Law Relating To Contracts MCQ Quiz - Objective Question with Answer for Law Relating To Contracts - Download Free PDF

The correct answer is B and D only.

Key Points

• In commercial law, the ability to enter into a contract is known as contractual capacity. The capacity to contract is precisely defined in Section 11 of the Indian Contract Act of 1872.
• It determines if a specific person is qualified or eligible to get into the contract based on three main criteria.
• First, the people doing the engagement must be mentally sound, then they must be over the age of 18, and last, they must adhere to the legislation of contracts.

Important PointsA person lacks contractual capacity, if

1. Lacking mental ability by being a Minor, there are some exceptions to this, such as contracts for entering into education, or contracts for necessities that are deemed as having fair terms.    
2. Lacking Mental Capacity: This means that if someone is deemed to be mentally incompetent, certain mental disorders or psychological conditions frequently allow them to nullify contracts (or allow their guardian to do so).
3. Being Intoxicated: The ability to void a contract due to intoxication is also possible, but this is the exception rather than the rule.

   The court will consider the extent of the drunkenness and the counterparty's awareness of it when determining whether it can undermine contractual competence.

4. Lacking Signatory Authority : It is possible that a large contract would be challenging to enforce if someone without signatory authority signs it on their company's behalf and lacks contractual ability. It would be wise to mail the contract again in this situation and make sure the proper signatory is requested.

5. Convict Serving Sentence: A person who is guilty and is serving imprisonment does not have the capacity to enter into a contract. He also cannot sue on the contracts that were before his conviction. After the expiry of his sentence, he is at liberty to suit.

The correct answer is C and E only.

Key PointsAnother method of mutually agreeable contract termination is rescinding the agreement. A contract can be rescinded to end the agreement. Which plainly implies that the original contract need not be fulfilled when the parties agree to cancel.

Important PointsContract is said to be discharged by recession in following cases:

1. Lack of Capacity: A person who may have lacked the necessary mental or physical capacity, or who is a minor or has other capacity concerns, to enter into a contract. Absence of capacity is cause for cancellation.
2. Fraud: In an effort to get the other party to sign a contract, one party committed fraud and produced false statements.
3. Duress: A party was forced against their will to engage into a contract (duress, coercion, undue influence).
4. Mistake of Fact: A factual error occurs when one party did not understand the contract's provisions and would not have signed them differently.
5. Anticipatory Repudiation: On the grounds of anticipatory repudiation, a party may withdraw a contract if the other party is defaulting on its commitments. This indicates that the non-rescinding party no longer fulfils its own responsibilities and that the rescinding party is seen to have failed in its obligations.
6. Lack of Consideration: The contract may be cancelled if the consideration is deemed legally insufficient or fails because it did not follow the standards for contract formation.
7. Public Policy: Because it directly conflicts with the interests of the public, a contract that violates public policy may be dissolved.

The correct answer is C and E only.

Key PointsAnother method of mutually agreeable contract termination is rescinding the agreement. A contract can be rescinded to end the agreement. Which plainly implies that the original contract need not be fulfilled when the parties agree to cancel.

Important PointsContract is said to be discharged by recession in following cases:

1. Lack of Capacity: A person who may have lacked the necessary mental or physical capacity, or who is a minor or has other capacity concerns, to enter into a contract. Absence of capacity is cause for cancellation.
2. Fraud: In an effort to get the other party to sign a contract, one party committed fraud and produced false statements.
3. Duress: A party was forced against their will to engage into a contract (duress, coercion, undue influence).
4. Mistake of Fact: A factual error occurs when one party did not understand the contract's provisions and would not have signed them differently.
5. Anticipatory Repudiation: On the grounds of anticipatory repudiation, a party may withdraw a contract if the other party is defaulting on its commitments. This indicates that the non-rescinding party no longer fulfils its own responsibilities and that the rescinding party is seen to have failed in its obligations.
6. Lack of Consideration: The contract may be cancelled if the consideration is deemed legally insufficient or fails because it did not follow the standards for contract formation.
7. Public Policy: Because it directly conflicts with the interests of the public, a contract that violates public policy may be dissolved.

The correct answer is B and D only.

Key Points

• In commercial law, the ability to enter into a contract is known as contractual capacity. The capacity to contract is precisely defined in Section 11 of the Indian Contract Act of 1872.
• It determines if a specific person is qualified or eligible to get into the contract based on three main criteria.
• First, the people doing the engagement must be mentally sound, then they must be over the age of 18, and last, they must adhere to the legislation of contracts.

Important PointsA person lacks contractual capacity, if

1. Lacking mental ability by being a Minor, there are some exceptions to this, such as contracts for entering into education, or contracts for necessities that are deemed as having fair terms.    
2. Lacking Mental Capacity: This means that if someone is deemed to be mentally incompetent, certain mental disorders or psychological conditions frequently allow them to nullify contracts (or allow their guardian to do so).
3. Being Intoxicated: The ability to void a contract due to intoxication is also possible, but this is the exception rather than the rule.

   The court will consider the extent of the drunkenness and the counterparty's awareness of it when determining whether it can undermine contractual competence.

4. Lacking Signatory Authority : It is possible that a large contract would be challenging to enforce if someone without signatory authority signs it on their company's behalf and lacks contractual ability. It would be wise to mail the contract again in this situation and make sure the proper signatory is requested.

5. Convict Serving Sentence: A person who is guilty and is serving imprisonment does not have the capacity to enter into a contract. He also cannot sue on the contracts that were before his conviction. After the expiry of his sentence, he is at liberty to suit.

The correct answer is C and E only.

Key PointsAnother method of mutually agreeable contract termination is rescinding the agreement. A contract can be rescinded to end the agreement. Which plainly implies that the original contract need not be fulfilled when the parties agree to cancel.

Important PointsContract is said to be discharged by recession in following cases:

1. Lack of Capacity: A person who may have lacked the necessary mental or physical capacity, or who is a minor or has other capacity concerns, to enter into a contract. Absence of capacity is cause for cancellation.
2. Fraud: In an effort to get the other party to sign a contract, one party committed fraud and produced false statements.
3. Duress: A party was forced against their will to engage into a contract (duress, coercion, undue influence).
4. Mistake of Fact: A factual error occurs when one party did not understand the contract's provisions and would not have signed them differently.
5. Anticipatory Repudiation: On the grounds of anticipatory repudiation, a party may withdraw a contract if the other party is defaulting on its commitments. This indicates that the non-rescinding party no longer fulfils its own responsibilities and that the rescinding party is seen to have failed in its obligations.
6. Lack of Consideration: The contract may be cancelled if the consideration is deemed legally insufficient or fails because it did not follow the standards for contract formation.
7. Public Policy: Because it directly conflicts with the interests of the public, a contract that violates public policy may be dissolved.

The correct answer is B and D only.

Key Points

• In commercial law, the ability to enter into a contract is known as contractual capacity. The capacity to contract is precisely defined in Section 11 of the Indian Contract Act of 1872.
• It determines if a specific person is qualified or eligible to get into the contract based on three main criteria.
• First, the people doing the engagement must be mentally sound, then they must be over the age of 18, and last, they must adhere to the legislation of contracts.

Important PointsA person lacks contractual capacity, if

1. Lacking mental ability by being a Minor, there are some exceptions to this, such as contracts for entering into education, or contracts for necessities that are deemed as having fair terms.    
2. Lacking Mental Capacity: This means that if someone is deemed to be mentally incompetent, certain mental disorders or psychological conditions frequently allow them to nullify contracts (or allow their guardian to do so).
3. Being Intoxicated: The ability to void a contract due to intoxication is also possible, but this is the exception rather than the rule.

   The court will consider the extent of the drunkenness and the counterparty's awareness of it when determining whether it can undermine contractual competence.

4. Lacking Signatory Authority : It is possible that a large contract would be challenging to enforce if someone without signatory authority signs it on their company's behalf and lacks contractual ability. It would be wise to mail the contract again in this situation and make sure the proper signatory is requested.

5. Convict Serving Sentence: A person who is guilty and is serving imprisonment does not have the capacity to enter into a contract. He also cannot sue on the contracts that were before his conviction. After the expiry of his sentence, he is at liberty to suit.