Quiz: Indian Contract Law — 42 Fragen

1. Which statement best explains why an agreement is not necessarily a contract?

A. An agreement is enforceable by law as soon as two parties agree

B. An agreement is a contract only if it is enforceable by law

C. An agreement is always void unless both parties are competent

D. An agreement is a contract only when consideration is missing

Answer: (B)

Erklärung

A contract must be an agreement enforceable by law; enforceability is what prevents every agreement from automatically being a contract.

2. What is an offer in contract law?

A. A person's signification of willingness to do or abstain from doing something to obtain another person's consent

B. An agreement to resolve a dispute between parties

C. A statement of intention that cannot be accepted

D. A promise that is automatically enforceable without consideration

Answer: (A)

Erklärung

An offer is defined as a signification of willingness to do or abstain, aimed at obtaining the other party’s consent.

3. Which example fits the distinction that commercial agreements are enforceable while personal or moral agreements are not?

A. A religious community pledges to follow a spiritual practice

B. Two neighbors agree informally to help each other during a festival

C. A supplier and buyer sign terms for payment and delivery

D. A person promises a friend to keep a secret as a moral duty

Answer: (C)

Erklärung

Commercial agreements are enforceable, unlike personal, moral, social, or religious agreements which are not enforceable.

4. A person withdraws cash from an ATM after entering a PIN; which contract classification best explains the type of contract formed by their conduct?

A. A tacit contract

B. An implied contract

C. A voidable contract

D. A bilateral contract

Answer: (A)

Erklärung

This conduct forms a tacit contract—an implied agreement inferred from behavior, such as using an ATM to obtain cash. The other options describe different legal characteristics (enforceability or party liability), not the mode of formation.

5. Which statement best distinguishes a void contract from a voidable contract in terms of enforceability?

A. A void contract is enforceable until it is avoided by the aggrieved party

B. A void contract is not enforceable at all, while a voidable contract can be enforced unless avoided

C. A void contract can be enforced if both parties later confirm it

D. A voidable contract is not enforceable unless the aggrieved party avoids it

Answer: (B)

Erklärung

A void contract is not enforceable, whereas a voidable contract remains enforceable unless the aggrieved party avoids it. The first and second choices invert the rule, and the last option incorrectly treats a void contract as being capable of later enforcement by confirmation.

6. In a construction deal, the contractor performs now but the client must perform later; how should the contract’s execution be classified?

A. Executory contract

B. Partly executed and partly executory contract

C. Unilateral contract

D. Executed contract

Answer: (B)

Erklärung

Because performance has occurred by only one party, it is partly executed and partly executory. “Executed” and “executory” both assume the opposite timing, and “unilateral” concerns liability structure rather than performance timing.

7. A shop advertises a product price in a newspaper, but the advert does not expressly promise to sell to anyone who replies. Can a customer who responds to the advert by writing “I accept” treat it as an offer capable of acceptance?

A. No, because an invitation to offer is not itself an offer

B. No, because an acceptance must be made only verbally

C. Yes, because advertisements are always offers

D. Yes, because any reply to a price advertisement is acceptance

Answer: (A)

Erklärung

An invitation to offer is not a definite offer capable of creating a binding contract by acceptance. A newspaper price notice that invites offers cannot be accepted like a proper offer.

8. Two companies separately send identical offers to each other by post at the same time, without knowing of the other’s offer. What is the legal effect of these simultaneous offers?

A. They form a contract immediately upon dispatch of both offers

B. They amount to a counter offer that rejects the other party’s offer

C. They constitute a cross offer and do not conclude a contract

D. They create a standing offer until one party communicates acceptance

Answer: (C)

Erklärung

When similar offers are made without mutual knowledge, it is a cross offer, which does not conclude a contract. A counter offer would require modifying and rejecting the original offer, not mere similarity.

9. An offer is still pending while the offeree considers it. Which event would most likely terminate the offer before acceptance?

A. The offeror dies while the offeree is still considering

B. The offeree makes an unrelated purchase from the offeror

C. The offeree sends a draft acceptance but does not accept

D. The offeree asks questions about the goods

Answer: (A)

Erklärung

An offer terminates by the death of the offeror before acceptance. Inquiry or unrelated conduct by the offeree does not, by itself, end the offer.

10. The offeree writes to the offeror: “I accept, but only if my business partner approves.” Under the rules for acceptance, what is the effect?

A. It is valid because acceptance can be conditional on internal matters

B. It is invalid because acceptance must be unconditional

C. It is invalid only if the offeree also fails to pay a deposit

D. It is valid acceptance because it is communicated within time

Answer: (B)

Erklärung

Acceptance must be unconditional; acceptance “subject to another person’s approval” is invalid. A key distractor is the idea that conditional internal approval still counts as acceptance, which the rule rejects.

11. A buyer argues that a contract fails because the payment promised was too small to be “adequate.” What is the correct rule?

A. Adequacy of consideration is not required, though consideration is generally necessary for every contract

B. No consideration is needed if the parties are related

C. Adequacy of consideration is required whenever the contract benefits only one party

D. Consideration is required only for promises made in writing

Answer: (A)

Erklärung

The general rule is that adequacy of consideration is not required, though consideration is generally necessary for a contract. The other options introduce requirements not stated in the rule.

12. Which situation is an example where no consideration is required because of the special category of agreements based on natural love and affection?

A. A written and registered promise between persons in immediate relation based on natural love and affection

B. A promise to compensate for an unlawful act, supported by supposed “love and affection”

C. A spoken promise made to a stranger with a small payment mentioned later

D. A contract where the promise is to pay an amount that already forms part of an existing obligation

Answer: (A)

Erklärung

No consideration is required for agreements involving natural love and affection when written, registered, between persons in immediate relation, and based on that natural love. The other choices do not fit the specified exception or conflict with the requirement of lawful consideration.

13. A friend pays money for a contract made between two other people and then tries to file a lawsuit to enforce it. Under privity, what is the key limitation?

A. The third party can sue only if the contract was registered

B. The third party can sue if the consideration was delivered in person

C. The third party may provide consideration but cannot sue because only parties to the contract can sue

D. The third party can sue as long as they supplied some part of the consideration

Answer: (C)

Erklärung

Under privity of contract, a third party cannot sue on the contract even if they provided consideration; only the contract parties can sue. Providing consideration does not by itself remove the privity limitation.

14. Which group fits the definition of persons incompetent to contract?

A. Only those who have committed fraud or coercion in negotiations

B. Any person who signs under pressure but is later willing to perform

C. Minors, persons of unsound mind, and persons disqualified by law

D. Only persons who lack literacy to read the contract

Answer: (C)

Erklärung

Incompetent persons to contract include minors, persons of unsound mind, and those disqualified by law. The distractors describe conduct or ability rather than the legal categories of incompetence.

15. After signing an agreement with a minor, the other party claims the minor can later be held to the contract because the minor ratified it after reaching majority. What is the legal effect?

A. The agreement with a minor is void ab initio and cannot be ratified after attaining majority

B. The agreement becomes enforceable only if the minor received restitution

C. The agreement remains valid after majority if both parties accept performance

D. The agreement can be enforced if the minor had no intention to cause harm

Answer: (A)

Erklärung

An agreement with a minor is void ab initio and cannot be ratified after majority. The other choices contradict the stated rule about invalidity and ratification.

16. A person alternates between periods of sanity and insanity over time. Which term best describes this condition for contract-capacity purposes?

A. A person intoxicated while sober

B. Lunatic

C. Idiot

D. A person who made a minor mistake in understanding

Answer: (B)

Erklärung

A lunatic has alternating periods of sanity and insanity, whereas an idiot has permanently lost mental power. Intoxication is a different concept tied to being unable to think rationally while intoxicated.

17. Which scenario best illustrates coercion in contract law?

A. Making a false statement about a transaction that is later discovered to be incorrect

B. Keeping quiet even though there is no duty to speak

C. Threatening to unlawfully detain property unless a person enters an agreement

D. A mistaken belief about a legal rule relevant to the contract

Answer: (C)

Erklärung

Coercion includes unlawfully detaining or threatening to detain property to cause a person to enter an agreement. Fraud, silence without conditions for fraud, and legal mistake are different grounds.

18. A doctor who has a close relationship with a patient uses that position to obtain a real unfair advantage. What is this most likely to be classified as?

A. Mistake of foreign law

B. Misrepresentation

C. Coercion

D. Undue influence

Answer: (D)

Erklärung

Undue influence exists when one party dominates another’s will through a near relationship and uses that position to get an actual unfair advantage, such as in a doctor-patient relationship. Coercion and misrepresentation are different categories, and mistake is a different defect in consent.

19. One party intentionally deceives the other through a deliberate false statement that actually causes the other party to act. Which label fits best?

A. Undue influence

B. Coercion

C. Fraud

D. Misrepresentation

Answer: (C)

Erklärung

Fraud involves intentional deception, including deliberate false statements that actually deceive and induce action. Misrepresentation is an innocent false representation, not one made with intention to deceive.

20. A party forms a mistaken belief about the law of another country that affects the transaction. How is this mistake generally treated?

A. A mistake of domestic law has the same effect as a mistake of fact

B. A mistake of foreign law has the same effect as a mistake of fact

C. Any mistake of law is treated as irrelevant to consent

D. A mistake of foreign law is treated only as bilateral mistake and not unilateral

Answer: (B)

Erklärung

Mistake of foreign law has the same effect as mistake of fact, unlike domestic law. The other options contradict the stated distinction and treatment.

21. When an agreement’s object or consideration is forbidden by law, how is the agreement treated?

A. It is voidable at the option of the parties

B. It remains valid but punishable

C. It is automatically enforceable by damages

D. It is void

Answer: (D)

Erklärung

An agreement is void if its object or consideration is forbidden by law. Such an arrangement cannot be enforced as a valid contract.

22. Which scenario best describes maintenance rather than champerty?

A. Assistance in litigation without sharing the proceeds

B. Support in a dispute involving no third-party involvement

C. Financial assistance in litigation for a share of the proceeds

D. Legal representation where the advocate later receives court costs only

Answer: (A)

Erklärung

Maintenance is assistance in litigation without sharing proceeds, while champerty involves a share of the proceeds. The proceeds-sharing element distinguishes champerty.

23. A seller agrees not to trade for five years but the agreement is part of the sale of goodwill; what is the likely legal effect?

A. It is automatically void because time limits never matter

B. It is valid only if the buyer can arbitrate disputes

C. It can fall within an exception and may be valid

D. It is void as a general restraint of trade

Answer: (C)

Erklärung

Restraints of trade are generally void, but exceptions exist for restrictions on sellers of goodwill. That makes the agreement potentially valid under the recognized exception.

24. A promoter offers to pay a bonus based on the outcome of a skill-based competition that both sides can influence through training; does this fit the definition of a wager?

A. No, because wagers require equal chance and no interest or control in the event

B. Yes, because any uncertain event can be a wager

C. No, because wagering agreements must be illegal to be wagers

D. Yes, because skill-based outcomes are treated as equal chances

Answer: (A)

Erklärung

A wagering agreement requires equal chances of gain or loss, no interest, no control, and an intention to bet; skill-based outcomes with interest or control do not meet that test. Insurance/skill-type transactions are not wagers for the same reason.

25. Which description best captures a contingent contract?

A. Performance depends on an event that forms the contract’s consideration

B. Performance depends on an independent uncertain collateral event

C. Performance is automatic because it is already certain

D. Performance depends on the promisee’s willingness to accept payment

Answer: (B)

Erklärung

A contingent contract requires performance only if an uncertain collateral event happens or does not happen, and that collateral event must be independent of the consideration. Options describing dependence on willingness or on the consideration mismatch the definition.

26. Which situation is a recognized cause of quasi-contractual obligations?

A. An agreement to share profits from a future uncertain business

B. Finding goods and then seeking lawful preservation of them

C. A breach of contract that entitles only to damages

D. A promise based on mere intention without benefit or transaction

Answer: (B)

Erklärung

Causes include finding goods, and similar situations listed for quasi-contract. Profit-sharing agreements and damages for breach are not the quasi-contract causes identified here.

27. Which event can discharge a contract?

A. Mutual agreement

B. An increase in the contract price due to inflation

C. A promise being made but not yet due

D. A minor delay that does not prevent performance

Answer: (A)

Erklärung

A contract is discharged by mutual agreement among other listed modes. The other options do not constitute the discharge grounds stated here.

28. A tender for payment is made three weeks early, without giving the promisee a reasonable opportunity to verify the goods. Is it a valid tender?

A. No, because a valid tender must be at the proper time and allow verification

B. No, because tenders must always be made after the due date

C. Yes, because a tender only needs to be offered in writing

D. Yes, because verification is only required when money is paid

Answer: (A)

Erklärung

A valid tender must be unconditional, at the proper time and place, and must give the promisee a reasonable opportunity to verify conformity. Being early and denying verification prevents validity.

29. The promisor refuses to perform. The promisee continues the contract. What can the promisee not do later?

A. Terminate later; only continuing prevents later termination

B. Cancel immediately and still claim damages

C. Terminate later only if damages are also claimed

D. Demand performance only from a third party beneficiary

Answer: (A)

Erklärung

If the promisee continues the contract, they cannot later terminate it (though they may claim damages in the case of refusal). The “continuing cannot later terminate” point is the key rule tested here.

30. Which situation is an example of supervening impossibility?

A. The subject matter is destroyed after the contract is formed

B. The contract is impossible at the moment it is created

C. The parties face temporary inconvenience without legal or factual change

D. The promisor finds performance commercially less profitable

Answer: (A)

Erklärung

Supervening impossibility arises from unexpected events after formation, such as destruction of the subject matter. Initial impossibility is the void-ab-initio scenario covered by the contrast.

31. In an indemnity, what is the indemnifier’s promise primarily meant to protect the indemnity holder from?

A. Loss caused only by the indemnity holder’s own negligence

B. Default by a third person in paying a debt

C. Loss caused by the indemnifier or another person

D. Insolvency of the creditor after judgment

Answer: (C)

Erklärung

An indemnity is meant to save the indemnity holder from loss caused by the promisor (indemnifier) or another person. A guarantee, by contrast, concerns default by a third person.

32. Which situation best describes a contract of guarantee?

A. A promise that protects against loss from any cause by the promisor

B. A promise to perform or discharge a third person’s liability upon default

C. A promise that applies only to one completed transaction

D. A promise that can be revoked only by the creditor

Answer: (B)

Erklärung

A guarantee involves performing a promise or discharging the liability of a third person if that person defaults. Indemnity focuses on loss rather than third-party default.

33. How do a specific guarantee and a continuing guarantee differ in scope?

A. A specific guarantee requires consideration, while a continuing guarantee does not

B. A specific guarantee always lasts until revoked, while a continuing guarantee ends after one transaction

C. A specific guarantee concerns only default by the creditor, while a continuing guarantee concerns only loss

D. A specific guarantee covers a single transaction, while a continuing guarantee covers a series

Answer: (D)

Erklärung

A specific guarantee covers one transaction, whereas a continuing guarantee extends to a series of transactions. The other options mix up unrelated features or swap the concepts.

34. In a typical guarantee arrangement, what is the nature of the surety’s liability relative to the principal debtor’s liability?

A. The surety’s liability depends only on the indemnity holder’s choice, not on contract terms

B. The surety’s liability is primary and greater than the principal debtor’s liability

C. The surety’s liability is secondary and ordinarily equal to the principal debtor’s liability

D. The surety is never liable unless the creditor has obtained judgment first

Answer: (C)

Erklärung

The surety’s liability is secondary and ordinarily equal to the principal debtor’s liability, though it can be limited or reduced by express contract. This is not a purely primary or judgment-dependent liability rule.

35. Which example best fits the definition of bailment?

A. Buying goods and keeping them for your own use

B. Merely holding goods with no contract or purpose beyond possession

C. Delivering goods for a purpose, with an agreement that they will be returned or disposed of as directed after completion

D. Storing goods for a buyer without any return or disposal obligation

Answer: (C)

Erklärung

Bailment requires delivery for a specific purpose with an obligation that the goods will be returned or disposed of according to the deliverer’s directions after the purpose is accomplished. Mere possession without that obligation is not bailment.

36. Which set of elements is essential to establish bailment?

A. Consideration plus transfer of ownership and a specified purpose

B. Only delivery of goods and a promise to return them

C. Only delivery of goods and payment of charges for storage

D. A contract, delivery of goods, a specified purpose, and return or disposal, with no consideration required

Answer: (D)

Erklärung

Bailment requires a contract, delivery of goods, a specified purpose, and return or disposal of the goods; no consideration is necessary. The other options omit key required elements or add ownership/consideration requirements.

37. Which statement correctly distinguishes between actual, symbolic, and constructive delivery in bailment?

A. Symbolic delivery transfers physical possession, while actual delivery and constructive delivery both require third-party custody

B. Actual delivery transfers control only, symbolic delivery transfers physical possession, and constructive delivery transfers ownership

C. Constructive delivery transfers physical possession to the bailee, while symbolic delivery leaves custody with a third party

D. Actual delivery transfers physical possession, symbolic delivery transfers control via an act (e.g., handing over keys), and constructive delivery leaves custody with a third party who acknowledges holding for the bailor

Answer: (D)

Erklärung

Actual delivery is physical possession, symbolic delivery transfers control through an act like handing over keys, and constructive delivery keeps custody with a third party who acknowledges holding for the bailor. The distractors incorrectly swap these meanings.

38. A pledge is best understood as what with respect to ownership?

A. A contract that transfers title but not possession to the pledgee

B. Bailment of goods as security for a debt or promise, without transferring ownership interest

C. Transfer of full ownership to the pledgee with only temporary possession

D. A bailment where the pledgee automatically becomes the sole owner upon default

Answer: (B)

Erklärung

A pledge is bailment of goods as security for payment or performance, and it does not transfer ownership interest. The common confusion is thinking the pledge transfers title.

39. What defines an agency relationship?

A. A relationship where goods are delivered for a purpose under bailment

B. A relationship where a principal sells goods to a third party through a broker

C. A relationship where a surety guarantees payment only after default

D. A relationship where an agent acts on behalf of a principal with a third person

Answer: (D)

Erklärung

Agency is a relationship in which an agent is employed by a principal to act on the principal’s behalf with a third person. The other options describe unrelated contract arrangements.

40. Which statement about creation of agency and ratification is correct?

A. Agency can be created only by express authority; ratification takes effect only on the date it is made

B. Estoppel cannot create agency and ratification never relates back

C. Agency may be created by express authority, implied authority, estoppel, necessity, or ratification; ratification relates back to the original act

D. Ratification creates new authority only for acts occurring after ratification

Answer: (C)

Erklärung

Agency can arise through express authority, implied authority, estoppel, necessity, or ratification, and ratification relates back to the original act’s date. The incorrect options restrict agency creation and distort the timing effect of ratification.

41. Which duty is imposed on an agent under the agency rules described?

A. Use the principal’s confidential information for the agent’s personal benefit

B. Refuse to render accounts unless the principal requests them in writing

C. Avoid secret profits and misuse of information obtained during the agency

D. Invest principal funds in the agent’s preferred projects without approval

Answer: (C)

Erklärung

The agent must avoid secret profits and must not misuse information obtained during the agency, among other duties. The other choices contradict core agent obligations by allowing misuse or refusing duties.

42. How does a substituted agent differ from a sub-agent?

A. A sub-agent and substituted agent are identical because both are controlled by the principal directly

B. A sub-agent generally acts under the original agent’s control, while a substituted agent is appointed with the principal’s knowledge and consent and is the principal’s agent

C. A substituted agent acts under the original agent’s control, while a sub-agent is appointed only by the principal

D. A substituted agent is always appointed without the principal’s knowledge, while a sub-agent is always appointed with consent

Answer: (B)

Erklärung

A sub-agent acts under the original agent’s control and is generally the agent of the original agent, while a substituted agent is appointed with the principal’s knowledge and consent and is the agent of the principal. The distractors reverse control or claim consent is absent/irrelevant.