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CBSE Questions for Class 12 Commerce Legal Studies Topics Of Law Quiz 4 - MCQExams.com
CBSE
Class 12 Commerce Legal Studies
Topics Of Law
Quiz 4
A contract entered with foreign sovereigns and Ambassadors cannot be enforced against them in court of law except _________.
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with the permission of court
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with the permission of Central Government
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by an act of Parliament
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with the approval of President of India.
Explanation
The persons who disqualified from entering into a contract due to certain reasons may arise from their legal status, political status or corporate status:
Alien Enemy: An agreement with an Alien Enemy is held to be void.
Foreign Sovereign and Ambassadors: Foreign sovereigns and their representatives enjoy certain amount of privileges and immunities in every country. They cannot enter into a contract except through their agents residing in India. Moreover, the contract with them can be enforced in the court only with the permission of Central Government.
Convicts: A convict while he is undergoing imprisonment, cannot enter into a contract.
Insolvents: An insolvent person is a person who is said to be unable to discharge or get off his liabilities and therefore, has applied for being adjudged insolvent or if such proceedings have been initiated by any one of his creditors.
Company or Statutory bodies: A contract entered into by a corporate body or statutory body will be valid only to the extent it is within its Memorandum of Association
Which of these statements is true?
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All void agreements are illegal
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An illegal agreement is void ab initio
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An agreement always create a legal obligation
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When both the parties have completely performed their respective obligations, it is called an executory contract
Explanation
An agreement is rendered illegal if the object or consideration of the agreement is illegal i.e. forbidden by law or against morality and public policy and is also punishable. But void agreements need not be illegal as they are not enforceable by law but can be performed without any legal recourse. Also, an illegal agreement is illegal since the formation of the contract and is void ab initio, i.e. void from the beginning.
Agreement is a wider concept than a contract. A contract is a legally enforced agreement. This means that all contracts are agreements but all agreements are not contracts such as social agreement which does not need any legal sanctions. Hence, an agreement need not always create legal obligation unless it is legally enforced.
An executory contract is a contract made by two parties in which the terms are set to be fulfilled at a later date. The contract stipulates that both sides still have duties to perform before it becomes fully executed. The contract is often in place between a debtor or borrower and another party.
X agrees to advance Rs. 5000 to Y subject to the condition that Y divorce his wife and marry X's daughter. This agreement is _________.
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Valid
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Void
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Voidable
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Illegal
Explanation
As per section 23 of the act the consideration or object of an agreement is lawful, unless it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.
In this case, X has agreed to pay Y when he divorces his wife and marries X's daughter. This act in itself is immoral and opposed to public policy and morality and hence is void.
If the object or consideration of an agreement is unlawful, then it becomes a ____________________.
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Voidable agreement
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Void agreement
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Valid agreement
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All the three
Explanation
As per section 23 of the Contract Act, the consideration or object of an agreement is lawful, unless it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In this case, the agreement becomes void ab initio and illegal.
X promised Y that he will never marry during his life time. This agreement is ________.
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valid
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void
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voidable
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illegal
Explanation
Under section 27 of the act, any agreement pertaining to the restraint of marriage of a person other than a minor is void in nature and cannot be enforced. In this matter too, X has promised not to marry during his lifetime which is consideration and object of the agreement and hence is restraint of marriage and void.
Which of the following agreement is not an agreement opposed to public policy?
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Trading with enemy
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Stifling prosecution
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Restraint of trade
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Insurance contract
Explanation
As per section 23 of the act, those contracts, considerations or objects of which are unlawful i.e. illegal or immoral or forbidden by law or opposed to public policy are void in nature. The Act does not anywhere define the expressions "public policy" or "opposed to public policy" or "contrary to public policy". However, the term "public policy" could plainly mean issues concerning the public or public benefit and the interest of public at large. Over the years the courts have developed the meaning of the term 'opposed to public policy'. It contain agreements such as:
Trading with Enemies:
All trade with enemies is against public policy. Thus it is unlawful and is void. However, if a contract is made during peace times and later on war breaks out, one of the two things may result, Either the contract is suspended or it stands dissolved depending upon the intention of the parties to contract.
Stifling Prosecution:
An agreement in which one party agrees to drop criminal proceedings pending in a court in consideration of some amount of money, is unlawful. Therefore, such an agreement cannot be enforced except where crime is compoundable.
Agreement to Commit a Crime:
If in an agreement, the consideration is committing a crime, the agreement is opposed to public policy and is void. Similarly, an agreement to indemnify a person against consequences of his criminal act is unenforceable being opposed to public policy.
Agreements in Restraint of Legal Proceedings:
agreements which prohibits wholly or partly any party to the agreement to enforce his rights in respect of any contract is void to that extent.
If an agreement curtails the period of limitation which is prescribed by the law of limitation is void. This is so because, its object is to defeat the provisions of law.
All the illegal agreements are _________________.
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Avoidable
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Ab initio void
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Valid
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Contingent
Explanation
An illegal agreement, under the common law of contract, is one that the courts will not enforce because the purpose of the agreement is to achieve an illegal end. The illegal end must result from performance of the contract itself. These kind of agreement are void from the beginning stage only and hence is void ab initio i.e. void from the beginning.
X owes Rs. 10,000 to Y. Y promises to accept Rs. 5000 in full satisfaction of the amount. The agreement is _________.
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valid
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avoidable
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illegal
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unenforceable
Explanation
Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit as per section 63 of the Act. In this case, though the creditor i.e. Y has accepted to take the amount less than the originally owed amount, the agreement is valid as per section 63 of the Act.
Which one of the following damage is not recoverable under the Indian Contract Act,1872?
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Ordinary damages
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Special damages
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Nominal damage
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None of the above
Explanation
Damages recoverable are
-Ordinary Damage.
-Special Damage.
-Exemplary / Punitive Damages.
-Nominal Damages.
-Liquidated Damages.
An agreement between the buyer and seller of goodwill whereby the seller agrees not to carry on business within specified local limits so long as the buyer or his representatives carry on the business is valid provided __________________.
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The restriction relates to similar business only
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Geographical area is specified
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Restriction applies only up to the period during the buyer or his representatives carry on the business
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All the three
Explanation
As per section 27 of the Contract Act, every agreement by which anyone is restrained from exercising a lawful profession or trade or business of any kind, is to that extent void. However there is exception to this rule in the same section which says : : One who sells goodwill of a business with a buyer to refrain from carrying on a similar business, within specified local limits so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein provided that such limits appear to the Court reasonable, regard being had to the nature of business. Hence, ans is (D)
The terms of appointment of X contains a term that he will serve the company for at least 3 years failing which the personal bonds submitted by him will be executed. This agreement is ___________.
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void being in restraint of personal freedom
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void being opposed to public policy
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valid contract
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illegal contract
Explanation
As per section 27 of Contract Act, Every agreement by which anyone is restrained from exercising a lawful profession or trade or business of any kind, is to that extent void. However, there are certain exceptions to this rule. For example, agreements of service often contain negative covenants preventing the employee from working elsewhere during the period covered by the agreement and there is no rule of public interest which prevents this clause and consider it as a valid restraint.
In the present case, the appointment of X has a term that he will serve the company for at least 3 years failing which the personal bonds submitted by him will be executed. This covenant is valid in nature. An agreement of this class does not fall within Section 27.
If it did, all contracts of personal service for a fixed period would be void. An agreement to serve exclusively for a week, a day, or even for an hour, necessarily prevents the person so agreeing to serve from exercising his calling during that period for anyone else than the person with whom he so agrees.
X says to Y, I shall sell my CAR to you. Will you buy it? Y responded by saying yes, I shall buy it. This agreement is not valid because of __________________.
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Uncertainty of price
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Uncertainty of model of car
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Being not in writing
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All the three
Explanation
An agreement requires offer, acceptance, consideration as well as free consent of the parties to it. All these elements must be fixed or specified and not vague or uncertain as it will render the agreement void. In this case too, X has offered to sell his car to Y but has not specified about the car as well as price of the car . This means that the object of this agreement is uncertain and hence is void in nature.
Which of the following restraint is not valid restraint?
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An agreement containing clause restraining the employee from doing any other job after his retirement
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An agreement between the sugar manufacturer to not to sell sugar below Rs. 2000 per Qt.
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An undertaking given by an employee not to leave the present employer before 3 years
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All the three
Explanation
As per section 27 of Contract Act, Every agreement by which anyone is restrained from exercising a lawful profession or trade or business of any kind, is to that extent void. However, there are certain exceptions to this rule:
One who sells goodwill of a business with a buyer to refrain from carrying on a similar business, within specified local limits so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein provided that such limits appear to the Court reasonable, regard being had to the nature of business.
Regulations as to the opening and closing of business in the market, licensing of traders, supervision and control of dealers and the mode of dealing are not invalid and is a valid restraint.
Agreements of service often contain negative covenants preventing the employee from working elsewhere during the period covered by the agreement and there is no rule of public interest which prevents a transfer of them against the employer’s will being restrained but an agreement to restrain an employee from competing with his employer after the termination of employment may not be allowed by the courts. Hence, an agreement restraining the employee from doing any job after retirement is not a restraint and is void under section 27.
A contract is said to be discharged when _________________.
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Intention of breach of contract by either party is known.
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Intention of breach of contract by either party is suspected by circumstances of the case.
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It ceases to operate.
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Not backed by adequate consideration.
Explanation
When parties enter into a contract, each has rights and duties that are spelled out in the agreement. When the sides perform their rights and duties, the contract is then discharged. In these cases, discharge of contract refers to an agreement that's fully performed. This means the contractual relationship is now terminated and contract now ceases to operate . However, parties can terminate an agreement even if they don't fulfill their primary contractual obligations.
Waiver under the Contract Act means _________________.
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Abandonment of contractual rights
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Forfeiture of contractual rights
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Lapse of contractual rights
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Debts of contractual rights
Explanation
A waiver is the voluntary relinquishment or surrender of some known right or privilege. This has been provided under section 63 of the Contract Act, which says that every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance,or may accept instead of it any satisfaction which he thinks fit. The promisee has the right to let go or abandon the rights attached with the contract and further discahrge the contract.
A waiver of contract ________________.
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Requires agreement and consideration
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Consideration only
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Agreement only
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Requires neither agreement nor consideration
Explanation
As per section 63 of the act, a contract may be discharged by agreement between the parties to waive their rights arising from the contract. Thus, in case of waiver, the person who is entitled to any right under the contract, intentionally relinquishes them without consideration and without a new agreement.
As per section 37 of the Contract Act parties to the contract must _________.
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perform
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offer to perform
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either (a) or (b)
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both a and b to be fulfilled
Explanation
As per section 37 of the Contract Act, the parties to a contract must either perform, or offer to perform, their respective promises, unless such performance is dispensed with or excused under the provisions of this Act, or of any other law. Promises bind the representatives of the promisors in case of the death of such promisors before performance, unless a contrary intention appears from the contract.
Which of the following restraint of trade is valid?
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Agreements between the traders to regulate or fix price.
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Not to sell goods at loss.
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Agreement to sell goods without VAT invoice.
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A party agreeing to not to carry on any business other than that of the firm in which he is a partner.
Explanation
Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void. However, there is an exception to this law which says, one who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein, provided that such limits appear to the Court reasonable, regard being had to the nature of the business. Therefore, if there is an agreement between the traders regarding regulation or fixing of price then such agreement cannot be said to be of restraint of trade.
In a contract, when the object and consideration is unlawful it is deemed as _________.
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void
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voidable
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valid
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contingent
According to section 2(h) of the Indian Contract Act,"___________ is an agreement enforceable by law ".
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Consideration
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Agreement
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Promise
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Contract
According to Section $$25$$ of the Indian Partnership Act, $$1932$$, the liability of a partner is ________.
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nNone of the above
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jJoint
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sSeveral
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jJoint and several
Performance of a contract takes place when parties to the contract fulfils the contractual obligations _________.
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in the manner provided
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within the time so provided
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in either of these to be satisfied
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both (a) and (b) to be fulfilled
Explanation
Performance of contract' means fulfillment of the obligations by the parties. The parties who make the contract must fulfill their obligations according to the terms laid down in the contract. Performance of contract is one of the methods to discharge a contract.
A contract should be performed at the time specified and at the place agreed upon as well as in the manner provided in the contract. When this has been accomplished, the parties are discharged automatically and the contract is discharged eventually.
________ is not a void.
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Wagering agreement
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Agreement in restraint of trade
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Contingent contract
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Agreement in restraint of marriage
Explanation
Section 30 of the Indian Contract Act talks about wagering agreements, which reads
“agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made.”
As per section 27 of the act, ev
ery agreement by which anyone is restrained from exercising a lawful profession or trade or business of any kind, is to that extent void.
Under section 26, every agreement in restraint of the marriage of any person, other than a minor, is void.
Contingent contracts, on the other hand, are the ones where the promisor performs his obligation only when certain conditions are met.
If two or more parties enter into a contract to do or not do something, if an event which is collateral to the contract does or does not happen, then it is a contingent contract. These types of agreements are generally valid in nature. Under section 32 of the act,
A contingent contract might be based on the happening of an uncertain future event. In such cases, the promisor is liable to do or not do something if the event happens. If the happening of the event becomes impossible, then the contingent contract is void.
A contract should be performed by ________________.
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The promisor
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The promisor's agent
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Promisor's legal representatives
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Any of the above
Explanation
Generally, a contract is performed by the promisor or his agent or his legal representative but as per section 40 of the act, if it appears from the nature of the case that it was the intention of the parties to any contract that any promise contain in it should be performed by the promisor himself, such promise must be performed by the promisor. In other cases, the promisor or his representatives may employ a competent person to perform it.
Special damages can be claimed ___________________.
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Invariably in all the cases
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Only when special circumstances are brought to the knowledge of the defendant
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To punish the guilty party
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To deter a person from committing a breach of such contract
Explanation
Special Damages are the consequential damages caused by the breach of contract due to the existence of special circumstances. Such damages are awarded by the courts only when at the time of making a contract, these special circumstances were forseeable by the party committing the breach as well as brought to the notice of the aggrieved party.
If the special circumstances was already in the knowledge of the party responsible for the breach of contract, the formality of communicating them to him may not be necessary.
Who can demand performance of a contract _______________.
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Promisee
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Third party
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Legal representative
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(a) & (c)
Explanation
It is only the promisee who can demand performance of the promise under a contract, for, the general rule is that "a person cannot acquire rights under a contract to which he is not a party". A third party cannot demand performance of the contract even if it was made for his benefit.
In case of the death of the promisee, his legal representatives are entitled to enforce the performance of the contract against the promisor.
All agreement are contract _______.
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if they are on stamp paper
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if they are made by the free consent of parties
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if they are registered
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all of these
Assignment of contractual obligation takes place ___________.
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In case of death
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In case of insolvency
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Both
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None
Explanation
An assignment is the transfer of rights held by one party called the “assignor” to another party called the “assignee.” In contracts, generally assignment is done for the persons incompetent to contract especially minor, dead people as well as people declared insolvent by the court.
The general rule is that when a person becomes
insolvent, the assignment of his rights and duties takes
effect by operation of law.
A promise depending upon personal consideration
terminates on death of the promisor. S
ection 37 of the Indian Contract Act provides that in
case of death of promisors before performance of their
promise, representatives of the promisors are bound to
perform the promise. Hence assignment of obligations takes place.
In which of the following cases time is the essence of the contract?
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Where parties to the contract have expressly agreed to treat it as such.
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Where the nature of the transaction and intention of the parties were such that the performance within stipulated time was essence.
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Both
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None
Explanation
As per section 55 of the act, when a party to a contract promises to do a certain thing at or before a specified time, and fails to do such thing at or before a specified time, the contract or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of essence of the contract.
If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time.
If, in case of a contract voidable on account of the promisor's failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation of any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of acceptance, he gives notice to the promisor of his intention to do so.
In which of the following cases a contract need not be performed?
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If the promisee agrees to dispense with or remit wholly or in part the performance of the promise made to him.
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When a person at whose option a contract is avoidable rescinds it, the other party thereto need not perform any promise thereon contained in which he is promisor.
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If any promisee neglects or refuses to afford the promisor reasonable facilities for the performance of his promise, the promisor is excused by such neglect or refusal as to non-performance caused thereby.
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All the three
Explanation
As per the Contract Act, the circumstances under which contracts need not be performed are as follows:
If parties to a contract agree to 'Novation,' 'Rescission' or 'Alteration'; the original contract need out be performed. In such cases the original contract disappears and is substituted by a new contract.
If parties to a contract agree to dispense with or remit performance of promise either wholly or in part, the original contract stands discharged. This is technically called as 'Remission.'
When a person, at whose option a contract is voidable, rescinds it, the other party there to need not perform his promise.
If any promisee neglects or refuses to afford the promisor reasonable facilities for the performance
of his promise, the promisor is excused for the non-performance of the contract.
Which of these contracts can be specifically enforced?
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When there is lack of standard for ascertaining the actual damages
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When compensation in money is not an adequate relief
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Both
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None of these
Explanation
Under section 10 of the Specific Relief Act, 1963, the specific performance of any contract maybe enforced-
when there exists no standard for ascertaining actual damage caused by the non-performance of the act agreed to be done; or
when the act agreed to be done is such that compensation in money for its non-performance would not afford adequate relief.
If an act becomes impossible after the contract is executed for ________ no compensation/damages is payable.
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no fault of either party
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fault of only one party
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fault of promisor
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fault of both the parties
Explanation
A contract to do an act, which after the contract is made, becomes impossible, or by reason of some event which the parties could not prevent, becomes void when the act becomes impossible or unlawful. This is called “Supervening Impossibility”, i.e. impossibility arising subsequent to the formation of the contract. In such a case the contract will be void as soon as such events make the performance of the contract impossible.
Impossibility arises due to the happening of certain events which were neither in the contemplation of the parties when they entered into the agreement nor either of the parties are responsible for causing the performance of the contract impossible.
The contract of agency between the principal and his agent is __________.
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enforceable
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not valid
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deniable
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none of these
When the parties to a contract agree that a certain sum of money would be payable in case of breach of contract such payment of damage is called _________.
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liquidated damage
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unliquidated damage
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penalty
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special damages
Explanation
Liquidated damages refer to the sum of damages that the parties assess and agree upon at the time of contract for breach of the contract by either party. On breach of contract, this sum of money becomes payable irrespective of the actual value of the damages that may be caused on breach. The Indian Contract Act, 1972 recognizes liquidated damages under Section 74 by stating that if parties stipulate any amount to be paid as damages or any penalty to be imposed on breach, the aggrieved party is entitled to only that amount or penalty and no other greater or lesser amount.
Under Indian Contract Act promisor is the ___________.
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person who make the proposal
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person who accepts the proposal
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person who makes the promise
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person to whom the promise is made
A letter of acceptance sent by post is lost in transit.
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There is a concluded contract as the letter of acceptance is put in the course of transmission.
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There is no concluded contract as the acceptance has not come to the knowledge of the proposer.
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There is no concluded contract as the acceptance has not been communicated to the proposer.
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All the above
Parties are not competent to contract if any one of them is __________.
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a minor
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insane
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declared insolvent
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All the above
Discharge of contract due to insolvency is __________.
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discharge by mutual agreement
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discharge by lapse of time
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discharge by operation of law
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discharge by impossibility
An agreement of agency must make clear the _________ of a person to act on behalf of another person.
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intention
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certainty
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involvement
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None of the above
Which is correct?
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Proposal + acceptance = Agreement
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Promise + offer= agreement
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Agreement + promise = contract
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All the above
Which of the following are the rights available to agents ?
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Right to remuneration
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Right to retainer
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Right ti lien
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All of the above
Section 17 of the Indian contract act deals with ___________.
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wilful misrepresentation
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coercion
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fraud
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both a and b
Transfer of shares in the partnership firm is _________.
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Marginally restricted
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Freely transferable
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Prohibited
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None of the above
Explanation
The restrictions on the transfer of shares in private companies flow from the partnership principle, which is the soul and basis of private companies. These restrictions, as stated above are considered essential in private companies which are usually a group of trading persons bound together by close ties of friendship. These close associations can be established with anyone and everyone so easily and therefore, these members seek to keep the shares of such a company within the group.
Hence, option (A) is the correct answer.
What is the partnership written agreement known as?
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Partnership contract
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Agreement
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Partnership deed
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Partnership Act
Explanation
The document containing the terms and conditions of the partnership agreement is known as Partnership Deed. It is a stamped paper on which the terms and conditions for the regulation of the partnership are written. It also contains the names, details, rights, and duties of all the partners.
Hence, option (C) is the correct answer.
Which one of the following is not a remedy available in case of default?
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Sue for beach of contract and for damages.
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Repossess the goods after the buyer has resold them.
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Stop delivery of the goods.
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Demand specific performance.
In order for promissory estoppel to arise, a number of requirements exist. Which one of the following is not a requirement for promissory estoppel?
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The promise must be made by clear words.
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It must be inequitable for the promisor to go back on his promise.
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The promisee must rely on the promise.
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There must be a clear promise that legal rights will not be enforced.
Which of the following are the elements that constitute a partnership?
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There must be a contact regarding a partnership
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There must be an association of two or more persons
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There should be $$7$$ persons
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Both A and B
Explanation
Partnership is the result of a contact. It does not arise from status , operation of law or inheritance. Thus at the time of death of the father , who has a partner in partnership firm , the son can claim share in the partnership property but cannot become a partner unless he enters into a contract for the same with others persons concerned.
A partnership is a association of two or more persons who carry on as co-owners and share profits.
A, a contractor,appointed B to manage his entire work. It was agreed that B would receive 50% of the profits as his remuneration and would bear all the losses, if any here, B is ____________.
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an agent
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a partner
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a sole proprietor
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None of the above
What is the age of attaining majority as per Indian Contract Act,1872 when the minor is under the guardianship of the court of wards?
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16 years
0%
18 years
0%
21 years
0%
20 years.
Explanation
Section 11 of The Indian Contract Act specifies that every person is competent to contract provided:
He should not be a minor i.e and individual who has not attained the age of majority i.e 18 years in normal case and 21 years if a guardian is appointed by the Court.
What is the terms that will be implied when its is not stipulated in the contract?
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What can be done when the wrong quantity is delivered.
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The place and time of delivery
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Freedom from any lien or encumbrance
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All of the above
Explanation
Implied terms of a contract refer to the terms and conditions that are assumed to be included in the contract even though not clearly stated. For example, Section 37 of the Sale of Goods Act, 1930 states that if seller delivers wrong quantity of goods and the buyer accepts them as it is instead of returning, he is bound to pay the seller although the contract does not specify anything about payment in case of wrong quantity delivery. Section 36 of the Act specifies that when the contract does not specify the place for delivery of the goods, it is to be delivered either at the place where the contract for sale or agreement to sell has been entered into or in their absence in the place of production manufacturing. Section 30 of the Act states that once the buyer has obtained possession of the goods, it is to be assumed that it is free from any lien or encumbrance. In other words, the seller's lien ends at that point of time, irrespective of the fact whether ir has been stated in the contract or not.
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Practice Class 12 Commerce Legal Studies Quiz Questions and Answers
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