Elements of Contract Exercise Solutions | KalviGavani

Elements of Contract: Exercise Solutions

How to Use This Page

Read the Samacheer Kalvi textbook chapter first. Then use this page to revise: attempt the textbook questions on your own, then compare with the model answers below. Pay special attention to the Common Mistakes section and the Exam Checklist before your test.

Key Concepts (Quick Recap)

I. Choose the Correct Answer (MCQ)

Q1. An agreement enforceable by law is a

(a) Enforceable acceptance   (b) Accepted offer   (c) Approved promise   (d) Contract ✓

Q2. Every promise and every set of promises, forming the consideration for each other, is an

(a) Agreement ✓   (b) Contract   (c) Offer   (d) Acceptance

Q3. Void agreement signifies

(a) Agreement illegal in nature   (b) Agreement not enforceable by law ✓   (c) Agreement violating legal procedure   (d) Agreement against public policy

Q4. Acceptance to be valid must

(a) Be absolute   (b) Be unqualified   (c) Both be absolute & unqualified ✓   (d) Be conditional

Q5. A contract with or by a minor is a

(a) Valid contract   (b) Void contract   (c) Voidable contract   (d) Voidable at the option of either party ✓

Q6. Contracts classified on the basis of performance are

(a) executed contracts   (b) executory contracts   (c) partly executed or partly executory contracts   (d) all of the above ✓

Q7. A contract in which, under the terms of a contract, nothing remains to be done by either party is known as

(a) executed contract ✓   (b) executory contract   (c) unilateral contract   (d) none of the above

Q8. All illegal agreements are void, but all void agreements are not illegal.

(a) True ✓   (b) Partly true   (c) False   (d) None of the above

Q9. A appoints B as his agent, by way of a power of attorney. This is an example of

(a) express contract ✓   (b) implied contract   (c) tacit contract   (d) unlawful contract

Q10. A contract creates

(a) rights in person ✓   (b) rights in parties   (c) no obligations   (d) only obligations and no rights

Q11. The Contract Act came into force

(a) from 1 September 1972   (b) before 1 September 1882   (c) from 1 September 1872 ✓   (d) after 1 September 1872

II. Fill in the Blanks

1. The Indian Contract Act came into force on 1st September 1872. 2. Per Section 2(h), "An agreement enforceable by law is a contract." 3. Acceptance must be both absolute and unqualified to be valid. 4. A contract with a minor is void ab initio (void from the beginning). 5. Consideration means "something in return" (quid pro quo). 6. A quasi contract is an obligation imposed by law for the sake of justice and fair play. 7. Every contract is an agreement, but every agreement is not a contract. 8. A voidable contract is enforceable at the option of one or more parties but not at the option of others. 9. The two parts of the Indian Contract Act are General Contract and Special Contract. 10. A contract creates rights in person (rights against a specific person). 11. A contract with a minor is void ab initio (void from the beginning). 12. Revocation means withdrawal of an offer before acceptance is complete. 13. An agreement without consideration is generally void. 14. Quasi contract is an obligation imposed by law, not based on agreement. 15. The Indian Contract Act has two parts: General Contract and Special Contract.

III. True or False (with corrections)

1. All void agreements are illegal. False. All illegal agreements are void, but not all void agreements are illegal. A wagering agreement is void but not illegal.

2. A minor can enter into a valid contract. False. A contract with a minor is void ab initio (void from the very beginning). A minor lacks the capacity to give valid consent.

3. Consideration means "something in return." True. Consideration means quid pro quo — something in return for the promise.

4. A quasi contract is a real contract based on agreement. False. A quasi contract is NOT a real contract. It is an obligation imposed by law for the sake of justice and fair play, regardless of the parties' intention.

5. A tacit contract is based on written words. False. A tacit contract must be inferred from the conduct of the parties, not from written or express words.

6. Acceptance can be conditional. False. Acceptance must be both absolute and unqualified. Conditional or qualified acceptance amounts to a counter-offer, not valid acceptance.

IV. Match the Following

V. Answer Briefly

Q1. What is law?

Law means a "set of rules" which governs our behaviour and relating in a civilized society. It regulates the conduct of persons and imposes obligations on them to act within the framework of rules.

Q2. Why should one know the law?

One should know the law to which they are subjected because ignorance of law is no excuse. Every person is presumed to know the law of the land, and ignorance cannot be pleaded as a defence for breaking the law.

Q3. Can a minor enter into a Contract?

Under the Indian Contract Act 1872, a contract entered by or with a minor is void as well as void ab initio, meaning it has no legal effect from the very beginning. A minor lacks the capacity to give valid consent, and therefore cannot enter into a binding contract.

Q4. Who can enter into a Contract?

Every person is competent to contract provided they:

1. Are of the age of majority 2. Are of sound mind 3. Are not disqualified from contracting by any law

Alien enemies, foreign sovereigns, accredited representatives of foreign states, insolvents, and convicts are not competent to contract.

Q5. Define Contract.

Per Section 2(h) of the Indian Contract Act, 1872: "An agreement enforceable by Law is a Contract." A contract requires offer, acceptance, consideration, free consent, capacity of parties, lawful object, and certainty of terms.

Q6. What is meant by Tacit Contract?

A contract is said to be tacit when it must be inferred from the conduct of the parties rather than from their express words. Examples: obtaining cash through an ATM, and sale by fall of the hammer at an auction.

Q7. What are the two parts of the Indian Contract Act?

1. General Contract — covers general principles of contract law 2. Special Contract — covers specific types such as indemnity, guarantee, bailment, pledge, and agency

Q8. What do you mean by Acceptance?

Per Section 2(b), when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise.

VI. Answer in Detail

Q1. Explain the essentials of a Valid Contract.

For an agreement to become a valid contract, the following 10 essentials must be present:

1. Offer and Acceptance: There must be a lawful offer by one party and its lawful acceptance by the other. The offer must be communicated, and acceptance must be absolute and unqualified.

2. Legal Relationship: The parties must intend to create a legal relationship. Social or domestic agreements lacking this intention are not contracts.

3. Lawful Consideration: Every agreement must be supported by consideration — something in return. Consideration must be lawful, real, and not illusory.

4. Lawful Object: The object of the agreement must be lawful. It must not be forbidden by law, fraudulent, or opposed to public policy.

5. Free Consent: Consent must be free — not obtained through coercion, undue influence, fraud, misrepresentation, or mistake.

6. Capacity of Parties: The parties must be competent to contract — they must be of the age of majority, of sound mind, and not disqualified by any law.

7. Certainty of Terms: The terms of the agreement must be certain and not vague. If the meaning is uncertain, the agreement cannot be enforced.

8. Possibility of Performance: The agreement must be capable of being performed. An agreement to do an impossible act is void.

9. Not declared Void: The agreement must not be one that has been expressly declared void by the Act (e.g., agreements in restraint of trade, wagering agreements).

10. Necessary Legal Formalities: Where the law requires a particular form (e.g., written, registered), those formalities must be complied with.

Q2. Difference between Contract and Agreement

Q3. Explain the classification of Contract on the basis of Validity.

1. Valid Contract: An agreement that satisfies all the essential elements of a valid contract — offer, acceptance, consideration, free consent, capacity, lawful object, certainty, and possibility of performance.

2. Void Contract: Per Section 2(j), a contract that ceases to be enforceable by law. A void contract is one that was valid when made but becomes void due to impossibility of performance, change of circumstances, or subsequent illegality.

3. Voidable Contract: Per Section 2(i), an agreement enforceable by law at the option of one or more parties but not at the option of the others. The aggrieved party can choose to rescind or affirm the contract. Examples include contracts formed through coercion, undue influence, fraud, or misrepresentation.

4. Illegal Contract: A contract whose object or consideration is forbidden by law. All illegal agreements are void, but not all void agreements are illegal. An illegal contract has wider consequences — even collateral transactions become tainted.

5. Unenforceable Contract: A contract that cannot be enforced in a court of law due to some technical defect, such as lack of writing, registration, or stamp duty — even though it may otherwise be valid.

Q4. Explain the classification of Contract on the basis of Formation.

1. Express Contract: A contract whose terms are expressly stated in words — either spoken or written. Example: A appoints B as his agent by way of a power of attorney.

2. Implied Contract: A contract inferred from the acts or conduct of the parties rather than from their explicit words. Example: Obtaining cash through an ATM, or a person boarding a bus and paying the fare.

3. Quasi Contract: Not a true contract in the sense of an agreement, but an obligation imposed by law on a person for the sake of justice and fair play — regardless of the parties' intention. Examples: supply of necessaries to an incompetent person, payment by an interested person, obligation to pay for non-gratuitous acts.

4. Tacit Contract: A contract that must be inferred from the conduct of the parties. It is similar to an implied contract but specifically refers to situations where consent is given through actions rather than words. Examples: sale by fall of the hammer at an auction, obtaining cash through an ATM.

Q5. Explain the classification of Contract on the basis of Performance.

1. Executed Contract: A contract in which both parties have performed their respective obligations. Nothing remains to be done by either party. Example: A buys a book from a shop and pays the price immediately.

2. Executory Contract: A contract in which something remains to be done by one or both parties. The obligations are yet to be performed. Example: A agrees to deliver goods to B next month, and B agrees to pay on delivery.

3. Unilateral Contract: A contract in which only one party has to perform his obligation while the other party has already performed his part. Example: A offers a reward for finding his lost dog — the offeror is bound, but the offeree is not obligated to search.

4. Bilateral Contract: A contract in which both parties exchange promises and are yet to perform their respective obligations. Both parties have outstanding commitments. Example: R offers to sell his car to S for Rs. 10,00,000 and S accepts — both have promises to perform.

Additional: Write a note on the Indian Contract Act.

The Indian Contract Act occupies the most important place in Commercial Law. It came into force on 1st September 1872 and applies to the whole of India except Jammu and Kashmir. The Act contains two parts: (1) General Contract — covering fundamental principles such as offer, acceptance, consideration, and voidable agreements, and (2) Special Contract — covering specific types such as indemnity, guarantee, bailment, pledge, and agency. The Act provides the legal framework for all business and commercial transactions in India.

Common Mistakes to Avoid

1. All illegal agreements are void, but NOT all void agreements are illegal — A wagering agreement is void but not illegal; an agreement to commit a crime is both void and illegal. 2. A contract with a minor is void ab initio (from the beginning), NOT voidable — The minor can neither be bound nor can the other party enforce it. 3. Consideration = "something in return" (quid pro quo) — A contract without consideration is invalid (except in exceptions like gifts under seal). 4. Quasi contract is NOT a real contract — It is an obligation imposed by law for the sake of justice and fair play, not based on agreement. 5. Tacit contract is inferred from conduct, NOT from written words — It is similar to implied contract but specifically inferred from the parties' actions. 6. Acceptance must be both absolute AND unqualified — Conditional or qualified acceptance amounts to a counter-offer, not valid acceptance. 7. An executed contract means both parties have performed — Nothing remains to be done. Do not confuse with executory contract where obligations are yet to be performed. 8. The Indian Contract Act applies to the whole of India except Jammu and Kashmir — This is a frequently tested fact. 9. Agreement = Offer + Acceptance; Contract = Agreement + Enforceability — Every contract is an agreement, but not every agreement is a contract.

Exam Checklist

• [ ] Can define contract per Section 2(h) and list 10 essentials
• [ ] Can distinguish contract vs agreement (5 differences)
• [ ] Can classify contracts by validity (valid, void, voidable, illegal, unenforceable)
• [ ] Can classify contracts by formation (express, implied, quasi, tacit)
• [ ] Can classify contracts by performance (executed, executory, unilateral, bilateral)
• [ ] Know that Indian Contract Act came into force on 1st September 1872
• [ ] Can explain consideration per Section 2(d)
• [ ] Can explain voidable contract per Section 2(i)