DR.J.K.

PATEL INSTITUTE OF
MANAGEMENT
Professor: Dipak Gaywala

MBA II SEM III

Legal Aspects of Business
The Indian Contract Act,1872

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Q.1. Under which of the following instances, does
offer automatically lapse?
a. If it is revoked by the offeror at any time before
it acceptance.
b. If the offeror or offeree dies becomes insane and
the other party comes to know of it before
acceptance.
c. If the offer is not accepted within the specified or
reasonable time.
d. Upon failure to fulfill a condition precedent to
acceptance.
e. All of the above.
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Q.2. Which of the following statements is false?
a. Consideration must be received by all the
joint promissors.
b. Consideration may move from the promisee
or any other person.
c. Consideration may be an act, abstinence or
forbearance or a return promise.
d. Consideration must be real.
e. Consideration must not be illegal, immoral or
opposed to public policy.

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Q.3. Which of the following offers constitutes a valid offer?
a. An auctioneer displays a T.V. set before the gathering in
an auction sale.
b. Shyam advertises in the newspaper that he would pay
Rs.5000 to any one, who finds and returns his lost
briefcase containing valuables.
c. Ram who is in possession of three cars purchased in
different years says ‘ I will sell you a car’.
d. A cloth shop owner announces that silk saree prices are
reduced by 60%.
e. Ram communicates to Shyam that he will sell his car for
Rs. 150000.

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Q.4. Communication of acceptance made by post is
complete against the offeror when the letter of
acceptance
a. Reaches the offeror.
b. Is posted to him.
c. Is in transit.
d. Is signed by the offeree.
e. Both (a) and (d) above.

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Q.5. Anil aged 17 years, borrowed money from a
money lender by representing himself to be of
21 years.
a. Anil can be sued for fraud.
b. Anil cannot be sued for fraud.
c. Anil is liable to repay the amount.
d. Guardian of Anil is liable to repay the amount.
e. Both (a) and (c) above.

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Q.6. Which of the following is not a flaw in a
contract
a. Inadequacy of consideration.
b. Wager in nature.
c. Illegality of the object.
d. Uncertainty of object.
e. Unlawful consideration.

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Q.7. An agreement made under coercion, renders
the contract
a. Valid.
b. Void.
c. Voidable.
d. Illegal.
e. Unenforceable.

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Q.8. The type of demages awarded in case of
breach of promise to marry is:
a. No demages.
b. General demages.
c. Nominal demages.
d. Exemplary demages.
e. Special demages.

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Q.9. A contract entered by mistake of law in India
is:
a. Valid.
b. Void.
c. Voidable.
d. Unlawful.
e. Illegal.

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Q.10. Which of the following offers is/are valid.
a. A says to B, ‘ I will sell you a car.’ A owns three
cars of different models.
b. An auctioneer displays a color TV set before a
gathering in an auction sale.
c. A furniture shop gave the following
advertisement in a newspaper ‘50% discount on
selected items tomorrow only’.
d. Rao advertised in The Hindu that he would pay
Rs. 2000 to any one who finds and returns his
lost briefcase.
e. Both (a) and (d) above.
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Q.11.Which of the following statements construes
an offer?
a. Display of various varieties of silk sarees with
price marked upon them by cloth shop owner.
b. A publishing company provides a catalogue with
prices indicated on it for sale of books.
c. An auctioneer placed an advertisement in the
newspaper to sell a car.
d. Ram informs Shyam that he wants to sell his
Bajaj Scooter for Rs.8000.
e. All of the above.
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Q.12. Which of the following relationships does not
raise presumption of undue influence?
a. Trustee and beneficiary.
b. Doctor and Patient.
c. Solicitor and Client.
d. Husband and wife being Pardanashin woman.
e. Landlord and tenant.

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Q.13. Which of the following agreements is/are
valid?
a. Agreement in restraint of legal proceedings.
b. Agreement in curtailing period of limitation.
c. Agreement to stifle prosecution.
d. Agreement by an outgoing partner with his
parents not to carry on any business within a
specified period or within specified local limits.
e. All of the above.

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Q.14. Under which of the following modes a
contract is said to have been discharged by
operation of law?
a. Performance of the contract by both parties.
b. Mutual consent of both the parties.
c. Lapse of time in performance of the contract.
d. Insolvency of either of the parties.
e. Breach of contract by either of the parties.

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Q.15. The contract entered with a lunatic during the
time of sound mind is
a. Valid.
b. Void.
c. Void ab initio.
d. Voidable.
e. Not enforceable.

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Q.16. A accepts B’s invitation to dinner by phone.
This is not a contract as
a. There is no consensus between the two parties.
b. Acceptance is given orally.
c. There is no intention to create a legal
relationship.
d. Both (b) and (c) above.
e. None of the above.

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Q.17. A agreed to sell his car to B. His consent was
given at gun point. The contract is void as it
involves
a. Undue influence.
b. Compulsion.
c. Coercion.
d. Extortion.
e. None of the above.

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Q.18. A took up the responsibility of providing
education to B who was a minor. Which of the
following is true?
a. B is not liable to reimburse A and can claim
exemption as he is a minor.
b. The contract is void.
c. A can rescind the contract.
d. The minor is liable out of his property to
reimburse A.
e. None of the above.

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Q.19. Inserting a coin at the slot of a weighing
machine installed at the railway station is an
example of
a. Implied acceptance.
b. Express acceptance.
c. No acceptance.
d. Offer.
e. None of the above.

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Q.20. Which of the followings is/are the essential
elements of a valid offer?
a. Offer must have an intention to be bound by his
offer.
b. Offer must be made to specific person/party and
not to public at large.
c. Must be definite.
d. Both (a) and (c) above.
e. All of (a), (b) and (c) above.

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Q.21. Which of the following persons are competent
to contract?
a. A person of 18 years for whom guardian under
Guardians and Wards Act has been appointed.
b. Minors or intoxicated persons.
c. Accredited representatives of a foreign state.
d. Both (a) and (c) of the above.
e. Both (b) and (c) of the above.

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Q.22. Which of the following is false regarding consideration?
a. Natural love and affection is good consideration and may
support the contract if it is in writing and not registered.
b. Past consideration is valid and will support a subsequent
promise.
c. Consideration should move from the promisee alone.
d. A stranger to a contract may sue upon a contract when a
specific charge on property is created in his favor.
e. Both (a) and (c) of the above.

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Q.23. A contract where consent is obtained by
coercion is
a. A void contract.
b. An illegal Contract.
c. Voidable at the option of either of the parties to
the contract.
d. Voidable at the option of the party whose
consent was obtained by coercion.
e. Voidable if the coercion proceeds from one of the
parties to the contract and not from third party.

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Q.24.Which of the following is a void agreement?
a. An agreement collateral to wager.
b. An agreement to refer all future disputes in
connection with a contract to arbitration.
c. An agreement to refer all present disputes in
connection with a contract to arbitration.
d. An agreement to agree in future.
e. A contingent contract.

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Q.25. Identify correct statement from the following(
a. A minor may appoint an agent through his
guardian.
b. An agency without consideration is invalid.
c. A minor appointed as an agent is capable of
creating a valid contract between the principal
and third party.
d. All of the above.
e. Both (a) and (c ) above.

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Q.26. Mr. A accepts Mr. B’ s telephonic invitation
for dinner. This is
a. A valid contract.
b. An invalid contract.
c. A voidable contract.
d. A void contract.
e. Not a contract.

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Q.27. In a contract induced by fraud, the defrauded
party
a. Cannot rescind the contract.
b. Cannot rescind the contract but can sue for
demages.
c. Cannot sue for demages.
d. Can insist that he shall be put in a position in
which he would have been if the representation
made had been true.
e. Both (a) and (c) above.

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Q.28. A contract which is wholly performed by both
parties is called as
a. Unilateral contract.
b. Bilateral contract.
c. Executed contract.
d. Executory contract.
e. Quasi contract.

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Q.29. A promises B to compensate the loss caused
to B either by him or by another person. The
contract is called
a. Contract of guarantee.
b. Contract of indemnity.
c. Contract of security.
d. Contract of bailment.
e. Contract of agency.

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Q.30. Which of the following is/are true?
a. Consideration must be real.
b. Consideration can be inadequate.
c. A promise to do something which one is already
bound to do by law, will be treated as good
consideration.
d. Consideration must be adequate.
e. Both (a) and (b) above.

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Q.31. Jai purchased a guitar of antique value, by
fraud from Mehta. Before Mehta rescinds, Jai
sold the guitar to Khan who buys in good faith.
a. The sale to Khan is void.
b. The sale to Khan is neither void nor voidable.
c. Khan gets good title.
d. Khan is bound to return guitar to Mehta.
e. Mehta can sue Khan.

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Q.32. Which of the following statements is false?
a. A minor cannot be adjudged insolvent.
b. A minor may enter into contract of
apprenticeship.
c. A minor can be an agent of principal.
d. A minor can be one of the partners on par with
others.
e. The Court never orders specific performance of
agreements entered by a minor.

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Q.33. In which of the following cases a contract
stands discharged by operation of law?
a. By express contract.
b. By Novation of terms of contract.
c. By unauthorized alteration of terms of contract.
d. By renunciation of obligations.
e. By destruction of subject matter.

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Q.34. An instrument which is incomplete in some
respects is called as
a. Ambiguous instrument.
b. Inchoate instrument.
c. Void instrument.
d. Fictitious instrument.
e. Escrow.

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Q.35. Under which of the following circumstances does an
offer made by an offeror lapse?
a. When the offeror becomes inane but the offeree accepts
the offer oblivious of offeror’ s insanity.
b. Suman instructs Kamal to make an offer to Vipul by
October 12, 1999 and gives Vipul three days time for
acceptance. Kamal makes the offer on October 13, 1999
which is accepted by Vipul on October 14,1999.
c. When the offeree accepts the offer.
d. When the offeree makes a counter offer.
e. When the offer is accepted by a person to whom it is
made.

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Q.36. Which of the following is an exception to the
rule that ‘ an agreement in restraint of trade is
void’?
a. Agreement in restraint of marriage.
b. Agreement in restraint of carrying of trade after
sale of goodwill.
c. Agreement in restraint of legal proceedings.
d. Agreements of trading with enemy.
e. Agreements restricting personal liberty.

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Q.37. Which of the following is an exception to the
general rule that agreement without
consideration is void?
a. Payment to pay a time barred debt.
b. An agreement entered with love and affection.
c. Compensation for voluntary services.
d. An agreement entered with respect to agency.
e. All of the above.

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Q.38. Which of the following is not a difference between a
wagering agreement and a contingent contract?
a. A wagering agreement consists of reciprocal promises
whereas a contingent contract may not contain such
reciprocal promises.
b. A wagering agreement is essentially of a contingent
nature whereas a contingent contract may not be of
wagering nature.
c. A wagering agreement is voidable whereas contingent
contract is valid.
d. A wagering contract is not a game of chances whereas in
case of contingent contract it is so.
e. In a wagering contract the future event is the sole
determining factor while in a contingent contract the
future event is collateral.
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Q.39. Who can be a beneficiary to a contract?
a. A major.
b. A minor.
c. An alien enemy.
d. An insolvent.
e. Both (a) and (b) above.

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Q.40. Which of the following is/are not the legal
rule for valid consideration.
a. The consideration must move only from the
promisee himself.
b. Consideration must move at the desire of the
promisor.
c. Consideration shall be past, present or future.
d. Consideration need not be adequate.
e. None of the above.

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 Solution
1 e 11 d 21 d 31 c
2 a 12 e 22 e 32 d
3 e 13 d 23 d 33 c
4 b 14 d 24 d 34 b
5 b 15 a 25 e 35 d
6 b 16 c 26 e 36 b
7 c 17 c 27 d 37 e
8 d 18 d 28 c 38 d
9 a 19 a 29 b 39 b
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10 d 20 d 30 e 40 a