BULLET
Legal Aptitude
Contract – 2
Number of questions: 10
1. Principle: A contingent contract is a contract
to do or not to do something, if an event
collateral to the contract, does or does not
happen.
Explanation: In case of a contingent contract
both parties must have real interest in the
occurrence or non-occurrence of the event.
Further the event must be collateral to
contract and not the sole determining factor
of the contract. In other words, in a contingent
contract the contract has already come into
existence between the parties but its
performance depends on happening or non-
happening of the future event.
Facts: C, a tennis player enters into a contract
before a tournament to wear the logo of GS
Company on his shirt, for the duration of the
tournament. C was to receive a sum of Rs.
10 lacs for the contract. The contract further
stated that in case C wins the tournament,
the company will pay him another 2 lac
rupees. Decide whether the contract is a
contingent contract?
(a) The contract is a contingent contract as
the company paying Rs. 2 lacs depends
on C winning the tournament.
(b) The contract is not a contingent
agreement as the parties have no real
interest in the happening or non-happening
of the events.
(c) The contract is a contingent contract as
there is a real interest of parties in the
happening of the event.
(d) Both (a) and (c)
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2. Principle: A wagering agreement can be
defined as an agreement, one by which two
persons, professing to hold opposite views
touching the issue of a future uncertain event,
mutually agree that dependent upon the
determination of that event, one shall win from
other and that the other shall pay to him, a
sum of money, neither of the contracting
parties having any other interest in the contract
other than the sum at stake, there being no
other real consideration for making the
contract. A mutual chance of loss and gain is
essential for a wagering agreement.
Facts: India and Pakistan qualify to play the
final of Cricket World Cup. X declares that he
would pay each player a sum of Rs. 10 lacs if
India wins the match. India won the match
and certain players demanded the
performance of the promise made by X. X tried
to rescind his offer on the ground that his
declaration was based on a future uncertain
event, thus it was wagering agreement.
Decide.
(a) The agreement was a wagering agreement
as it was based on a future uncertain
event.
(b) The agreement was a wagering agreement
as there was no real consideration
forwarded for the agreement.
(c) The agreement was a wagering agreement
as the parties had no real interest in the
uncertain event.
(d) None of the above.
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3. Principle 1: A wagering agreement can be
defined as an agreement one by which two
persons, professing to hold opposite views
touching the issue of a future uncertain event,
mutually agree that dependent upon the
determination of that event, one shall win from
other and that the other shall pay to him, a
sum of money, neither of the contracting
parties having any other interest in the contract
other than the sum at stake, there being no
other real consideration for making the
contract. A wagering contract is void.
Principle 2: A contingent contract is a
contract to do or not to do something, if an
event collateral to the contract, does or does
not happen.
Facts: A and B enter into an agreement
whereby A promises to pay B, a sum of Rs.
100,000/- if B's car meets an accident. The
car actually meets with an accident and B
demands payment of money from A. A,
refuses performance on the ground that the
agreement was a wagering agreement,
whereas B demands performance on the
ground that it was a contingent contract. B
files a suit against A. If you were asked to
decide the issue as a judge, you would:
(a) Declare that the agreement is a wagering
agreement, thus void and refuse to enforce
the agreement.
(b) Declare that the agreement is neither a
wagering agreement nor a contingent
contract.
(c) Declare that the agreement is a
contingent contract and enforce the same.
(d) None of the above.
4. Principle: An agent is a person employed to
do any act for another, or to represent another
in dealing with third persons. The person for
whom such act is done, or who is
represented, is called the principal.
Explanation: The real test of agency is that
whether the person appointed to act for
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principal has an express or implied authority
to represent the principal in dealing with third
person making the principal legally
answerable.
Facts: A moves to new city X. Before moving,
he asks his friend B to appoint a servant for
him to do his daily chores. B appoints C as
A's help. After A moves to the city, C joins
him at his home and starts working for him.
C during the course of his employment buys
household items from D, the local grocer,
without paying, on the promise that A shall
pay for the items. A knows of the arrangement.
One day D asks A for payment of the items
bought by C, A refuses saying that C had no
express authority to act on his behalf. Decide
whether C is an agent of A?
(a) C is an agent of A as he had implied
authority to act on his behalf. C was aware
of the arrangement and never objected to
the same.
(b) C is not an agent of A as C was not
employed by A but by B. Since he was
not appointed by A, he cannot act as his
agent.
(c) C is not an agent of A, as A never expressly
authorized C to transact on his behalf
thereby binding him contractually.
(d) C is an agent of A for all his acts as he
was appointed by B, at the request by A.
5. Principle: A case of agency of necessity
arises where after the parties have created a
contractual relationship. In case of some
emergency, the law confers upon one party
authority to act for another or allows the agent
to exceed the authority, which has been
conferred upon him, in the interest of the other
party.
Facts: A and B entered into a contractual
relationship where A agreed to transport B's
products. B owned a unit producing woolen
garments. A shipment of products was
consigned to A by B to be delivered to
Srinagar from Jammu. Enroute, due to heavy
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 unseasonal snowfall, the national highway
was declared closed for traffic for a week. A's
truck carrying the consignment was stranded
midway along with other trucks and
passenger vehicles. Due to the unseasonal
snowfall, many passengers were found
themselves ill equipped to deal with the
plummeting temperatures. They asked A to
sell the woolen clothes. A agreed to the
suggestion and sold the consignment. After
returning to Jammu he deposited the sale
amount to B, which was higher than what B
would have fetched in Srinagar. B alleged that
A has transcended his authority and
threatened to sue him. A took the plea of
necessity. Decide.
(a) An agency of necessity was created as a
situation of emergency arose.
(b) No agency of necessity has arisen and A
has exceeded his authority.
(c) B has no locus to complain as A's actions
fetched him more profit than expected.
(d) An agency of necessity was created as
but for A's actions, the goods would have
perished.
6. Principle: An agent is bound to conduct the
business of his principal according to the
directions given by the principal, or in the
absence of any such directions, according to
the custom which prevails in doing business
of the same kind at the place where the agent
conducts such business. When the agent acts
otherwise, if any loss sustained, he must
make it good to his principal and if any profit
accrues, he must account for it.
Facts: A is in the business of manufacturing
the steel guarders for bridges. A, frequently
used to give material on credit to his friend
and brother-in-law X, who was a well known
bridge construction contractor and was known
for punctuality of payment in the market. B,
A's store manager was aware of the
arrangement between A and X. Once when A
was away X came to the store and demanded
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certain materials on credit. The customs
governing the market was that agents did not
sell goods on credit. B refused but X prevailed
upon him by threatening not to do business
with A in future. B in his considered opinion
thought that since X, was A's friend and
brother-in-law, known for punctuality of making
payments, and considering the subsisting
business relations between A and X gave him
goods on credit. Another important factor that
weighed upon him was the fact that his
decision might have consequences on the
business relations. X after receiving the goods,
declined to make the payments. A, alleged
that B has failed to discharge his duties and
asked him to make good the losses suffered
by him. Decide.
(a) B has failed to discharge his duties as
A's agent.
(b) B has not failed to discharge his duties
as A himself gave materials to X on credit,
therefore he had implied authority to do
so as the manager of the store. Thus he
cannot be made liable to make good the
losses.
(c) B has not failed in discharge of his duties
as he acted in good faith and in the
interests of his master, therefore he
cannot be made liable to make good the
losses.
(d) B has failed to discharge his duties and
must make good the losses suffered by
A.
(Note: Questions 7 and 8 are based upon same set
of facts and principles. Apply the same to both the
questions and answer the following.)
Principle 1: Delivery of goods by one person to
another for some purpose, upon a contract that they
shall when the purpose is accomplished, be returned
or otherwise disposed of according to the directions
of the persons delivering them is called bailment.
The person who delivers the goods is called the bailor
and the person to whom the goods are delivered is
called the bailee.
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Principle 2: Bailor is bound to disclose the faults in 9.
the goods of, which he is aware and which materially
interferes with the use of the good or which exposes
the bailee to extraordinary risk. A bailor for hire is
liable for damage irrespective of his knowledge of
fault in the goods.
Facts: A, and B are friends. A was going abroad for
two months and B asked him for his car for daily
use. A, told B that he could keep the car as A would
be buying a new car soon upon his return. There
was a fault in the brakes of the car and A was not
aware of it. B afterwards gave the car to C for a day,
in lieu of Rs. 1000/-. as C needed to go home.
When C was driving at a highway, at high speed,
suddenly a bullock cart came in front of him. As he
tried to apply the brakes, the brakes failed resulting
in injury to C. Decide.
10.
7. Whether A has bailed his car to B?
(a) A has bailed his car to B as the necessary
conditions of bailment have been fulfilled.
(b) A has not bailed his car to B as the
necessary conditions of bailment have not
been fulfilled.
(c) A, has not bailed but sold his car to B.
(d) A has bailed the car to B so as to enable
him to be bail it to C.
8. Whether a contract of bailment has arisen
between B and C, making B liable.
(a) A contract of bailment has arisen but B
cannot be held liable as C himself was
driving the car very fast.
(b) No contract of bailment has arisen
between B and C as there was no
instruction to return or otherwise dispose
of the car.
(c) A contract of bailment has arisen between
B and C but B cannot be held liable as
the he was unaware of the fault.
(d) A contract of bailment has arisen and B
can be made liable.
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Principle: A contract, by which one party
promises to save the other from the loss
caused to him by the conduct of the promisor
himself, is called a contract of indemnity.
Facts: A enters into a contract with B whereby
he promises to make good any loss caused
to him by his conduct in respect of a certain
sum of 200 rupees. A's son. throws a lighted
match stick in the barn of B and the barn
catches fire. B sues A upon the contract
between them. Decide.
(a) A is liable for the loss caused to B.
(b) A is not liable for the loss caused to B.
(c) A is liable for the loss caused to B to the
tune of Rs. 200.
(d) None of the above.
Principle: Partnership is an agreement
between two or more persons who have
agreed to share profits and losses of the
business carried on by all or any one of them
acting upon all.
Facts: A, B and C enter into an agreement.
As per the terms of the agreement A was to
invest in a venture, to be carried on by B and
C. As per the terms of the agreement A was
to get a fixed share of the profits and the
remaining profits were to be equally divided
between B and C. The agreement also
provided that the seed money, invested by A,
will be returned to him irrespective of the
circumstances prevailing. The venture goes
into losses and A abandons his claim in the
profit but makes a demand for the seed money.
Decide.
(a) A, B and C have entered into a partnership
agreement.
(b) A, B and C have not entered into a
partnership agreement.
(c) Only B and C have entered into a
partnership agreement.
(d) The relationship between the parties
cannot be determined based on the facts
given.
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