legal aspect of business.doc

7/29/2019 legal aspect of business.doc

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UNIT 1: LAW OF CONTRACT

1) The __________ forms the oldest branch of the law relating to business.

a) Negotiable Instruments Act, 1881 b) Sales of Goods Act, 1930

c) Companies Act, 1956 d) Law of Contract, 18722) Law is:

a) A general rule of external human action b) Body of principles

c) Both d) None

3) Law happens to be one of the most effective instruments of __________.

a) Co-operation b) Control

c) Service d) Regulation

4) __________ is the portion of law dealing with rights and obligations of

transactions between mercantile persons.

a) Commercial Law b) Mercantile Law

c) Business Law d) All5) An __________ enforceable by law is called a contract [u/s 2(h) of Indian

Contract Act, 1872].

a) Tie-up b) Pact

c) Agreement d) Treaty

6) __________ is every promise and every set of promises forming __________

for each other.

a) Consideration & Agreement b) Agreement & Consideration

c) Acceptance & Contract d) Contract & Consideration

7) A __________ is an accepted __________.a) Promise & Proposalb) Proposal & Promise

c) Promise & Acceptance d) Acceptance, Proposal

8) An agreement becomes enforceable only when it is couples with __________.

a) Acceptance b) Obligation

c) Proposal d) Promise

9) __________ is the legal __________ which binds the parties to a contract.

a) Obligation & Agreement b) Agreement & Contract

c) Obligation & Bond d) Promise & Bond

10) Obligations from agreements should be legal, and not, __________

obligations.a) Social b) Moral

c) Religious d) All

11) All contracts are agreements, but all agreements need not be contracts.

a) Trueb) False

12) Agreements that create __________ obligations are contracts.

a) Social b) Moral


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c) Legal d) Religious

13) Free consent is one that is free from all sorts of __________.

a) Agreements b) Promise

c) Pressure d) Consideration

14) Contractual capacity of a person means that he/she should be:

a) Major b) Of sound mind

c) Qualified under law of the land d) all

15) __________ is the price of a __________.

a) Consideration & Promiseb) Promise & Consideration

c) Agreement & Contract d) Contract & Agreement

16) Agreements in India may be __________ or __________.

a) Oral, Writtenb) Implicit, Explicit

c) Verbal, Gestural d) Oral, Verbal

17) An agreement not enforceable by law [u/s. 2(g)] is _________.

a) Valid contract b) Void contractc) Voidable contract d) Illegal contract

18) An agreement enforceable by law at the option of one or more of the parties

thereto but not at the option of the other

or others is __________.

a) Valid contract b) Void contract

c) Voidable contract d) Illegal contract

19) All illegal agreements are void but, all void agreements are not illegal.

a) Trueb) False

20) A contract becoming unenforceable due to some technical reason is

__________.

a) Valid contract b) Unenforceable contract

c) Voidable contract d) Illegal contract

21) Promisor is a person making the __________ and promise is the one, accepting

the __________.

a) Offer b) Proposal

c) Both d) None

22) An offer may be __________ or __________.

a) Verbal, Written b) General, Specificc) Explicit, Implicit d) Simple, Complex

23) The test of contractual intention is __________ and not __________.

a) Objective & Subjectiveb) Subjective & Objective

c) Supplementary & Complementary d) Complimentary & Supplimentary

24) An offer must be __________ and __________.

a) Ambiguous & Uncertain b) Definite & Certain


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c) Indefinite & Certain d) Indefinite & Uncertain

25) Are all terms of an offer be expressed?

a) Yes b) No

26) __________ is not an offer.

a) Statement of intention b) Invitation to offer

c) Both d) None

27) __________ is necessary to complete the operation of an offer.

a) Agreement b) Communication

c) Consideration d) Contract

28) __________ is a two-sided bargain based on the freedom of contract.

a) Proposal b) Agreement

c) Offer d) Consideration

29) Two __________ offers do not make a contract.

a) Different b) Identical

c) Conflicting d) Opposite30) A proposal, when accepted, becomes a __________.

a) Offer b) Acceptance

c) Promise d) None

31) __________ turns the offer into a __________ obligation.

a) Acceptance & Social b) Acceptance & Binding

c) Proposal & Legal d) Proposal & Legal

32) Should be from the person to whom it is made | Unconditional & absolute | To

be communicated | Should be

according to the prescribed form | Must be provoked by offer | Must be given

before the offer lapses or is revoked|

Should not be provisional |

Which of the above is true for acceptance?

a) First three b) First five

c) All d) None

33) A qualified or conditional acceptance is a __________.

a) Valid acceptance b) Invalid acceptance

c) Counter-offer d) Deviated acceptance

34) Acceptance is not a mental resolve, but some __________ manifestation.

a) Internal b) Externalc) Implied d) Explicit

35) If the offeree does not signify his assent to the offeror according to the mode

prescribed, it becomes __________.

a) Valid acceptance b) Invalid acceptance

c) Counter acceptance d) Deviated acceptance

36) __________ is not a binding agreement unless final approval is given.


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a) Provisional acceptanceb) Deviated acceptance

c) Counter acceptance d) Conditional acceptance

37) Under Indian Law, the communication of acceptance is complete as against the

acceptor only when it comes to the

Knowledge of the __________.

a) Acceptor b) Proposer

c) Promisee d) Offeree

38) An offer can be terminated by:

a) Lapse b) Rejection & destruction of the subject matter

c) Revocation d) All

39) A __________ has the same effect as rejection.

a) Counter offerb) Deviated acceptance

c) Conditional offer d) Provisional acceptance

40) The withdrawal of an offer by the offeror is called __________.

a) Revocationb) Rejectionc) Cancellation d) Lapse

41) A proposal may be revoked by the proposer before the __________ of its

acceptance is complete.

a) Offer b) Communication

c) Registration d) Promise

42) The majority age of a minor, whose guardian is appointed by a court is

__________.

a) 21 yearsb) 18 years

c) 15 years d) 23 years

43) As per the principles governing a minors contract:

a) Judges are counselors b) Jury are servants

c) Law is guardian d) All

44) A minors agreement is __________.

a) Invalid b) Valid

c) Void-ab-initio d) Unenforceable

45) A minor, in law, is incapable of giving __________.

a) Consentb) Approval

c) Acceptance d) Promise

46) A minor can be __________ under law.a) Payee b) Endorsee

c) Promisee d) All

47) __________ relates back to the date of making the contract.

a) Acceptance b) Promise

c) Ratification d) Consideration


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48) A contract which was __________ originally cannot be made valid by

subsequent __________.

a) Void, Amendment b) Void, Ratification

c) Invalid, Ratification d) Void-ab-initio, Ratification

49) In a free consent, there should be

a) Consensus ad idem b) Identity of minds

c) Both d) None

50) __________ is the committing or threatening to commit any act forbidden by

the Indian Penal Code (IPC).

a) Fraud b) Coercion

c) Undue influence d) Mistake

51) Threat to file a false suit is __________ under Indian Penal Code.

a) Fraud b) Coercion

c) Undue influence d) Mistake

52) Elements of undue influence include:a) Dominating the will of a person b) Obtaining unfair advantage over another

c) Both (a) and (b) d) None

53) Unlike __________, __________ must come from a party to the contract and

not a stranger to it.

a) Undue influence, Coercion b) Coercion, Undue influence

c) Fraud, Coercion d) Fraud, Mistake

54) Undue influence involves __________.

a) Physical force b) Moral force

c) Emotional force d) Social force

55) Coercion involves __________.

a) Physical forceb) Moral force

c) Emotional force d) Social force

56) In a suit, the party __________ the contract must prove the existence of undue

influence.

a) Making b) Accepting

c) Avoiding d) Offering

57) A contract made by a dominant party with a weaker party is called

__________.

a) Provisional contract b) Unconscionable contractc) Enforceable contract d) Invalid contract

58) Does undue influence involve any criminal liability?

a) Yes b) No

59) A fraud is a statement:

a) Made knowingly b) Without belief in its truth

c) Being recklessly careless d) All


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60) In a fraud, the representation made must be a __________.

a) Factb) Opinion

c) Intention d) All

61) __________ of material facts amounts to fraud.

a) Revealing b) Active concealment

c) Exposing d) None

62) A __________ is merely irrelevant if it has not induced the party to whom it

was made to act upon.

a) Coercion b) Fraud

c) False misrepresentation d) Undue influence

63) Silence is not fraud except under __________ circumstances.

a) Three b) Two

c) Four d) Five

64) Silence amounts to fraud when:

a) It is the duty to speak b) Silence is equivalent to speechc) Both (a) and (c) d) None

65) Statement of fact made by one party to another at the time of entering into

contract with an intention to induce the

other party to enter into the contract is called __________.

a) Proposal b) Representation

c) Offer d) Promise

66) A misrepresentation may be __________ or __________.

a) External, Internal b) Direct, Indirect

c)Innocent, Intentional

d) Explicit, Implicit

67) __________ misrepresentation is called __________.

a) External & Fraud b) Innocent & Mistake

c) Direct & Mistake d) Intentional & Fraud

68) Section 18 of the Indian Contract Act, 1872, deals with __________

misrepresentation.

a) External b) Innocent

c) Intentional d) Internal

69) Misrepresentation includes:

a) Positive assertion of a fact b) Breach of duty

c) Mistake about subject matter d) All70) A false statement need not be made direct to the plaintiff. True or False?

a) Trueb) False

71) If a misrepresentation has not been embodied in the contract, it creates no

contractual obligation unless it is ______.

a) False b) Fraudulent

c) True d) Binding


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72) When a party to the contract has a duty to disclose all material facts regarding

the subject matter of the contract, but

does not do so, he is said to be guilty of __________.

a) Fraud b) Mistake

c) Misrepresentation d) Undue influence

73) Usually, mistake refers to:

a) Misunderstanding b) Wrong thinking

c) Wrong belief d) All

74) Courts only recognize mistakes that __________ the contract.

a) Misrepresent b) Invalidate

c) Validate d) Stops

75) Mistake may be:

a) Mistake of fact b) Mistake of law


76) Bilateral mistake is one where there is no real correspondence of __________and __________.

a) Offer & Proposal b) Offer & Acceptance

c) Promise & Acceptance d) Promisor & Promisee

77) A mutual mistake as to the identity of the subject matter renders the contract

__________.

a) Voidb) Voidable

c) Null and void d) Unenforceable

78) A mistake as to the quality of the subject matter will not render the agreement

__________ owing to the principle of

__________, unless there is a misrepresentation or guarantee by the seller.

a) Void & Consensus ad idem b) Voidable & Equitable justice

c) Void & Caveat Emptor d) Void & Estoppel

79) Where the mistake is __________ and the parties enter into the contract with

false assumption and mistake

regarding the value of the subject matter, there cannot be an enforceable contract

between them.

a) Mutualb) Unilateral

b) Bilateral d) Intentional

80) Section 22 of the Indian Contract Act provides that a contract is not__________ because it was caused by

__________ mistake.

a) Void, Bilateral b) Voidable, Unilateral

c) Voidable, Bilateral d) Void, Unilateral

81) Mistake as to the law of the land does not render the contract __________.

a) Void b) Voidable


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a) Third party b) Stranger

c) Outsider d) Nonentity

94) When rights under a contract are assigned, the ________ can sue upon the

contract for the enforcement of his rights.

a) Assignor b) Proposor

c) Assignee d) Offeror

95) A contract entered into by the agent acting within the scope of his authority can

be enforced by __________.

a) Agent b) Suppliers

c) Principal d) Government

96) An illegal agreement is necessarily unlawful whereas, an unlawful agreement

need not be illegal. True or False?

a) Trueb) False

97) The word Law u/s 23 of the Indian Contract Act means enactment of the

__________.a) Legislature b) Subordinate legislation

c) Hindu & Mohammadan law d) All

98) A legal object aiming at circumventing the provisions of any law becomes

_________ u/s 23 of Indian Contract Act.

a) Voidb) Voidable

c) Unlawful d) Unenforceable

99) An agreement entered with a __________ purpose or to perpetuate fraud on

others is void.

a) Unlawful b) Immoral

c) Fraudulent d) Illegal

100) Agreements interfering marital relations are considered __________.

a) Illegal b) Immoral

c) Oppose to public policy d) None

101) __________ is an elastic term and its connotations may vary with the social

structure of the state.

a) Public policyb) Immoral

c) Illegal d) Unlawful

102) The term enemy u/s 23 of Indian Contract Act, 1872 includes residents

(permanent or temporary) in __________.a) Enemys country b) Enemy occupied territory


103) __________ refers to an agreement for sharing the benefit to be derived from

the lawsuit.

a) Maintenance b) Champerty

c) Concubine d) Stifle prosecution


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104) _________ refers to an agreement seeking to provide assistance financial or

otherwise to bring or defend a lawsuit.

a) Maintenanceb) Champerty

c) Concubine d) Stifle prosecution

105) An agreement which unduly restrains the __________ of an individual is

void.

a) Integrity b) Liberty

c) Honesty d) Independence

106) Agreements in restraint of trade, marriage, tending to create an interest

against duty, interfering with parental duties,

restraining personal liberty are examples of __________.

a) Oppose to public policyb) Illegal

c) Immoral d) None

107) When the rights and obligations arising out of contract are extinguished, the

contract is said to be __________.a) Discharged b) Termimated

c) Both (a) and (b) d) Cancelled

108) Contract may be discharged in __________ ways.

a) Five b) Six

c) Seven d) Ten

109) When a contract is duly performed by both the parties, it is discharged

by__________.

a) Performanceb) Mutual consent

c) Lapse of time d) Operation of law

110) Discharge of a contract by performance may be by __________.

a) Actual performance b) Attempted performance

c) Tender d) All

111) A performance becomes attempted performance because of the non-

acceptance of the performance by _________.

a) Promiseeb) Promisor


112) Is a conditional tender a valid tender?

a) Yes b) No

113) Is a tender made to a stranger valid?a) Yes b) No

114) Tender by __________ is invalid as it is not a __________ tender.

a) Cash, Legal b) Cash, Valid

c) Cheque, Legal d) Cheque, Valid

115) When a new contract is substituted for an existing contract between the same

or different parties, the consideration


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Mutually being the discharge of the old contract __________ occurs.

a) Alteration b) Novation

c) Rescission d) Remission

116) __________ means change in one or more of the material terms of a contract.

a) Alterationb) Novation


117) A contract discharged by an agreement between the parties, before the date of

performance, so as to make the

contract non-binding is called __________ of the contract.

a) Recission b) Cancellation

c) Both (a) and (b) d) Termination

118) Non-performance of a contract by both the parties for a long period without

complaint amounts to __________.

a) Remission b) Implied recission

c) Recission d) Waiver119) Acceptance of a lesser sum than what was contracted for or a lesser

fulfillment of the promise made is __________.

a) Alteration b) Novation


120) __________ is the deliberate abandonment or giving up of a right which a

party is entitled to under a contract.

a) Remission b) Novation

c) Recission d) Waiver

121) According to section 56 of the Indian Contract Act, 1872, an agreement to do

an act __________ is itself void.

a) Illegal b) Immoral

c) Impossible d) Oppose to public policy

122) In __________, the dissolution of the contract occurs automatically, not

depending on the choice of the parties.

a) Doctrine of supervening impossibility/illegalityb) Doctrine of frustration

c) Both (a) and (b) d) All

123) Destruction of the subject matter, failure of the ultimate purpose, death or

personal incapacity of promisor, change

of law are instances where the contract is discharged on the ground of__________.

a) Operation of law b) Doctrine of supervening impossibility

c) Mutual consent d) Lapse of time

124) __________ of a contract cannot be discharged on the ground of supervening

impossibility.

a) Commercial impossibility b) Difficulty of performance


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c) Failure of one of the objects d) All

125) Doctrine of supervening impossibility applies when the impossible act is

__________.

a) Beyond the control of promisor b) Not due to the negligence of the promisor

c) Not self-induced by the promisor d) All

126) The specified period within which legal action should be taken by the

aggrieved party for breach of contract is

__________.

a) Period of limitationb) Period of payment

c) Period of action d) Period of suit

127) Death of the promisor, insolvency of one of the parties, merger of an inferior

right contract with a superior right

contract, unauthorized material alteration renders a contract discharge by

__________.

a) Mutual consent b) Lapse of timec) Operation of law d) Breach of contract

128) Where the contract is of a personal nature, death of the __________

discharges the contract.

a) Promisee b) Promisor


129) Breach of contract may be:

a) Anticipatory breach b) Actual breach

c) Both (a) and (b) d) Attempted breach

130) Anticipatory breach of contract occurs __________ the time for fixed

performance.

a) After b) Before

c) On d) All

131) Actual breach of contract occurs __________ the time for fixed performance.

a) After b) Before

c) On d) All

132) The fundamental principle underlying damages is not __________ but

__________.

a) Compensation, Punishment b) Punishment, Compensation

c) Punishment, Demurrage d) Compensation, Penalty133) Damages in a contract are of __________ types.

a) Three b) Five

c) Four d) Six

134) Damage arising naturally from the breach is called __________.

a) Ordinary damage b) General damage

c) Compensatory damage d) All


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135) Ordinary damages are restricted to the __________ consequences of the

breach of contract.

a) Direct b) Proximate

c) Both (a) and (b) d) Remote

136) __________ loses which are not naturally and probable consequence of the

breach of contract are not regarded as

ordinary damages.

a) Remote b) Indirect

c) Both (a) and (b) d) Proximate

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