Legal Reasoning

[Topic: Law of Contracts] – LA-O2

Test Legal Reasoning

Test Code LA-02
Topic Law of Contracts
No. of Questions 25
Maximum Marks 25
Competitive score 20 and above
Time allowed 15 minutes
Answers are provided in this file for self-evaluation.

1. A party who suffers loss as a result of breach of contract can, in the usual course, claim
a. Ordinary damages
b. Exemplary damages
c. Special damages
d. Penal damages

2. An agreement to share the benefits of public office is

a. Valid
b. Voidable
c. Void
d. None of the above

3. Exemplary damages is related to

a. Damages awarded to set an example
b. Damages for loss arising special circumstances
c. Damages fixed by the court in ordinary circumstance
d. None of the above

4. Past consideration means

a. Money received in the past without making even a proposal
b. The price which is more than the promisor’s expectation
c. The price paid or service rendered at the desire or request of the promisor followed
by a subsequent promise
d. None of the above

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5. P offers to sell his car to Q for Rs. 50,000/- Q agrees to buy the car for Rs. 45,000/- the
reply of Q amounts to
a. Offer
b. Counter offer
c. Invitation to an offer
d. Standing offer

6. Which of the following constitutes an ‘offer’ in a self-service store?

a. Display of goods at the shop window
b. When the customers asks for some goods
c. There is no offer in such cases
d. Picking up an article and approaching the cashier’s desk for payment

7. A party to a contract can be discharged for performing it, if it has become

a. Expensive
b. Onerous
c. Commercial inviable
d. Impossible

8. A person who sues for damages under the law of contract

a. Is entitled to recover the agreed amount of compensation for the loss suffered
b. Is not entitled to recover the agreed amount of compensation for the loss suffered
c. Is entitled to recover the agreed amount of compensation by proving the exact loss
suffered
d. Is entitled to recover the agreed amount of compensation without having to prove the
exact loss suffered

9. If the terms of the contract are not fulfilled, the law will endeavour so far as money can go,
to place the aggrieved party
a. In a position more advantageous than that which would have arisen had the contract
been performed
b. In the same position as if the contract has been performed
c. In the equal position as if the contract has not be performed
d. To status-quo

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 Legal Reasoning
[Topic: Law of Contracts] – LA-O2

10. Which of the following statements is correct?

a. Third party can always sue for breach of contract
b. Wagering agreements are illegal
c. When consent is not free, agreement will be void
d. Catalogue is an invitation to receive offer

11. A promise to give money or money’s worth upon the determination or ascertainment of an
uncertain event is called a
a. Lottery
b. Wager
c. Debt
d. Contract

12. Promises forming consideration for each other are known as

a. Independent promises
b. dependent promises
c. Reciprocal promises
d. mutual promises

13. Consideration must move at the desire of

a. The promisor
b. The promisee
c. Promisor or any third party
d. Both promisor and the promise

14. A person who is not a party to a contract

a. Cannot sue
b. can sue only in well recognized cases
c. can sue
d. All the above

15. Principles:
i. Agreement by way of wager is void.
ii. Contract of wager is not illegal.
iii. No cause of action arises out of a wagering agreement
iv. Illegal agreements are void.

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 Legal Reasoning
[Topic: Law of Contracts] – LA-O2

Facts: Aryan enters into a bet with Balbir. Aryan promises that he will pay
Rs.50,000/- to Balbir if Australia defeats India in one day international being played at
Delhi. Balbir in turn promises to pay Rs.50,000/- to Aryan if India defeats Australia.
India defeats Australia and Balbir instead of paying the amount to Aryan executes a
promissory note in favour of Aryan promising that he will pay money on or before a
specified date. No witness attests the promissory note. The promissory note is not
registered. Balbir fails to pay within the stipulated time.
Decisions:-
1) Aryan will not win because; he should have accepted only cash and not a
promissory note.
2) Aryan would win because promissory note is valid and enforceable.
3) Aryan will not win as the agreement is as such unenforceable.
Reasons: -
a. No suit can be brought about for recovering anything alleged to be won on any
wager.
b. Wager is not illegal
c. For a promissory note to be valid and enforceable, neither witnesses nor
registration is required.
d. As promissory note is yet another contract, Aryan should have accepted cash
Your decision with reason:
a. 1, a
b. 3, a
c. 2, c
d. 1, d

16. Principles:
i. Only persons of sound mind can enter into a contract.
ii. A person is said to be of sound mind for the purpose of making a contract, if at the
time when he makes it, he is capable of understanding it and of forming a rational
judgment as to its effect upon his interests.
iii. A person, who is usually of unsound mind, but occasionally of sound mind, may make
a contract when he is of sound mind. A person, who is usually of sound mind, but
occasionally of unsound mind, may not make a contract when he is of unsound mind.

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Facts: Ramesh entered into a contract with Suresh under which he sold his house for
Rs.5 lakhs. This contract was signed and registered on 15 February, 2008. On 20
February, 2008 a suit was filed by legal heirs of Ramesh to get the contract dated 15
February, 2008 annulled by the Court on the ground that Ramesh is not of sound mind.
The Court found that Ramesh was suffering from acute depression resulting in
forgetfulness and had orientation problems and was put on medicines for neurotic and
psychiatric ailments since 10 February, 2008.
Decisions:-
1. Ramesh was competent to enter into contract dated 15 February, 2008
2. Ramesh was of sound mind when he entered into the contract.
3. Ramesh cannot be considered being of sound mind on 15 February, 2008
4. Under all circumstances the contract entered between Ramesh and Suresh is valid.
Reasons:
th
a. As he was under medication since 10 February 2008, he could be regarded as a
person of sound mind
b. Depression and forgetfulness are common problems and persons suffering from
these cannot be termed mentally unsound.
c. Since Ramesh has been suffering from mental ailments, even prior to his signing
agreement, the agreement is invalid.
Your decision with reason:
a. 1, a
b. 2, a
c. 4, b
d. 3, c

17. Principle:
Every agreement by which anyone is restrained from exercising a lawful
profession, trade or business of any kind is to that extent void. This principle is
subject to exceptions.
Factual Situation: Vivek enrolled himself for MDS course under a government Dental
College. As per the admission conditions, students who complete the MDS course
should serve the government services for one year. Vivek completed his course
successfully and was waiting for his government posting but did not hear from the
college for more than a year. Vivek then approached the college asking them to return
his degree certificates so that he could apply for a job elsewhere.

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But the college refused and insisted that he should serve in a government hospital as
per the agreement. In a suit filed by Vivek against the college,
a. Vivek will win because he had waited for one year after completion of the course,
but no government posting was allotted.
b. Vivek will win because the clause in the admission is by itself unreasonable and
hence void.
c. Vivek will lose because he knew the condition before taking up the admission
d. Vivek will lose because he ought to be more patient and wait for his government
posting.

18. Principle:
a. A mere declaration of one’s intention does not give right of action to another.
b. When a person fulfils the requirement of a general offer, he is said to convey
his acceptance.
Facts:Anand says in conversation with Ravi that he might give Rs 5,000 to the person
who marries his sister. Ravi marries Anand’s sister. Can Ravi recover Rs 5,000/- from
Anand?
a. Yes, Ravi can recover Rs. 5,000/- from Anand as he has fulfilled the conditions of
general offer.
b. No, Ravi cannot recover Rs. 5,000/- from Anand for it was merely an expression of
his intention.
c. No, Ravi cannot recover Rs. 5,000/- as Anand did not make the offer to him directly.
d. None of these

19. Principle: A contract which is impossible to perform becomes void.

Facts: Mukund agreed to deliver a specific crop of tomatoes to Anant identified by both
of them. Before delivery, crop was burnt by lightening. Is Mukund discharged from the
performance of the contract?
a. Yes Mukund is discharged from performance as the subject matter of the contract is
destroyed.
b. No, Mukund is not discharged from performance as he can procure tomatoes from
other sources
c. Yes, Mukund is discharged from performance as the subject matter of the contract
was specifically identified and the same got destroyed later .
d. None of these

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 Legal Reasoning
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20. Principle:
a. An agreement to compensate for past voluntary service is valid.
b. A minor cannot ratify a contract upon attaining majority.
Facts: A renders some services to B during his minority at the request of B. B, on
attaining majority, enters into an agreement with A to compensate A for services rendered
during B’s minority. Is the agreement valid?
a. No, the agreement is not valid, as ratification of minor’s contract is not possible.
b. Yes, the agreement is valid, because A voluntarily rendered services to B.
c. Yes, the agreement is valid, since B makes it only after attaining majority.
d. None of these

21. Principle I: Specific performance means directing the party who breaches the contract ,
to carry out his promise according to what he had contracted to do.
II: Specific performance cannot be enforced in personal contracts
Facts:A famous classical dancer enters into a contract with the owner of a theatre. She
agrees that she will give performances in the theatre for a period of one month and that
during this period she will not give dance performance in any other theatre. The dancer
now refuses to give her performance in the theatre. Can this contract be specifically
enforced against the dancer?
a. The theatre owner can specifically enforce the contract against the dancer as she had
agreed to give the performance
b. The theatre owner can specifically enforce the contract against the dancer as the tickets
have already been sold and publicity has been given
c. Court will not enforce specific performance as the contract is personal in nature
d. Court can prevent her from giving dance performance in any other theatre

22. Principle: Any contract that is entered into by the parties due to ‘undue influence’
shall not be valid. A contract is said to be induced by ‘undue influence’ where the
relationship between the parties is such that one of the parties is in a position to
dominate the will of the other and uses that position to obtain an unfair advantage
over the other.

Factual situation: Ishant, was a part of the Cricket Team of the XYZ School. Kapil, his
coach was in the process of selecting the School Team for the District- Level Match.

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 Legal Reasoning
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Ishant was not performing well in the practice sessions, but was desperate to play in the
match. Kapil informed Ishant that he would select him for the match if Ishant would sell
his Laptop (worth Rs.50,000) for Rs.5000 . Ishant sold his Laptop for the said price. Is
the contract valid?
a. Yes, consideration need not be adequate.
b. Yes, because Ishant wanted to be in the team, so he sold his laptop
c. No, because Kapil misused his position and got the laptop at a low price
d. Yes, because Kapil bargained and got the best price.

23. PRINCIPLE: Proposal or acceptance of any promise has to be conveyed expressly

or in an implied manner
FACTS: The owners of Andhra Lions in the Indian Cricket Challenge League(ICCL) were
interested in purchasing Sreeshanth, a popular Indian cricketer. When his name came up
for the auction, the other teams started bidding and raised his price to Rs.80 Lakhs. The
Mumbai team was desperate to have him in their side shouted a price for Rs.90 Lakhs.
Andhra Lions lifted their hands for Rs.1 Crore. As the organizer was unable to see their
hands, he sold the player to Mumbai. Andhra disputed the sale stating that they have
accepted for a higher offer. Can they succeed?
a. Yes, they showed primary interest in picking up the player.
b. No, Mumbai shouted for a higher price and purchased the player
c. Yes, Andhra Lions has signified its acceptance by lifting the hands
d. No, they did not shout or tell out a price and failed to express their interest explicitly.

24. PRINCIPLE: Every agreement in restraint of the marriage of any person, other than
a minor, is void.
FACTS: The natives of Gudur, a village in Andhra Pradesh were against inter-caste
marriages. Ravi and Maneka, belonging to different castes wanted to marry. As the
village elders were against it, the matter was referred to the Khap Panchayat. In the
meeting of the Khap Panchayat, it was agreed that they will not marry each other and
they agreed to it and gave it in writing. Is it valid?
a. Yes, it was a decision of the Khap Panchayat.
b. No, the agreement restricting their marriage is not valid. They are free to marry each
other..
c. Yes, they have given it in writing.
d. Yes, Right to religion will have an overriding effect on the right to marry.

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25. Principle: A wife living with her husband has the implied authority of the husband
to buy articles of household necessity. The husband is legally liable to pay the
amount towards the same.
th
Facts: Mr. Sundar is the husband of Ms.Sunitha. They are living together. On 20 April
2009, Ms. Sunitha has bought a diamond necklace on credit from National jewelers. She
has told the National Jewelers that Mr. Sundar will pay the price of the necklace which
was Rs.1.5 lakhs. Mr. Sundar has not paid the amount.
a. The National Jewelers cannot recover the amount from Mr. Sundar through Court.
b. The National Jewellers can recover the amount from Mr. Sundar through Court.
c. The National Jewelers will have to first proceed against Ms. Sunitha, if she does not
pay, then Mr. Sundar is liable to pay.
d. Ms. Sunitha can ask her parents to pay the amount.

ANSWERS ON NEXT PAGE

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 Legal Reasoning
[Topic: Law of Contracts] – LA-O2

1.a 2.c 3.a 4.c 5.b 6.d 7.d

8.c 9.b 10.d 11.b 12.c 13.a 14.a

Q.No Answer Hints / Explanations

15. b Since wagering agreement is unenforceable, Aryan will not win.

16. d Since Ramesh has been having such problems from 10th February, the agreement
is invalid.

17. a As Vivek has not got the Govt. posting even after a year, he would win.

18. b Ravi cannot claim the amount from Anand as the latter has neither made a
specific nor a general offer to Ravi. The word ’might’ is a clue.

19. c As the crop was “specifically identified” by the parties and the same was
destroyed, Mukund is discharged from the contract.

20. a As a minor cannot ratify the contract entered into during his minority upon
becoming a major, the agreement is invalid.
nd
21. c Applying the 2 principle, it is clear that the Court will not enforce specific
performance against the dancer.

22. c Straightforward application of the principle

23. c Andhra Lions can succeed, as they had conveyed their acceptance in an implied
manner by raising their hands.

24. b Straightforward application of the principle

25. a As purchase of jewelry does not constitute necessity, Sunder is not liable.

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