1.40 LIABILITY FOR DAMAGES
(a) Liability for special damages : Where a party to a contract receives a notice of special
circumstances affecting the contract, he will be liable not only for damages arising naturally
and directly from the breach but also for special damages.
(b) Liability to pay vindictive or exemplary damages : These damages may be awarded
only in two cases, viz. (i) for breach of promise to marry; and (ii) wrongful dishonour by a
banker of his customer’s cheque. In a breach of promise to marry, exemplary damages
may be awarded to the other party taking into consideration the injury caused to his or
her feelings. The amount of damages recoverable by the drawer of cheque from his banker
in case of wrongful dishonour of his cheque may be quite heavy, depending upon the loss
of credit and reputation suffered on that account.
(c) Liability to pay nominal damages : Nominal damages are awarded where the plaintiff
has proved that there has been a breach of contract but he has not in fact suffered any real
damage. Now you may ask why such damages are at all awarded. The answer is simple.
It is awarded just to establish the right to decree for the breach of contract. The amount
may be a rupee or even 10 paise.
(d) Damages for deterioration caused by delay : In the case of deterioration caused to goods
by delay, damages can be recovered from carrier even without notice. The word
‘deterioration’ not only implies physical damages to the goods but it may also mean loss of
special opportunity for sale.
1.41 HOW TO CALCULATE THE DAMAGE ?
Under a contract for the sale of goods, the measure of damages, when the buyer breaks the
contract, is the difference between the contract price and the market price at the date of breach.
If the contract is broken by the seller, the buyer is entitled to recover from the seller the difference
between the market price and the contract price at the date of breach.
Duty to mitigate the loss. You will perhaps recollect that the party who suffers in consequence
of the breach of contract must take all reasonable steps to mitigate the loss from such a breach;
he cannot claim as damages any loss which he has suffered due to his own negligence.
Besides claiming damages as a remedy for the breach of contract, the following remedies are
also available :
(i) Rescission of contract : When a contract is broken by one party, the other party may treat
the contract as rescinded. In such a case he is absolved of all his obligations under the
contract and is entitled to compensation for any damages that he might have suffered.
(ii) Suit upon Quantum Meruit : The phrase ‘quantum meruit’ literally means “as much as is
earned” or “according to the quantity of work done”. When a person has begun the work
and before he could complete it, the other party terminates the contract or does something
which make it impossible for the other party to complete the contract, he can claim for the
work done under the contract. He may also recover the value of the work done where the
further performance of the contract becomes impossible. The claim on quantum meruit
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must be brought by a party who is not at default. However, in certain cases, the party in
default may also sue for the work done if the contract is divisible. Following are the cases
in which a claim on quantum meruit may arise :
(a) Where the work has been done and accepted under a contract which is subsequently
discovered to be void, in such a case, the person who has performed the part of the
contract is entitled to recover the amount for the work done and the party, who
receives and accepts the benefit under such contract, must make compensation to the
other party.
(b) Where a person does some act or delivers something to another person with the
intention of receiving payments for the same (i.e. non-gratuitous act), in such a case,
the other person is bound to make payment if he accepts such services or goods, or
enjoys their benefit.
(c) The compensation for the work done may be recovered on the basis of quantum
meruit. Where the contract is divisible and a party performs part of the contract and
refuses to perform the remaining part, in such a case, the party in default may sue the
other party who has enjoyed the benefits of the part performance.
(iii) Suit for specific performance : Where damages are not an adequate remedy in the case
of breach of contract, the court may in its discretion on a suit for specific performance
direct party in breach, to carry out his promise according to the terms of the contract.
(iv) Suit for injunction : Where a party to a contract is negativating the terms of a contract,
the court may by issuing an ‘injunction order’ restrain him from doing what he promised
not to do.
1.42 SUMMARY
In case of breach of contract by one party the other party need not perform his part of the
contract and is entitled to compensation for the loss occurred to him. Damages for breach of
contract must be such loss or damage as naturally arises, in the usual course of things or which
had been reasonably supposed to have been in contemplation of the parties when they made
the contract, as the probable result of the breach. Any other damages are said to be remote or
indirect damages, hence, cannot be claimed.
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CHAPTER – 1
THE INDIAN
CONTRACT
ACT, 1872
Unit 6
Contingent
and
Quasi-Contracts
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THE INDIAN CONTRACT ACT, 1872
Learning objectives
(cid:2) Have clarity about the basic characteristics of ‘Contingent contract’ and ‘quasi-contract’
so that you are able to distinguish between a contract of any of these types and a simple
contract.
(cid:2) Be familiar with the rules relating to enforcement of these in order to gain an understanding
of rights and obligations of the parties to the contract.
In this unit we shall briefly examine what is called a ‘contingent contract’, its essentials and the
rules regarding enforcement of this type of contracts. Again, the Contract Act recognises certain
cases in which an obligation is created without a contract. Such obligations arise out of certain
relations which cannot be called as contracts in the strict sense. There is no offer, no acceptance,
no consensus ad idem and in fact neither agreement nor promise and yet the law imposes an
obligation on one party and confers a right in favour of the other. We shall have a look on these
cases of ‘Quasi-contracts’.
1.43 WHAT IS A CONTINGENT CONTRACT ?
According to Section 31 of the Act, contingent contract is a contract to do or not to do something,
if some event collateral to such contract, does or does not happen.
Contracts of insurance are of this class.
Example : A contracts to pay B Rs. 1,00,000 if B’s house is destroyed by fire. This is a contingent
contract.
1.44 ESSENTIALS OF A CONTINGENT CONTRACT
(1) The performance of a contingent contract is made dependent upon the happening or
non-happening of some event. A contract may be subject to a condition precedent or
subsequent.
(2) The event on which the performance is made to depend, is an event collateral to the
contract, i.e., it does not form part of the reciprocal promises which constitute the contract.
Thus the event should neither be a performance promised, nor the consideration for a
promise. Thus (i) where A agrees to deliver 100 bags of wheat and B agrees to pay the
price only afterwards, the contract is a conditional contract and not contingent; because
the event on which B’s obligation is made to depend is part of the promise itself and not a
collateral event. (ii) Similarly, where A promises to pay B Rs. 1,00,000 if he marries C, it is
not a contingent contract.
(3) The contingent event should not be the mere will of the promisor. For instance, if A promises
to pay B Rs. 10,000, if he so chose, it is not a contingent contract. (In fact, it is not a
contract at all). However, where the event is within the promisor’s will but not merely his
will, it may be contingent contract. For example, if A promises to pay B Rs. 10,000 if A left
Delhi for Bombay on a particular day, it is a contingent contract, because going to Bombay
is an event no doubt within A’s will, but is not merely his will.
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1.45 RULES RELATING TO ENFORCEMENT
Enforcement of contracts contingent on an event ‘happening’ : Where a contingent contract
is made to do or not to do anything if an uncertain future event happens, it cannot be enforced
by law unless and until that event has happened. If the event becomes impossible, such contracts
become void. To illustrate this concept, let us take an example. X entered into a contract with
Y to purchase Y’s buffalo, if X survives Z. In view of the said principle of law, the contract, in
the instant case, could not be enforced by law unless and until Z died during the life-time of X.
Enforcement of contracts contingent on an event ‘not-happening’ : Where a contingent contract
is made to do or not to do anything if an uncertain future event does not happen it can be
enforced only when the happening of that event becomes impossible and not before. For example,
P agreed to pay Q a sum of money, if a certain ship does not return. The ship was sunk. The
contract could be enforced as the ship would never return in the circumstances.
When shall an event on which contract is contingent be deemed impossible, if it is the
future conduct of a living person : Suppose, the future event on which a contract is contingent
is the way in which a person will act at an unspecified time. In such a case, the event shall be
considered to have become impossible when such person does anything which renders it
impossible that he should so act within any definite time or otherwise than under further
contingencies. For instance, A agrees to pay B a sum of money if A marries C; C marries D. The
marriage, of A to C is now to be considered impossible, although it is possible that D may die
and that C may afterwards marry A.
Agreement contingent on impossible event (Section 36) : A contingent agreement to do or
not to do anything, if an impossible event happens, is void. The impossibility of the event may
be or may not be known to the parties to the agreement at the time when they entered into it.
For example X agrees to pay Y 1,000 rupees if two straight lines should enclose a space. The
agreement is void.
1.46 WHAT IS A QUASI-CONTRACT ?
In the case of every contract, the promisor voluntarily undertakes an obligation in favour of
the promisee. A similar obligation may be imposed by law upon a person for the benefit of
another even in the absence of a contract. Such cases are known as quasi contracts. The
obligation created in either of the cases is identical. Quasi contracts are based on principles of
equity, justice and good conscience.
The salient features, of quasi contractual right, are as follows:
(a) Firstly, it does not arise from any agreement of the parties concerned, but is imposed by
the law; and
(b) Secondly, it is a right which is available not against the entire world, but against a particular
person or persons only.
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1.47 TYPES OF QUASI-CONTRACTS
Under the provisions of the Indian Contract Act, the relationship of quasi contract is deemed
to have come to exist in five different circumstances which we shall presently dilate upon. But
you will notice that in none of these cases there comes into existence any contract between the
parties in the real sense. Due to peculiar circumstances in which they are placed, the law
imposes in each of these cases of contractual liability.
(a) Claim for necessaries supplied to persons incapable of contracting (Section 68): If
necessaries are supplied to a person who is incapable of contracting, e.g. minor or a person
of unsound mind, the supplier is entitled to claim their price from the property of such a
person.
Accordingly, if A supplies to B, a lunatic, necessaries suited to B’s status in life, A would be
entitled to recover their price from B’s property. He would also be able to recover the price
for necessaries supplied by him to his (B’s) wife or minor child since B is legally bound to
support them. However, if B has no property, nothing would be realisable. You should,
however, note that in such circumstances, the price only of necessaries and not of articles
of luxury, can be recovered. To establish his claim, the supplier must prove not only that
the goods were supplied to the person who was minor or a lunatic but also that they were
suitable to his actual requirements at the time of the sale and delivery.
Similarly, if money has been advanced in like circumstances for the purchase of necessaries,
its reimbursement can be claimed.
(b) Right to recover money paid for another person : A person who has paid a sum of money
which another is obliged to pay, is entitled to be reimbursed by that other person provided
the payment has been made by him to protect his own interest.
(c) Obligation of a person enjoying benefits of non-gratuitous act (Section 70): Such an
obligation arises under the provision of Section 70 reproduced below:
“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.”
It thus follows that for a suit to succeed, the plaintiff must prove: (i) that he had done the
act or had delivered the thing lawfully; (ii) that he did not do so gratuitously; and (iii) that
the other person enjoyed the benefit.
(d) Responsibility of a finder of goods: Such a responsibility arises under Section 71 which
is reproduced below:
“A person who finds goods belonging to another and takes them into his custody is subject
to the same responsibility as a bailee”.
He is, therefore, required to take proper care of things found, not to appropriate it to his
own use and, when the owner is traced, to restore it to the owner. Further, he must take as
much care of the goods found as a man of ordinary prudence would, under similar
circumstances, take care of his own goods of the same bulk, quantity and value as those of
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the goods found. Let us exemplify this rule by means of an illustration. P, a customer in D’s
shop, puts down a broach with her coat and forgets to pick it up. One of D’s assistants
found it and it was placed in a drawer over the weekend. On Monday, it was discovered as
missing. D was liable to P in view of the absence of that ordinary care which in the
circumstances, a prudent man would have taken.
(e) Liability for money paid or thing delivered by mistake or under coercion: Such liability
arises under Section 72 of the Contract Act which is reproduced below:
“A person to whom money has been paid, or anything delivered, by mistake or under
coercion must repay or return it.”
In each of the above cases, contractual liability is the creation of law and does not depend
upon any mutual agreement between the parties.
1.48 WAGERING AGREEMENT AND CONTINGENT CONTRACT
The points of distinction between the two may be noted as follows :
1. A wagering agreement is a promise to give money or money’s worth upon the determination
or ascertainment of an uncertain event.
A contingent contract, on the other hand, is a contract to do or not to do something if
some event, collateral to such contract does or does not happen.
2. In a wagering agreement the uncertain event is the sole determining factor, while in a
contingent contract the event is only collateral.
3. A wagering agreement is essentially of a contingent nature whereas a contingent contract
may not be of a wagering nature.
4. A wagering agreement is void whereas a contingent contract is valid.
5. In a wagering agreement, the parties have no other interest in the subject matter of the
agreement except the winning or losing of the amount of the wager. In other words, a
wagering agreement is a game of chance. This is not so in case of a contingent contract.
1.49 SUMMARY
Contingent Contracts are the contracts, which are conditional on some future event happening
or not happening and are enforceable when the future event or loss occurs. (Section 31)
Rules for enforcement
(a) If it is contingent on the happening of a future event, it is enforceable when the event
happens. The contract becomes void if the event becomes impossible, or the event does not
happen till the expiry of time fixed for happening of the event.
(b) If it is contingent on a future event not happening. It can be enforced when happening of
that event becomes impossible or it does not happen at the expiry of time fixed for non-
happening of the event.
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(c) If the future event is the act of a living person, any conduct of that person which prevents
the event happening within a definite time renders the event impossible.
(d) If the future event is impossible at the time of the contract is made, the contract is void ab
initio.
Quasi Contracts arise where obligations are created without a contract. The obligations which
they give rise to are expressly enacted:
(a) If necessaries are supplied to a person who is incapable of contracting, the supplier is
entitled to claim their price from the property of such a person.
(b) A person who is interested in the payment of money which another is bound to pay, and
who therefore pays it, is entitled to be reimbursed by the other.
(c) A person who enjoys the benefit of a non-gratuitous act is bound to make compensation.
(d) A person who finds lost property may retain it subject to the responsibility of a bailee.
(e) If money is paid or goods delivered by mistake or under coercion, the recipient must repay
or make restoration.
1.50 MULTIPLE CHOICE QUESTIONS
1. The law of contract in India is contained in
(a) Indian Contract Act, 1862 (b) Indian Contract Act, 1962
(c) Indian Contract Act, 1872 (d) Indian Contract Act, 1972
2. An agreement enforceable by law is a
(a) Promise. (b) Contract. (c) Obligation. (d) Lawful Promise.
3. A void agreement is one which is
(a) Valid but not enforceable
(b) Enforceable at the option of both the parties.
(c) Enforceable at the option of one party
(d)Not enforceable in a court of law.
4. An agreement which is enforceable by law at the option of one or more of the parties
thereon but not at the option of the other or others is a
(a) Valid Contract. (b) Void Contract.
(c) Voidable Contract. (d) Illegal Contract.
5. Which of the following is false? An offer to be valid must:
(a) Intend to create legal relations.
(b) Have certain & unambiguous terms.
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(c) Contain a term the non-compliance of which would amount to acceptance.
(d)Be communicated to the person to whom it is made.
6. When the consent of a party is not free, the contract is
(a) Void. (b) Voidable. (c) Valid. (d) Illegal.
7. Which of the following is false? An acceptance:
(a) Must be communicated. (b) Must be absolute and unconditional.
(c) Must be accepted by a person having authority to accept.
(d)May be presumed from silence of offeree.
8. In case of illegal agreements, the collateral agreements are:
(a) Valid. (b) Void. (c) Voidable. (d) None of these.
9. An offer may lapse by:
(a) Revocation. (b) Counter Offer. (c) Rejection of Offer by Offeree.
(d)All of these.
10. A proposal when accepted becomes a
(a) Promise. (b) Contract. (c) Offer. (d) Acceptance.
11. Which of the following statement is true?
(a) Consideration must result in a benefit to both parties.
(b) Past consideration is no consideration in India.
(c) Consideration must be adequate.
(d)Consideration must be something, which a promisor is not already bound to do.
12. Which of the following statement is false? Consideration:
(a) Must move at the desire of the promisor.
(b) May move from any person.
(c) Must be illusory. (d) Must be of some value.
13. Which of the following statement is false?
(a) Generally a stranger to a contract cannot sue.
(b) A verbal promise to pay a time barred debt is valid.
(c) Completed gifts need no consideration.
(d)No consideration is necessary to create an agency.
14. Consideration must move at the desire of
(a) Promisor. (b) Promisee. (c) Any other person.(d) Any of these.
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15. Which of the following statement is true?
(a) There can be a stranger to a contract.
(b) There can be a stranger to a consideration.
(c) There can be a stranger to a contract & consideration.
(d)None of the above.
16. Consideration may be
(a) Past (b) Present (c) Future (d) All of the above.
17. Consideration in simple term means:
(a) Anything in return. (b) Something in return.
(c) Everything in return. (d)Nothing in return.
18. Which of the following is not an exception to the rule – No consideration, No contract
(a) Compensation for involuntary services. (b) Love & Affection.
(c) Contract of Agency. (d)Gift.
19. Ordinarily, a minor’s agreement is
(a) Void ab initio (b) Voidable. (c) Valid. (d) Unlawful.
20. A minor’s liability for ‘necessaries’ supplied to him;
(a) Arises after he attains majority age.
(b) Is against only minor’s property.
(c) Does not arise at all. (d)Arises if minor gives a promise for it.
21. Which of the following statements is not true about minor’s position in a firm?
(a) He cannot become a partner in an existing firm.
(b) He can become a partner in an existing firm.
(c) He can be admitted only to the benefits of any existing firm.
(d)He can become partner on becoming a major.
22. Which of the following statement is true?
(a) A contract with a minor is voidable at the option of the minor.
(b) An agreement with a minor can be ratified after he attains majority.
(c) A person who is usually of an unsound mind cannot enter into contract even when
he is of a sound mind.
(d)A person who is usually of a sound mind cannot enter into contract when he is of
unsound mind.
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23. Consent is not said to be free when it is caused by
(a) Coercion. (b) Undue Influence. (c) Fraud. (d) All of these.
24. When the consent of a party is obtained by fraud, the contract is;
(a) Void. (b) Voidable. (c) Valid. (d) Illegal.
25. The threat to commit suicide amounts to
(a) Coercion. (b) Undue Influence.
(c) Misrepresentation. (d)Fraud.
26. Moral pressure is involved in the case of
(a) Coercion. (b) Undue Influence.
(c) Misrepresentation. (d)Fraud.
27. A wrong representation when made without any intention to deceive the other party
amounts to
(a) Coercion. (b) Undue Influence.
(c) Misrepresentation. (d)Fraud.
28. Which of the following statement is true?
(a) A threat to commit suicide does not amount to coercion.
(b) Undue influence involves use of physical pressure.
(c) Ignorance of law is no excuse.
(d)Silence always amounts to fraud.
29. In case of illegal agreements, the collateral agreements are:
(a) Valid (b) Void (c) Voidable (d) Any of these.
30. An agreement the object or consideration of which is unlawful, is
(a) Void. (b) Valid. (c) Voidable. (d) Contingent.
31. An agreement is void if it is opposed to public policy. Which of the following is not
covered by heads of public policy?
(a) Trading with an enemy. (b) Trafficking in public offices.
(c) Marriage brokerage contracts. (d) Contracts to do impossible acts.
32. On the valid performance of the contractual obligations by the parties, the contract
(a) is discharged. (b) becomes enforceable.
(c) becomes void. (d) none of these.
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33. Which of the following persons can perform the contract?
(a) Promisor alone. (b) Legal representatives of promisor.
(c) Agent of the promisor. (d) All of these.
34. A, B and C jointly promised to pay Rs. 60,000 to D. Before performance of the contract,
C dies. Here, the contract
(a) becomes void on C’s death.
(b) should be performed by A and B along with C’s legal representatives.
(c) should be performed by A and B alone.
(d)should be renewed between A, B and D.
35. A contract is discharged by novation which means the
(a) cancellation of the existing contract.
(b) change in one or more terms of the contract.
(c) substitution of existing contract for a new one.
(d)none of these.
36. A contract is discharged by rescisson which means the
(a) change in one or more terms of the contract.
(b) acceptance of lesser performance.
(c) abandonment of rights by a party.
(d)cancellation of the existing contract.
37. When prior to the due date of performance, the promisor absolutely refuses to perform
the contract, it is known as
(a) abandonment of contract. (b) remission of contract.
(c) actual breach of contract. (d) anticipatory breach of contract.
38. In case of anticipatory breach, the aggrieved party may treat the contract
(a) as discharged and bring an immediate action for damages.
(b) as operative and wait till the time for performance arrives.
(c) exercise option either (a) or (b). (d) only option (a) is available.
39. In case of breach of contract, which of the following remedy is available to the aggrieved
party?
(a) Suit for rescission. (b) Suit for damages.
(c) Suit for specific performance. (d) All of these.
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40. Sometimes, a party is entitled to claim compensation in proportion to the work done by
him. It is possible by a suit for
(a) damages (b) injunction
(c) quantum meruit (d) none of these.
41. Generally, the following damages are not recoverable?
(a) Ordinary damages. (b) Special damages.
(c) Remote damages. (d) Nominal damages.
42. A contract dependent on the happening or non-happening of future uncertain event, is
a
(a) Uncertain contract. (b) Contingent contract.
(c) Void contract. (d) Voidable contract.
43. A contingent contract is
(a) Void (b) Voidable (c) Valid (d) Illegal
44. A contingent contract dependent on the happening of future uncertain event can be
enforced when the event
(a) happens (b) becomes impossible
(c) does not happen (d) either of these.
45. A agrees to pay Rs. One lakh to B if he brings on earth a star from sky. This is a contingent
contract and
(a) Illegal (b) Valid (c) Voidable (d) Void.
46. Which of the following statements is true
(a) an agreement enforceable by law is a contract
(b) an agreement is an accepted proposal
(c) both (a) and (b) (d) none of these.
47. A voidable contract is one which
(a) can be enforced at the option of aggrieved party
(b) can be enforced at the option of both the parties
(c) cannot be enforced in a court of law
(d)courts prohibit.
48. On the acceptance of an offer by a offeree,
(a) Only the acceptor becomes bound by accepting the offer.
(b) Only the offeror becomes bound as his terms are accepted.
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(c) Both the acceptor and offeree becomes bound by the contract.
(d)None of these.
49. A, by a letter dated 25th December, 1998, offers to sell his house to B for Rs. 10 lakhs. The
letter reaches B on 27th December, 1998, who posts his acceptance on 28th December,
1998 which reaches A on 30th December, 1998. Here, the communication of offer is
complete on
(a) 25th December, 1998 (b) 27th December, 1998
(c) 28th December, 1998 (d) 30th December, 1998
50. In the above question, the communication of acceptance is complete against A on 28th
December, 1998, and against B on
(a) 25th December, 1998 (b) 27th December, 1998
(c) 28th December, 1998 (d) 30th December, 1998
51. As a general rule, an agreement made without consideration is
(a) void (b) voidable (c) valid (d) unlawful
52. A agrees to sell his car worth Rs. 100,000 to B for Rs. 20,000 only, and A’s consent was
obtained by coercion. Here, the agreement is
(a) void (b) valid (c) voidable (d) unlawful
53. An agreement made with free consent to which the consideration is lawful but
inadequate, is
(a) void (b) valid (c) voidable (d) unlawful
54. Which of the following persons are not competent to contract?
(a) minors (b) persons of unsound mind
(c) persons disqualified by law (d) all of these.
55. For the purposes of entering into a contract, a minor is a person who has not completed
the age of
(a) 16 years (b) 18 years (c) 20 years (d) 21 years
56. A contract with the minor, which is beneficial for him, is
(a) void ab initio (b) voidable (c) valid (d) illegal
57. Which of the following persons do not fall under the category of persons of unsound
mind?
(a) idiot (b) lunatics (c) drunken persons (d) alien.
58. Which of the following elements does not affect the free consent of the parties
(a) coercion (b) fraud (c) incompetency (d) undue influence
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59. When the consent of a party is obtained by coercion undue influence, fraud or
misrepresentation, the contract is
(a) void (b) voidable (c) valid (d) illegal
60. A threatens to kill B if he does not agree to sell his scooter to him for Rs. 1000 only. Here
B’s consent is obtained by
(a) undue influence (b) fraud
(c) coercion (d) none of these
61. When the consent to an agreement is obtained by coercion, the agreement is voidable at
the option of
(a) either party to the agreement (b) a party whose consent was so obtained
(c) a party who obtained the consent (d) none of these.
62. Where one party is in a position to dominate the will of another and uses his superior
position to obtain the consent of a weaker party, the consent is said to be obtained by
(a) coercion (b) undue influence (c) fraud (d) misrepresentation.
63. Which of the following acts does not fall under the categories of fraud?
(a) Intentional false statement of facts
(b)Active concealment of facts
(c) Innocent false statement
(d)Promise made without intention to perform.
64. Where the consent of a party is obtained by misrepresentation, the contract is
(a) valid (b) void (c) voidable (d) illegal
65. Which of the following statements is false?
(a) A contract is not voidable if fraud or misrepresentation does not induce the other
party to enter into a contract.
(b) A party cannot complain of fraudulent silence or misrepresentation if he had the
means of discovering the truth with ordinary means.
(c) In case of fraud or misrepresentation, aggrieved party can either rescind or affirm the
contract.
(d)A party who affirms the contract, can also change his option afterwards if he so
decides.
66. Where the consent of both the parties is given by mistake, the contract is
(a) void (b) valid (c) voidable (d) illegal
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67. As per section 20, the contract is void on account of bilateral mistake of fact. But as per
Section 22, if there is mistake of only one party, then the contract is
(a) void (b) valid (c) voidable (d) illegal
68. A contract made by mistake about the India Law, is
(a) void (b) valid (c) voidable (d) illegal
69. A contract made by mistake about some foreign law, is
(a) void (b) valid (c) voidable (d) illegal
70. A mistake as to a law not in force in India has the same effect as:
(a) mistake of fact (b) mistake of Indian law
(c) fraud (d) misrepresentation
71. The consideration or object of an agreement is considered unlawful, if it is
(a) forbidden by law (b) fraudulent
(c) immoral (d) all of these.
72. A agrees to pay Rs. 5 lakhs to B if he (B) procures an employment for A in Income Tax
Department. This agreement is
(a) void (b) valid (c) voidable (d) contingent.
73. A agrees to pay Rs. 50,000 to B if he kills C. The agreement is
(a) void (b) valid (c) voidable (d) contingent.
74. An agreement in restraint of marriage, i.e., which prevents a person from marrying, is
(a) valid (b) voidable (c) void (d) contingent
75. An agreement in restraint of marriage is valid in case of following persons.
(a) Minors (b) Educated (c) Married (d) None of these.
76. An agreement, which prevents a person from carrying a lawful business, is
(a) Valid (b) Void (c) Voidable (d) Contingent
77. An agreement in restraint of legal proceedings is void. It does not cover an agreement
which
(a) Restricts absolutely the parties from enforcing their legal rights
(b) Cuts short the period of limitation
(c) Discharges a party from liability or extinguishes the rights of a party
(d)Provides for a reference to arbitration instead of court of law.
78. A agrees to sell his car to B at a price which B may be able to pay. This agreement is
(a) void (b) valid (c) voidable (d) contingent
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79. An agreement to pay money or money’s worth on the happening or non-happening of a
specified uncertain event, is a
(a) wagering agreement (b) contingent contract
(c) quasi contract (d) uncertain agreement.
80. An agreement to do an illegal act e.g., to share the earnings of a smuggling business, is
(a) Valid (b) Void (c) Voidable (d) Contingent
81. Where an agreement consists of two parts once legal and the other illegal, and the legal
part is separable from the illegal one, such legal part is
(a) void (b) valid (c) voidable (d) illegal
82. A contingent contract dependent on the non-happening of a future uncertain event
becomes void when such event
(a) happens (b) does not become impossible
(c) does not happen (d) both (a) and (b)
83. A agrees to pay Rs. 1,000 to B if a certain ship returns within a year. However, the ship
sinks within the year. In this case, the contract becomes
(a) valid (b) void (c) voidable (d) illegal
84. A contingent contract dependent on the non-happening of specified uncertain event
within fixed time can be enforced if the event
(a) does not happen within fixed time
(b) becomes impossible before the expiry of fixed time
(c) happens within the fixed time
(d)both (a) and (b)
85. The basis of ‘quasi contractual relations’ is the
(a) existence of a valid contract between the parties
(b) prevention of unjust enrichment at the expense of others
(c) Provisions contained in Section 10 of the Contract Act
(d)Existence of a voidable contract between the parties.
86. Sometimes, a person finds certain goods belonging to some other persons. In such a case,
the finder
(a) becomes the owner of the goods and can use them
(b) is under a duty to trace the true owner and return the goods
(c) can sell the perishable goods if true owner cannot be found
(d)both (b) and (c)
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87. A, B and C jointly promised to pay Rs. 60,000 to D. A was compelled by D to pay the
entire amount of Rs. 60,000. Here
(a) A can file a suit against D for recovery of amount exceeding his share.
(b)A is entitled to recover Rs. 20,000 each from B and C
(c) On payment by A, the contract is discharged and B and C are also not liable to A.
(d)D is not justified here, and is liable to refund the entire amount to A.
88. In commercial transactions, time is considered to be of the essence of the contract, and if
the party fails to perform the contract within specified time, the contract becomes:
(a) voidable at the option of the other party
(b) void and cannot be enforced
(c) illegal for non-compliance of legal terms
(d)enforceable in higher court only.
89. Where the performance of a promise by one party depends on the prior performance of
promise by the other party, such reciprocal promises fall under the category of
(a) Mutual and concurrent (b) Conditional and dependent
(c) Mutual and independent (d) Both (a) and (b)
90. When after the formation of a valid contract, an event happens which makes the
performance of contract impossible, then the contract becomes:
(a) void (b) voidable (c) valid (d) illegal
91. A party entitled to rescind the contract, loses the remedy where
(a) he has ratified the contract
(b) third party has acquired right in good faith
(c) contract is not separable and rescission is sought of a part only
(d)all of these.
92. The special damages, i.e., the damages which arise due to so e special or unusual
circumstances -
(a) Are not recoverable altogether
(b) Are illegal being punitive in nature
(c) Cannot be claimed as a matter of right
(d)Can be claimed as a matter of right.
93. Which of the following statements is correct?
(a) Ordinary damages are recoverable.
(b)Special damage are recoverable only if the parties knew about them.
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(c) Remote or indirect damages are not recoverable.
(d)All of these.
94. When offer is made to a definite person, it is known as
(a) General Offer (b) Cross Offers
(c) Counter Offer (d) Special Offer
95. Standing Offer means
(a) Offer allowed to remain open for acceptance over a period of time.
(b) Offer made to the public in general.
(c) When the offeree offers to qualified acceptance of the offer.
(d)Offer made to a definite person.
96. When the offeree offers to qualified acceptance of the offer subject to modifications and
variations he is said to have made a
(a) Standing, open or Continuing offer. (b) Counter Offer.
(c) Cross Offers (d) Special Offer
97. What is legal terminology for the doing or not doing of something which the promisor
desires to be done or not done?
(a) Desires. (b) Wishes. (c) Consideration. (d) Promise.
98. Can a person who is usually of unsound, but occasionally of sound mind, make a contract?
(a) Yes, he can always make a contract. (b) Yes, but only when he is of sound mind.
(c) No, he cannot make a contract. (d) Can’t be determined.
99. A and B both believe that a particular kind of rice is being sold in the market at Rs. 3,000
per quintal and A sells rice of that kind to B at Rs.3,000 per quintal. But, in fact, the
market price was Rs. 4,000. The contract is
(a) Valid. (b) Void. (c) Voidable. (d) Illegal.
100. A sells the goodwill of his business to B and agrees with him to refrain from carrying on
a similar business within specified local limits. This contract is
(a) Valid. (b) Void. (c) Voidable. (d) Illegal.
101. R, an optical surgeon, employs S as the assistant for a term of three years and S agrees
not to practice as a surgeon during this period. This contract is
(a) Valid. (b) Void. (c) Voidable. (d) Illegal.
102. Agreement-the meaning of which is uncertain is
(a) Valid. (b) Void. (c) Voidable. (d) Illegal.
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103. A agrees to pay Rs. 500 to B if it rains, and B promises to pay a like amount to A if it does
not rain, this agreement is called
(a) Quasi Contract (b) Contingent Contract.
(c) Wagering Agreement. (d) Voidable Contract.
104. Suppose the time fixed for performance of the contract has expired but the time is not
essential. What is the remedy of the promisee in the circumstances?
(a) Can rescind the contract. (b) To claim compensation.
(c) No remedy available. (d) Can’t be determined.
105. A ___________ agreement is one, which is enforceable at the option of one party.
(a) Voidable (b) Void (c) Valid (d) Illegal
106. In case of illegal agreements, the collateral agreements are ________.
(a) Voidable (b) Void (c) Valid (d) Can’t be said.
107. ________ consideration is no consideration in England.
(a) Past. (b) Present (c) Future (d) Past and Present
108. Consideration must move at the desire of the___________.
(a) Promisor. (b) Promisee. (c) Any person
(d)Promisee or promissory or any other person
109. There can be a stranger to a _____________.
(a) Contract (b) Consideration (c) Agreement (d) Promise
110. A minor is liable for the ________________ supplied to him.
(a) Necessaries. (b) Luxuries (c) Necessities (d) All the things.
111. When the consent of a party is obtained by fraud, the contract is ____________.
(a) Valid (b) Void (c) Illegal (d) Voidable
112. An agreement the object or consideration of which is unlawful, is ____________.
(a) Valid (b) Void (c) Voidable (d) Can’t be said.
113. Implied contract, even if not in writing or express words, is perfectly ________if other
conditions are satisfied.
(a) Void (b) Valid (c) Voidable (d) Illegal.
114. Threat to commit suicide amounts to
1. Coercion
2. Offence under the Indian Penal Code
3. Undue Influence
4. Fraud
a. 1 & 2 b. 2 & 3 c. 3 & 4 d. 1 & 4
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115. Which of the following are covered under the heads Agreements Opposed to
Public Policy?
(1) Trading with enemy
(2) Trafficking in Public Offices
(3) Marriage Brokerage Contracts
(4) Contracts to do impossible acts
a. 1, 2, 3 b. 2, 3, 4 c. 1, 2, 4 d. 1, 2, 3, 4.
116. The consideration of an agreement is considered unlawful, if it is
(1) forbidden by law
(2) fraudulent
(3) immoral
(4) Very expensive.
a. 1, 2, 3 b. 2, 3, 4 c. 1, 2, 4 d. 1, 2, 3, 4.
117. Contract caused by which of the following is voidable:
(1) Fraud
(2) Mis-representation
(3) Coercion
(4) Bilateral Mistake.
a. 1, 2, 3 b. 2, 3, 4 c. 1, 2, 4 d. 1, 2, 3, 4.
118. Who among the following is not disqualified by law to enter in to contract?
1. A major person.
2. A lunatic.
3. Insolvent person.
4. Diplomatic staff of foreign states.
a. 1 & 2 b. 2 & 3 c. 3 & 4 d. 1 & 4.
119. Which of the following is true with respect to minor entering a contract?
1. An agreement with or by a minor is void ab initio.
2. A minor can be a beneficiary of a contract.
3. The contracts involving a minor as a beneficiary may be enforced at the option of the
third party.
4. A minor can ratify a contract on attaining majority.
a. 1 & 2 b. 2 & 3 c. 3 & 4 d. 1 & 4.
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120. Which of the following is/are not competent to enter into a contract?
1. A person of the age of majority.
2. A minor.
3. A person who is not capable of understanding the contract at the time of its making.
4. A lunatic during lucid intervals (period of soundness).
a. 1 & 2 b. 2 & 3 c. 3 & 4 d. 1 & 4.
121. Which of the following statements is true?
1. Even if a proposal is not accepted properly it becomes a valid contract.
2. The agreements which are against the public policy can be enforced if the parties are
willing to contract.
3. For breach of contract a party can claim compensation for loss or damage.
4. Two are more persons are said to consent when they agree upon the same thing in
the same sense.
a. 1 & 2 b. 2 & 3 c. 3 & 4 d. 1 & 4.
122. Which of the following is/are false?
1. Consideration must be real.
2. Consideration can be inadequate.
3. A promise to do something which one is already bound to do by law, will be treated
as good consideration.
4. Consideration must be adequate.
a. 1 & 2 b. 2 & 3 c. 3 & 4 d. 1 & 4.
123. Which of the following is/are the essential elements of a valid offer?
1. Offeror must have an intention to be bound by his offer.
2. Offer must be made to a specific person/party and not to public at large.
3. Must be definite.
4. Offer can be vague.
a. 1 & 3 b. 2 & 3 c. 3 & 4 d. 1 & 4.
124. Which of the following agreements is/are void?
1. Agreement in restraint of legal proceedings.
2. Agreement to stifle prosecution.
3. Agreement by an outgoing partner with his partners not to carry on any business
within a specified period or within specified local limits.
4. Contingent Contracts.
a. 1 & 2 b. 2 & 3 c. 3 & 4 d. 1 & 4.
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125. Which of the following offers do not constitute a valid offer?
1. An auctioneer displays a T.V. set before a gathering in an auction sale.
2. Ram who is in possession of three cars purchased in different years says ‘I will sell
you a car’.
3. A says to B, “Will you purchase my motor cycle for Rs. 20,000”?
4. Ram communicates to Shyam that he will sell his car for Rs. 1,50,000.
a. 1 & 2 b. 2 & 3 c. 3 & 4 d. 1 & 4.
126. Which of the following agreements are void?
1. Agreements made under the unilateral mistake of fact.
2. Agreements made under the bilateral mistake of fact.
3. Agreements the consideration of which is unlawful.
4. Contingent agreement.
a. 1 & 2 b. 2 & 3 c. 3 & 4 d. 1 & 4.
127. Which of the following is a requirement for misrepresentation to exist?
1. Misrepresentation should relate to a material fact.
2. The person making a misrepresentation should believe it to be true..
3. It must be made with an intention to deceive the other party.
4. The person making a misrepresentation should not believe it to be true.
a. 1 & 2 b. 2 & 3 c. 3 & 4 d. 1 & 4.
128. A contracts with B to buy a necklace, believing it is made of pearls whereas in fact it is
made of imitation pearls of no value. B knows that A is mistaken and takes no steps to
correct the error. Now A wants to cancel the contract on the basis of fraud. Which of the
following statement is correct?
a. A can cancel the contract alleging fraud.
b. A cannot cancel the contract.
c. A can cancel the contract alleging undue influence.
d. A can claim damages.
129. Mr. J invited all his close friends for a dinner on the occasion of the successful completion
of his research. He wanted to take good care of his friends and accordingly be arranged
a very lavish dinner in a star hotel. On the day, to his shock and surprise the friends could
not turn up to the dinner, consequently all the dishes and money were wasted. He was
terribly disappointed. In the above situation which of the following remedies is/are
available to Mr. J for the loss caused to him?
a. Mr. J can file a suit against his friends for not attending to the dinner.
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b. Mr. J cannot have any remedy.
c. Mr. J can recover the expenses incurred for the arrangements from his friends.
d. Mr. J can file a suit for the special damages.
130. G paid Rs. 1,00,000 to H to influence the head of the Government Organisation in order
to provide him some employment. On his failure to provide the job, G sued H for recovery
of the amount. Which of the following is correct?
a. The contract is valid and G can recover the amount from H.
b. The contract is void as it is opposed to public policy and G cannot recover.
c. G can recover the amount with interest.
d. G can recover the amount of Rs. 1,00,000 and damages.
131. M a popular singer, enters into a contract with the manager of a theatre, to sing at the
theatre two evenings a week for the next two months and the manager of the theatre
agrees to pay him at the rate of Rs. 1000 for each performance. From the sixth evening
onwards, M absents himself from the theatre. In this context, which of the following
remedies is/are available to the manager of the theatre against M?
a. He is at liberty to put an end to the contract.
b. He cannot put an end to the contract.
c. He is entitled to compensation for the damages sustained by him through M on his
failure to sing from the sixth evening onwards.
d. Both (a) and (c) above.
132. Ram, Rohit and Kiran jointly borrowed Rs. 2,00,000 from Rahim by executing a promissory
note. Rohit and Kiran are not traceable. Rahim wants to recover the entire amount from
Ram. Ram objected this move by saying he is liable to pay 1/3 of the debt only. Which of
the following statement(s) is correct?
a. Rahim can recover the entire amount from Ram.
b. Rahim can only recover 1/3 of Rs. 2,00,000 from Ram.
c. Rahim cannot recover any amount from Ram.
d. The promissory note is not executable against Ram as Rohit and Kiran are not
traceable.
133. At the time of marriage between A and B, A’s father promised to B’s parents that he will
pay five thousand rupees per month to B after her marriage with his son. On his failure
to pay the amount B wants to sue A’s father for the amount promised by him at the time
of her marriage with A. Which of the following statement(s) is correct?
a. B cannot sue A’s father as the contract is void for lack of consideration.
b. B cannot sue A’s father under the doctrine of privity of contracts.
c. B can sue A’s father for breach of contract.
d. B cannot sue A’s father as the contracts made at the time of marriage are not
enforceable by law.
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134. V purchased a used computer from P thinking it as a computer imported from USA, P
failed to disclose the fact to V. On knowing the fact V wants to repudiate the contract.
Which of the following statement(s) is correct?
a. V can repudiate the contract on the ground of fraud.
b. V can repudiate the contract on the ground of misrepresentation.
c. V cannot repudiate the contract.
d. V can repudiate the contract on the ground of mistake.
135. An auctioneer in Mumbai advertised in a newspaper that a sale of office furniture would
be held on December 23, 2003. a broker came from Hyderabad to attend the auction, but
all the furniture was withdrawn. The broker from Hyderabad sued the auctioneer for
loss of his time and expenses. Which of the following statement(s) is correct?
a. The broker can get damages from the auctioneer for loss of his time and expenses.
b. The broker will not get damages from the auctioneer for loss of his time and expenses.
c. An invitation to make offer is a valid offer.
d. A declaration of intention by a person will give right of action to another.
136. Ankit, aged 17 years, falsely representing himself to be of 22 years, enters into an agreement
to sell his property to Praveen and receives from Praveen a sum of Rs. 10,00,000 in advance.
Out of this sum, Ankit buys an imported car worth Rs. 5,50,000 and spends the rest on a
pleasure trip to France. After Ankit attained majority, Praveen sues him for the conveyance
of the property or, in the alternative, for the refund of Rs. 10,00,000 and damages. The
agreement between Ankit and Praveen is:
a. Void ab initio as it is a contract with a minor.
b. Voidable at the option of Praveen.
c. Would be valid if Ankit ratifies the agreement on attainting the age of majority.
d. Valid as Ankit has sold his own property for personal use.
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137. Match the following:
(i) Void Contract (a) In case of this collateral agreements are void.
(ii) Voidable Contract (b) Not enforceable in a court of law.
(iii) Illegal Contract (c) An agreement enforceable by law at the option of one or
more of the parties thereon but not at the option of the
other or others.
(iv) Valid Contract (d) Enforceable at the option of both the parties.
138. Match the following:
(i) Executed Contract (a) Contract in which only one party has to perform his
promise.
(ii) Executory Contract (b) Consideration for the promise in a contract is already given.
(iii) Unilateral Contract (c) Promise in a contract is outstanding on part of both the
parties.
(iv) Bilateral Contract (d) Reciprocal promises are to be performed in future.
139. Match the following:
(i) General Offer (a) Exchanging identical offers by two parties in ignorance.
(ii) Special Offer (b) Offer made to the public in general.
(iii) Cross Offers (c) Offer allowed to remain open for acceptance over a period
of time.
(iv) Continuing Offer (d) Offer made to a definite person.
140. Match the following:
(i) Coercion (a) Involves Moral Pressure.
(ii) Undue Influence (b) Person making false representation does not believe it to be
true.
(iii) Fraud (c) Involves Physical force.
(iv) Misrepresentation (d) The person making false representation believes it to be true.
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1.51 ANSWERS TO MULTIPLE CHOICE QUESTIONS
1. (c) 2. (b) 3. (d) 4. (c) 5. (c)
6. (b) 7. (d) 8. (b) 9. (d) 10. (a)
11. (d) 12. (c) 13. (b) 14. (a) 15. (b)
16. (d) 17. (b) 18. (a) 19. (a) 20. (b)
21. (b) 22. (d) 23. (d) 24. (b) 25. (a)
26. (b) 27. (c) 28. (c) 29. (b) 30. (a)
31. (d) 32. (a) 33. (d) 34. (b) 35. (c)
36. (d) 37. (d) 38. (c) 39. (d) 40. (c)
41. (c) 42. (b) 43. (c) 44. (a) 45. (d)
46. (c) 47. (a) 48. (c) 49. (b) 50. (d)
51. (a) 52. (c) 53. (b) 54. (d) 55. (b)
56. (c) 57. (d) 58. (c) 59. (b) 60. (c)
61. (b) 62. (b) 63. (c) 64. (c) 65. (d)
66. (a) 67. (b) 68. (b) 69. (a) 70. (a)
71. (d) 72. (a) 73. (a) 74. (c) 75. (a)
76. (b) 77. (d) 78. (a) 79. (a) 80. (b)
81. (b) 82. (d) 83. (b) 84. (d) 85. (b)
86. (d) 87. (b) 88. (a) 89. (b) 90. (a)
91. (d) 92. (c) 93. (d) 94. (d) 95. (a)
96. (b) 97. (c) 98. (b) 99. (a) 100. (a)
101. (a) 102. (b) 103. (c) 104. (b) 105. (a)
106. (b) 107. (a) 108. (a) 109. (b) 110. (a)
111. (d) 112. (b) 113. (b) 114. (a) 115. (a)
116. (a) 117. (a) 118. (d) 119. (a) 120. (b)
121. (c) 122. (c) 123. (a) 124. (a) 125. (a)
126 (b) 127. (a) 128. (b) 129. (b) 130. (b)
131. (d) 132. (a) 133. (c) 134. (c) 135. (b)
136. (a)
137. (i) (b) (ii) (c) (iii) (a) (iv) (d)
138. (i) (b) (ii) (d) (iii) (a) (iv) (c)
139. (i) (b) (ii) (d) (iii) (a) (iv) (c)
140. (i) (c) (ii) (a) (iii) (b) (iv) (d)
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