Under Section 2(h), when is an agreement a contract?
A When made orally
B When signed by witnesses
C When enforceable by law
D When filed in court
Answer: C. When enforceable by law. Section 2(h) defines a contract as an agreement enforceable by law.
Which word does the Act use for an offer?
A Consideration
B Guarantee
C Acceptance
D Proposal
Answer: D. Proposal. The Act uses “proposal” for a person signifying willingness to do or abstain from doing something to obtain another’s assent.
What must a valid acceptance be under Section 7?
A Written and notarized
B Absolute and unqualified
C Conditional and revocable
D Registered with court
Answer: B. Absolute and unqualified. Section 7 requires acceptance to be absolute and unqualified, expressed in a usual and reasonable manner unless the proposal prescribes a mode.
If a reply changes the offered price, what is it?
A Completed performance
B Unqualified acceptance
C Counter-offer
D Implied guarantee
Answer: C. Counter-offer. A reply that changes a material term does not accept the original proposal; it operates as a counter-offer.
For the proposer, when is acceptance complete under Section 4?
A When proposal is drafted
B When put into transmission
C When goods are delivered
D When court records it
Answer: B. When put into transmission. As against the proposer, acceptance is complete when it is put into a course of transmission to the proposer beyond the acceptor’s power.
At what point is acceptance complete against the acceptor?
A When proposer learns of it
B When offer is drafted
C When goods are inspected
D When acceptor signs privately
Answer: A. When proposer learns of it. As against the acceptor, acceptance is complete when it comes to the knowledge of the proposer.
Who may furnish consideration under Indian contract law?
A Only a witness
B Promisee or another person
C Only the promisor
D Only a court
Answer: B. Promisee or another person. Section 2(d) allows an act, abstinence, or promise by the promisee or any other person at the promisor’s desire.
Section 10 requires competent parties and free consent plus what?
A A written stamp always
B Registration in every case
C Lawful consideration and object
D A witness for each party
Answer: C. Lawful consideration and object. Section 10 also requires lawful consideration and object, and the agreement must not be expressly declared void.
How does Section 11 describe a competent person?
A A registered business only
B Any court-approved witness
C Any adult signatory
D Major, sound mind, not disqualified
Answer: D. Major, sound mind, not disqualified. Section 11 requires majority, soundness of mind, and no legal disqualification from contracting.
At what time must contractual soundness of mind exist?
A When contract is made
B At the end of performance
C Only when payment occurs
D Only at court filing
Answer: A. When contract is made. Section 12 assesses whether the person can understand the contract and form a rational judgment about its effect at the time of contracting.
When do parties consent under Section 13?
A Same thing, same sense
B Same lawyer, same court
C Same document, same signature
D Same price, same day
Answer: A. Same thing, same sense. Consent exists when two or more persons agree upon the same thing in the same sense.
What makes consent free under the Act?
A Equal bargaining power
B A written contract only
C Approval by a judge
D No listed vitiating factor
Answer: D. No listed vitiating factor. Section 14 addresses consent not caused by coercion, undue influence, fraud, misrepresentation, or mistake, subject to the Act’s rules.
Under Section 16, when may undue influence arise?
A Dominated will, unfair advantage
B A price changes later
C A party delays delivery
D A witness is absent
Answer: A. Dominated will, unfair advantage. Undue influence concerns a relationship in which one party can dominate another’s will and uses that position to obtain an unfair advantage.
Which conduct can amount to fraud under Section 17?
A A later market change
B Intentional deception or concealment
C A delayed shipment
D An honest price estimate
Answer: B. Intentional deception or concealment. Fraud includes specified acts done with intent to deceive or induce a party to enter an agreement.
How does misrepresentation differ from fraud?
A A court-approved term
B False assertion without fraudulent intent
C A lawful promise
D An intentional threat
Answer: B. False assertion without fraudulent intent. Misrepresentation includes certain false or unwarranted assertions made without the intent to deceive required for fraud.
How can an agreement induced by fraud generally be treated?
A Always valid forever
B Automatically criminal
C Void in every case
D Voidable at injured party’s option
Answer: D. Voidable at injured party’s option. Under Section 19, a contract induced by fraud is generally voidable at the option of the party whose consent was so caused, subject to statutory qualifications.
When does Section 20 make an agreement void for mistake?
A Both parties mistake essential fact
B A price later changes
C A witness forgets signing
D One party regrets the bargain
Answer: A. Both parties mistake essential fact. Section 20 addresses an agreement where both parties are under a mistake as to a matter of fact essential to the agreement.
Can one party’s factual mistake alone generally void a contract?
A No, not ordinarily
B Yes, always
C Only if witnessed
D Only after registration
Answer: A. No, not ordinarily. Section 22 says a contract is not voidable merely because one party was under a mistake as to a matter of fact.
Which type of object makes an agreement unlawful under Section 23?
A Profitable to both parties
B Performed quickly
C Written in plain language
D Forbidden by law
Answer: D. Forbidden by law. Section 23 treats an object or consideration forbidden by law as unlawful; it lists other unlawful categories too.
What is the general effect of no consideration?
A Automatically criminal
B Always enforceable
C Void, subject to exceptions
D Valid for one year
Answer: C. Void, subject to exceptions. Section 25 makes agreements without consideration void unless a stated exception applies.
Which past act can support a later promise under Section 25?
A Voluntary act for promisor
B An unrelated court filing
C A future market forecast
D A proposed gift only
Answer: A. Voluntary act for promisor. One exception covers a promise to compensate someone who has already voluntarily done something for the promisor, or something the promisor was legally compellable to do.
How must a promise to pay a time-barred debt be made?
A Written and signed
B Entered in a ledger
C Approved by a court
D Spoken before witnesses
Answer: A. Written and signed. Section 25 recognizes a written and signed promise to pay a time-barred debt as an exception to the no-consideration rule.
What agreement is void under Section 26?
A A wedding expense contract
B Restraint of adult marriage
C A marriage invitation
D A family settlement
Answer: B. Restraint of adult marriage. An agreement restraining the marriage of a person other than a minor is void under Section 26.
Under Section 27, what is the general rule on restraint of trade?
A Void, subject to exceptions
B Automatically criminal
C Always enforceable
D Valid only orally
Answer: A. Void, subject to exceptions. Section 27 generally voids agreements restraining lawful trade, subject to the statutory exception and other applicable law.
Which agreement does Section 28 generally invalidate?
A A court’s procedural order
B A valid arbitration clause
C Absolute restraint on legal proceedings
D A settlement after suit
Answer: C. Absolute restraint on legal proceedings. Section 28 generally voids agreements that absolutely restrict ordinary legal proceedings to enforce rights, subject to its stated exceptions.
What happens if an agreement’s meaning is uncertain?
A It is automatically registered
B It creates a tort
C It becomes a guarantee
D It is void
Answer: D. It is void. Section 29 makes agreements void when their meaning is not certain or capable of being made certain.
How does Section 30 treat wagering agreements?
A Valid if witnessed
B Generally void
C Always enforceable
D Automatically guaranteed
Answer: B. Generally void. Section 30 declares agreements by way of wager void, subject to limited statutory exceptions.
What does a contingent contract depend on?
A A witness’s opinion
B A completed court judgment
C Collateral uncertain event
D A fixed past event
Answer: C. Collateral uncertain event. Section 31 defines a contingent contract by reference to a collateral event happening or not happening.
How are impossible contingent events treated?
A Agreements are void
B They remain enforceable
C They require registration
D They become guarantees
Answer: A. Agreements are void. Section 36 makes agreements contingent on impossible events void, whether or not the parties knew of the impossibility.
When must parties to simultaneous reciprocal promises be ready?
A When both are ready
B Only after registration
C Only after full payment
D Only after judgment
Answer: A. When both are ready. Section 51 says a promisor need not perform unless the promisee is ready and willing to perform reciprocal promises that are to be simultaneously performed.
Once a promise is due, what does Section 37 require?
A Obtain a guarantee
B File a new lawsuit
C Register each payment
D Perform or offer performance
Answer: D. Perform or offer performance. Section 37 requires parties to perform or offer to perform their respective promises unless performance is dispensed with or excused.
What does novation under Section 62 accomplish?
A New contract replaces old
B A payment becomes a pledge
C A court transfers the case
D A witness replaces a party
Answer: A. New contract replaces old. Section 62 provides that parties may substitute a new contract, rescind, or alter the original contract.
What is the effect of a promise impossible from the outset?
A Enforceable for damages
B Automatically a guarantee
C Valid after notice
D Void from the outset
Answer: D. Void from the outset. Section 56 provides that an agreement to do an act impossible in itself is void.
What can subsequent impossibility do under Section 56?
A Create a surety
B Extend every deadline
C Erase prior consent
D Make contract void
Answer: D. Make contract void. A contract to do an act that later becomes impossible or unlawful becomes void when the act becomes impossible or unlawful.
Which kind of breach loss is usually excluded by Section 73?
A Direct natural loss
B Remote or indirect loss
C Loss within both parties’ contemplation
D Ordinary foreseeable loss
Answer: B. Remote or indirect loss. Section 73 allows compensation for loss naturally arising in the usual course or within the parties’ contemplation, but not remote or indirect loss.
How does Section 74 limit stipulated breach compensation?
A Automatic full penalty
B No compensation ever
C Reasonable, capped compensation
D Unlimited punitive damages
Answer: C. Reasonable, capped compensation. Section 74 permits reasonable compensation not exceeding the amount named or penalty stipulated.
Which promise is an indemnity under Section 124?
A Appointing a court receiver
B Transferring goods temporarily
C Saving another from loss
D Guaranteeing every future sale
Answer: C. Saving another from loss. Section 124 describes indemnity as a promise to save another from loss caused by the promisor or another person.
After meeting a covered claim, what can the indemnity-holder recover?
A Every future loss
B Unrelated business profits
C Covered damages and costs
D Punitive criminal fines
Answer: C. Covered damages and costs. Section 125 allows recovery of covered damages, qualifying costs, and certain compromise payments from the indemnifier.
Who are named as parties to a contract of guarantee?
A Buyer, seller, broker
B Bailor, bailee, finder
C Creditor, debtor, surety
D Principal, agent, witness
Answer: C. Creditor, debtor, surety. Section 126 identifies the creditor, principal debtor, and surety as the parties to a contract of guarantee.
How extensive is the surety’s liability under Section 128?
A Coextensive with debtor’s liability
B No liability before suit
C Only nominal damages
D Always limited to half
Answer: A. Coextensive with debtor’s liability. A surety’s liability is coextensive with that of the principal debtor unless the contract provides otherwise.
What does a continuing guarantee cover?
A Only court fees
B Series of transactions
C One isolated delivery
D A single witness statement
Answer: B. Series of transactions. Section 129 defines a continuing guarantee as one extending to a series of transactions.
When can variation discharge a surety?
A When creditor gives notice
B Without surety’s consent
C After full performance
D When a witness signs
Answer: B. Without surety’s consent. Section 133 addresses discharge of a surety for transactions subsequent to a variance in the contract made without the surety’s consent.
What is bailment under Section 148?
A Money lent without terms
B Land transferred permanently
C Goods delivered for a purpose
D A promise to pay damages
Answer: C. Goods delivered for a purpose. Bailment involves delivery of goods by one person to another for a purpose, with return or disposal as directed when that purpose is accomplished.
How much care must a bailee take?
A Absolute insurer care
B Ordinary prudent-person care
C No care at all
D Only written precautions
Answer: B. Ordinary prudent-person care. Section 151 requires the care an ordinarily prudent person would take of similar goods in similar circumstances.
When does a bailee ordinarily return goods?
A Only after ownership changes
B Whenever market prices rise
C Purpose ends or time expires
D Only after a lawsuit
Answer: C. Purpose ends or time expires. Section 160 requires return or delivery according to directions when the agreed time expires or the purpose is accomplished.
Which work may support a bailee’s particular lien?
A A future sales forecast
B A court filing fee
C An unrelated old debt
D Unpaid labor or skill
Answer: D. Unpaid labor or skill. Under Section 170, a bailee who rendered a service involving labor or skill on the bailed goods may retain them for due remuneration.
What does a pledge secure under Section 172?
A An agent’s commission
B Debt or promised performance
C A court’s jurisdiction
D A marriage agreement
Answer: B. Debt or promised performance. A pledge is a bailment of goods as security for payment of a debt or performance of a promise.
After default, what may a pawnee do?
A Keep goods without notice
B Sue or sell after notice
C Cancel unrelated contracts
D Transfer title automatically
Answer: B. Sue or sell after notice. Section 176 allows the pawnee to sue or sell the pledged goods after giving reasonable notice to the pawnor.
In agency, whom does the agent represent in dealings?
A A surety only
B Any witness
C The court
D The principal
Answer: D. The principal. Section 182 defines an agent as a person employed to act for or represent another, called the principal, in dealings with third persons.
Does creating an agency require consideration?
A Only after registration
B Yes, always
C Only in writing
D No
Answer: D. No. Section 185 states that no consideration is necessary to create an agency.