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Contract Law

Description: Practice Questions for improve your Law Knowledge.
Number of Questions: 25
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Tags: All Laws Contract Law
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Under what the surety will not be discharged from liability?

  1. On the death of surety

  2. By variance in the terms of contract

  3. By release or discharge of principal debtor

  4. None of these

Show answer
Correct Option: D
Explanation:

Because all the above mentioned statements are correct according to Contract Act,1872.

What is the effect of fraud in a contract?

  1. Sometimes the contract is valid.

  2. Contract is void.

  3. It is voidable.

  4. It is legal.

Show answer
Correct Option: C
Explanation:

Contract made under fraud is voidable at the option of that party whose consent is taken under fraud.

Which of the following statements is correct?

  1. Insurance contract is an indemnity contract.

  2. Insurance contract is a contingent contract.

  3. Insurance contract is a contract of guarantee.

  4. Insurance contract is a wagering contract.

Show answer
Correct Option: B
Explanation:

According to contract law, insurance contract is contingent contract which depends upon happening or non-happening of the event.

Which section of the Contract Act defines contract of guarantee?

  1. Section - 124

  2. Section - 125

  3. Section - 126

  4. Section - 128

Show answer
Correct Option: C
Explanation:

Contract of guarantee is provided by Sec- 126 of the Contract Act, 1872.

What is the objective of contract of guarantee?

  1. To provide additional security to the principal debtor

  2. To provide additional security to the creditor

  3. To provide additional security to the surety

  4. To provide additional security both to the principal debtor and creditor

Show answer
Correct Option: B
Explanation:

Objective of contract of guarantee is to provide additional security to the creditor.

Which of the following is not the right of indemnity holder?

  1. He can take action against promisor for recovering damages.

  2. He can take action for recovering costs.

  3. He has the right to be indemnified.

  4. None of these.

Show answer
Correct Option: D
Explanation:

Because all the above said  statements are correct.

What is the effect of consent obtained by concealment in contract of guarantee?

  1. Contract is valid

  2. Contract is voidable

  3. Contract is invalid

  4. None of these

Show answer
Correct Option: C
Explanation:

According to Sec- 143 of the Contract Act, guarantee obtained by concealment is invalid.

How many parties are required in contract of guarantee?

  1. Two parties

  2. Three parties

  3. One party

  4. None of these

Show answer
Correct Option: B
Explanation:

Contract of guarantee requires three parties-- 1. Principal debtor,  2. Creditor and  3. Surity.

Which of the following statements is incorrect?

  1. Guarantee obtained by misrepresentation is invalid.

  2. Guarantee obtained by concealment is invalid.

  3. Every contract requires free consent.

  4. Guarantee obtained by concealment is sometimes valid.

Show answer
Correct Option: D
Explanation:

It is not correct statement because Section 143 says consent obtained by concealment is not free consent and contract is not valid.

Which of the following is a correct statement?

  1. Contract of guarantee is always in written.

  2. Benefit to the principal debtor is sufficient consideration.

  3. There is no need of principal debt.

  4. Contract of guarantee is always in oral form.

Show answer
Correct Option: B
Explanation:

It is right statement according to the Contract Law.

In contract of indemnity one party promises to serve the other from loss which may be caused

  1. by the conduct of promisor himself

  2. by the conduct of any other person

  3. Both 1 and 2

  4. Neither 1 nor 2

Show answer
Correct Option: C
Explanation:

It is right because both 1 and 2 are correct options.

Which of the following statements is incorrect?

  1. There are two parties in the contract of indemnity.

  2. Object of contract of guarantee is the security of creditor.

  3. Contract of guarantee consists of three contracts.

  4. Indemnity contract consists of two contracts.

Show answer
Correct Option: D
Explanation:

Right- Because indemnity contract always consists one contract only that is indemnifier with indemnity holder. So it is incorrect statement.

What type of liability is possessed by surety?

  1. Same as that of principal debtor

  2. Not same as that of principal debtor

  3. Same as that of creditor

  4. None of these

Show answer
Correct Option: A
Explanation:

According to Sec-128 of the Contract Act, 1872 surety's liability is co-extensive with that of principal debtor.

What is the effect of surety's death?

  1. Discharge of surety from liability

  2. Discharge of principal debtor from liability

  3. Rights of creditor comes to an end

  4. None of these

Show answer
Correct Option: A
Explanation:

When surety dies then his liability comes to an end.

Which form is required by the contract of guarantee?

  1. Oral

  2. Written

  3. Both oral and written

  4. None of these

Show answer
Correct Option: C
Explanation:

Contract of guarantee may be made in both oral or in written form.

Which of the following statements is incorrect?

  1. Liability of surety and principal debtor is joint and several.

  2. Sometimes surety is liable not to the full extent as that of principal debtor.

  3. In contract of guarantee there can also be a surety.

  4. None of these

Show answer
Correct Option: D
Explanation:

Because all the above said statements are correct according to the Contract Act, 1872.

What type of liability is possessed by indemnifier?

  1. Secondary

  2. Primary

  3. Neither primary nor secondary

  4. None of these

Show answer
Correct Option: B
Explanation:

His liability is primary one because he has to be liable when the contemplated situation is there.

What is subrogation?

  1. Creditor's right

  2. Principal debtor's right

  3. Surety's right

  4. Third party's right

Show answer
Correct Option: C
Explanation:

It is right of the surety. When he makes payment to the creditor on behalf of principal debtor then he becomes invested with all the rights which the creditor had against the principal debtor.

What type of loss is covered by contract of indemnity?

  1. Loss caused by human agency

  2. Loss caused by natural agency

  3. Loss caused by accidents

  4. None of these

Show answer
Correct Option: A
Explanation:

According to Sec- 124 of the Contract Act, 1872 indemnity contract covers the loss caused by human agency.

Which of the following is not the right of surety?

  1. Right to subrogation

  2. Right to contribution with co- sureties

  3. Right to indemnity against the principal debtor

  4. Right to sue the creditor

Show answer
Correct Option: D
Explanation:

It is not the right of surety

When does a contract become irrevocable?

  1. When an offer has been made.

  2. When acceptance has been made.

  3. When there is a time limit for acceptance.

  4. None of these

Show answer
Correct Option: B
Explanation:

Once an acceptance is made offer can't be revoked and a contract becomes irrevocable.

Which of the following statements is correct?

  1. A minor can not take benefits of a partnership firm.

  2. A minor can become a partner of a partnership firm.

  3. A minor can take benefits of a partnership firm.

  4. None of these

Show answer
Correct Option: C
Explanation:

According to the Contract Act 1872 with the consent of all partners a minor can take benefits of partnership firm

What is provided by Section 124 of Contract Act,1872?

  1. Contract of guarantee

  2. Rights of indemnity holder

  3. Liability of surety

  4. Contract of indemnity

Show answer
Correct Option: D
Explanation:

Sec-124 says about contract of indemnity.

Which of the following statements is incorrect?

  1. Acceptance should be communicated.

  2. Acceptance should be expressed in usual and reasonable manner.

  3. Acceptance should be made while the offer is still subsisting.

  4. None of these

Show answer
Correct Option: D
Explanation:

It is right because all above mentioned statements are correct.

Which of the following is the legal consideration according to the Contract Act, 1872?

  1. Moral consideration

  2. Forbidden by law

  3. Fraudulante purpose

  4. None of these

Show answer
Correct Option: A
Explanation:

Yes every consideration should be moral according to the Contract Law.

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