is bound by law to pay, and who therefore pays it, is entitled to be reimbursed by the other. The essential requirement of this rule includes:

1. The payment made should be bona fide for the protection of one’s interest
2. The payment should not be a voluntary one
3. The payment must be such as the other party was bound by law to pay
4. All of the above

Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered. What conditions must be satisfied before any right of action arises?

1. The thing must have been done lawfully
2. The person doing the act should not have intended to do it gratuitously
3. The person for whom the act is done must have enjoyed the benefit of the act.
4. All of the above

The term Quantum Meruit means “as much as earned or deserved.” Identify the cases where Quantum meruit applies:

1. 1. Void agreement or a contract that becomes void
  2. Person enjoying benefit of non-gratuitous act / goods
  3. Act preventing the completion of contract
  4. Divisible contract
  5. Indivisible contract performed completely but badly
  6. Express or implied contract to render services but no remuneration is pre-settled

1. All of the above
2. (I) (V) and (VI) only
3. (II) (V) and (IV) only
4. None

Performance of a contract

Which of the following is correct for Performance of the contract?

1. A contract creates an obligation, which continues till the contract has been discharged by actual performance.
2. Performance of the contract is one of the vital modes of discharge of the contract.
3. A contract is said to have been performed when the parties to a contract either perform or offer to perform their respective promises.
4. All of the above

Types of performance includes:

1. Actual
2. Attempted
3. Both A&B
4. None

Actual performance –

1. When the promisor has made the performance in accordance with the terms of the contract and is accepted by the promisee.
2. Where the promisor has made an offer of performance but the offer of performance of promisor is not accepted by the promisee
3. It is also known as tender
4. All of the above

—Part I ended—

See Part II