LA: 7 (Law of Contracts–II)

Faculty Notes

Faculty Notes
Time: 120 Minutes

 Topics to be covered in this handout are as follows:

 Essentials of Contract
 Capacity to Contract
 Consent, coercion, undue influence, object, void agreements

What follows is an analysis of Questions pertaining to essentials of contract, capacity to

contract and Miscellaneous covered under Law of Contracts in entrance Exams like
CLAT, NLU (D) and Symbiosis from the year 2008 to 2019:

Breach of Employer / Minor Voidable

Exam
Contract Employee Contract Related Contract
CLAT 2 Questions 1 Question 3 Questions 1 Question

NLU (D) 2 Questions 1 Question 4 Questions 2 Questions

Symbiosis 1 Question 3 Questions 2 Questions 1 Question

 Introduction & Theory: 90 minutes

 Class Exercise: 30 minutes

1
 LA: 7 (Law of Contracts–II)
Faculty Notes

1.

Class Assignment
Mark the most appropriate answer

Offer

2. Offer is also called:

(a) Promisor
(b) Promisee
(c) Offeror
(d) Proposal
3. The person making the proposal is called:
(a) Promisor
(b) Promisee
(c) Offeree
(d) None of these
4. The person accepting the proposal is called:
(a) Promisor
(b) Promisee
(c) Offeree
(d) Both (b) and (c)
5. A makes a written offer to B. It is an example of:
(a) Express offer
(b) Implied offer
(c) Cross offer
(d) Counter offer
6. A makes spoken offer to B. It is an example of:
(a) Express offer
(b) Implied offer
(c) Cross offer
(d) Counter offer
7. Invitation to offer is:
(a) A valid offer
(b) Provides an opportunity to make an offer
(c) Not a valid offer
(d) None of these
8. An offer made to the people at large is called:
(a) General offer
(b) Specific offer
(c) Cross offers
(d) Counter offer
9. An offer made to a particular person or persons is called:
(a) General offer
(b) Specific offer
(c) Cross offers

2
 LA: 7 (Law of Contracts–II)
Faculty Notes

(d) Counter offer

10. An advertisement for the sale of goods by auction is an instance of:
(a) Invitation to offer
(b) A valid offer
(c) A valid acceptance
(d) None of these
11. The display of goods in a self-service shop is an example of:
(a) Invitation to offer
(b) A valid offer
(c) A valid acceptance
(d) None of these
12. Dr. M. P. Singh was a professor of the University of Delhi. After his retirement, he started writing books on
Constitutional matters. A publisher sends him a catalogue of books indicating prices of books relating to the
subject of his writing. Such a conduct on the part of publisher is an example of:
(a) Valid offer
(b) Invitation to offer
(c) Invitation to acceptance
(d) None of these
13. A offers to sell his bike to B for 25,000/- rupees. B offers to give 21,000/- only. Such offer on the part of B is:
(a) Cross offers
(b) Counter offer
(c) General offer
(d) Specific offer

Directions for Questions 13 to 16: Given below are two statements. One is of Assertion (A) and the other is of
Reason (R). Choose the correct alternative.
14. Assertion (A): Counter offer is not an acceptance of the offer.
Reason (R): Acceptance of offer must be complete and unconditional.
(a) Both A and R are true and R is the correct explanation of A.
(b) Both A and R are true and R is not the correct explanation of A.
(c) A is true but R is false
(d) A is false but R is true
15. Assertion (A): Cross offers do not result into a valid agreement.
Reason (R): Neither of the party has accepted the offer.
(a) Both A and R are true and R is the correct explanation of A.
(b) Both A and R are true and R is not the correct explanation of A.
(c) A is true but R is false
(d) A is false but R is true

16. Assertion (A): Offer must be accepted within a prescribed time. If no time is prescribed, the same must be
accepted within a reasonable time.
Reason (R): Offer cannot be allowed to last forever to give rise to a valid agreement.
(a) Both A and R are true and R is the correct explanation of A.
(b) Both A and R are true and R is not the correct explanation of A.
(c) A is true but R is false
(d) A is false but R is true

3
 LA: 7 (Law of Contracts–II)
Faculty Notes

17. Assertion (A): An offer must not contain a provision whereby its non-compliance would result in its acceptance
by another party.
Reason (R): Acceptance or otherwise of the offer is dependent on the sweet will of another party.
(a) Both A and R are true and R is the correct explanation of A.
(b) Both A and R are true and R is not the correct explanation of A.
(c) A is true but R is false
(d) A is false but R is true

18. Legal Principle: Acceptance of an offer must be communicated by the offeree or his authorized agent to the
offeror. In other words, merely mental acceptance of the offer does not amount to a valid acceptance.
Factual Situation: A person received an offer. Mentally, he accepted the offer. The letter of acceptance was
written by him but he did not send it.
Does the conduct of the person amount to valid acceptance of the offer?
(a) Yes, because he has intention to accept the offer
(b) Yes, because mental acceptance of an offer is its valid acceptance in the eyes of law
(c) No, because mental acceptance has not been communicated
(d) None of these
19. Legal Principle: Acceptance of offer must be communicated to the offeror by the offeree or his duty authorized
agent.
Factual Situation: A makes an offer to B to sell his car for 75,000/- rupees. B accepted his offer and asked his son
C to communicate the acceptance to A. Afterwards, A sold his car to D.
Which one of the followings is the correct alternative?
(a) B’s communication of his mental acceptance to C amounts to valid acceptance.
(b) B’s communication of his mental acceptance to anybody amounts to valid acceptance.
(c) For a valid acceptance of the offer, communication of acceptance by B or C to A is a must.
(d) None of these

Agreement in restraint.

20. Assertion (A): Intention to create a legal relationship is a must for a valid agreement.
Reason (R): Only then an agreement can become enforceable.
(a) Both A and R are true and R is the correct explanation of A.
(b) Both A and R are true and R is not the correct explanation of A.
(c) A is true but R is false
(d) A is false but R is true

21. What is the meaning of the expression “Gentleman’s agreement”?

(a) An agreement between people who trust each other, which is not written down and having no legal force.
(b) An agreement between two enemies.
(c) An agreement between two minors.
(d) An agreement between two persons of unsound mind
22. PRINCIPLE: All agreements in restraint of marriage are usually void if they are general or unlimited in scope.

4
 LA: 7 (Law of Contracts–II)
Faculty Notes

FACTS: Salma and Farida are co-widows of late Mr. Rehman Khan. They enter into an agreement that if any of
them remarried, the one who got remarried would forfeit her right to her share in the property of deceased Mr.
Rehman. Farida got remarried and challenged the agreement saying it was void as it was in restrain of marriage.
Will Farida succeed?
(a) Yes, the agreement restrains her from getting married, because if she chooses to get married she will
have to forfeit her rightful share in the property.
(b) Yes, there is no reciprocal promise flowing from Salma’s side in this agreement and Farida’s right to
get married is restrained by her having to lose her share in the property.
(c) No, Farida is not restrained from getting married. Putting certain conditions for remarriage doesn’t
make the agreement, an agreement in restrain of marriage. She is free to marry.
(d) None of these
23. PRINCIPLE: Every agreement by which any one is restrained from exercising a lawful profession, trade or
business of any kind, is to that extent void. Whether the restrain is general or partial, unqualified or qualified.
FACTS: Ironman and Batman were two butchers having their shops in the same locality. They entered into an
agreement by which Ironman would sell meat for 14days in a month and during this time Batman would keep his
shop closed and then Batman would sell meat for the rest of the month while Ironman kept his shop shut. After
Batman kept his shop shut for first 14days, Ironman subsequently refused to shut his shop for the rest of the month.
Batman sues Ironman. Decide.
(a) Batman will succeed as Ironman has committed a breach of contract, the agreement is valid as here
both Ironman and Batman are being allowed to carry their trade in divided fashion, and there is no restrain
as such.
(b) Ironman will succeed as the agreement is in partial restrain of Batman’s trade for 14days and Ironman’s
trade for remaining days of the month. Thus it is void.
(c) Batman will succeed as a mutual agreement to hold back trade for a few days, will not amount to
complete or absolute restrain as required by the principle. The agreement is a valid contract.
(d) Ironman will succeed because a promise to close shop for few days is not a good consideration in the
eyes of law.
24. PRINCIPLE: The seller of the ‘goodwill’ of a business can be restrained from carrying on a similar business,
within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on
a like business. Provided such restriction is reasonable.
FACTS: Sam and Dean separately were carrying on business as carriers of passengers by boats. Dean’s business
was bigger but Sam’s was more famous. Sam sold his business to Dean for a sum of money and agreed to abstain
from carrying on similar business there for a period of three years. Dean later on defaulted in payment of the
promised sum to Sam. Sam seeks to file a suit. Decide.
(a) Sam will fail as this is an agreement in restraint of trade and therefore void.
(b) Sam will fail as no sale of good will has taken place in the agreement, Dean has his own goodwill he is
merely expanding his business by buying Sam’s business. This agreement thus being in restraint of trade
is void.
(c) Sam will succeed, as what took place was clearly a sale of goodwill, Dean will make little or no profit from
Sam’s business if the goodwill along with the business was not sold. Therefore, the restraint is valid and so is
the agreement.
(d) Sam will succeed as the restrain clause in the agreement will not make the whole agreement void, only
the restraint part. Thus the part of sale is still valid agreement and Sam can recover money from Dean.
25. PRINCIPLE: An agreement in restraint of trade among the partners is valid if the restraint is reasonable in nature.

5
 LA: 7 (Law of Contracts–II)
Faculty Notes

FACTS: Sirius, James and Lupin open up a law firm in partnership. In the agreement of the partnership, it is stated
that none of them will carry on any business other than that of the partnership firm. Sirius however starts operating
a separate business of sealing in antics. Can James and Lupin sue him for breach of contract?
(a) Yes, James and Lupin can sue Sirius for breach of contract as the restrain put on partners is reasonable
and valid when viewed in context of partnership firm, and does not render their Partnership agreement void.
(b) No, the restrain is too wide and therefore not reasonable as barring a partner from carrying out ‘any’
business is unjustified.
(c) No, the restrain restricts the partners from carrying out any trade, even those that are not similar or
related to that of the partnership firm. It is unreasonable and renders the contract void.
(d) Insufficient data.
26. PRINCIPLE: An agreement in restraint of trade, when occurring as an agreement in the nature of a business
combination between traders or manufacturers is not void under certain circumstances.
FACTS: A, B and C formed a trade combination to carry on business but with the members of their caste only. Is
this an agreement in restraint of trade?
(a) Yes,
(b) No, though arbitrary trade combinations are allowed to put restrains that help them regulate the trade.
(c) No, even though there is some incidental deprivation of trade liberty the regularization is effective in
increasing market base through community unity therefore it is valid.
(d) Yes, it restrains A,B and C from carrying out business in an effective manner, it is unreasonable and
serves no purpose.
27. PRINCIPLE: Agreement in restraint of marriage, void – Every agreement of the marriage of any person, other
than a minor, is void. An agreement in restraint of marriage under Section 26 is
(a) voidable
(b) void
(c) valid
(d) unenforceable
28. PRINCIPLE: An agreement by which a party is restricted absolutely from taking the usual legal proceedings, in
respect of any rights arising from a contract.
FACTS: A sale and purchase contract between Tom(from Bombay) and Jerry(from Ahmadabad) fell under
concurrent jurisdiction of both the Bombay and Ahmadabad. But the contract provided that – any dispute arising
between the parties, settlement of the same legally or otherwise, will be decided in Bombay. Jerry defaults in
delivery of certain goods for which Tom sues him in Bombay court. Jerry claims that the contract is void as it
restricts legal proceedings. Will Jerry succeed?
(a) Yes, Jerry will succeed as the agreement restrains the usual legal proceedings to take place at the
madabad court.
(b) Yes, Jerry will succeed as the agreement takes away from jerry the right of filing case in his home
risdiction, thus refusing access to legal proceedings in Ahmadabad.
(c) No, Jerry will lose as selecting one of the two courts that are equally competent to try the suit does not
result in ‘absolute’ restraint; it is only partial restriction as to jurisdiction.
(d) No, Jerry will lose as he entered into the contract with free consent, he later on cannot claim restraint.

29. PRINCIPLE: Every agreement by which anyone is restrained from exercising a lawful profession, trade or
business of any kind, to that extent is void.
FACTS: A company entered into a contract with Coca Cola Ltd. to bottle soft drink produced by Coca
Cola. One of the terms of the contract was that the company would not bottle soft drinks for any other

6
 LA: 7 (Law of Contracts–II)
Faculty Notes

competitor of Coca Cola during the pendency of the contract.

(a) The contract is void since it restrains the lawful right of the company to engage in business.
(b) The contract is void because there is no consideration being paid.
(c) The contract is valid.
(d) The contract is void since the competitor is not a party to the contract.
30. PRINCIPLE: An agreement is void to the extent that it restricts absolutely, a party form enforcing his contractual
rights by usual proceedings in any ordinary court.
FACTS: A and B entered into a transaction in Delhi for sale of goods based in Delhi. The contract stated
that in case of a dispute, only civil courts in Chennai would have jurisdiction. Neither A, nor B resided or
carried on business in Chennai.
(a) The contract is valid since it is still an Indian court that has jurisdiction.
(b) The contract is void since it ousts the jurisdiction of the competent court.
(c) The contract is void since the consent of the court is required before entering into such a contract.
(d) The contract is valid since Chennai courts have expertise with respect to contractual matters.

Uncertain, Wagering Illegal and Contingent Agreement

31. PRINCIPLE: Agreements whose meaning is not certain or capable of being made certain are void.
FACTS: A, an owner of an Art Gallery entered into a contract with a painter B. Where B was to supply A with 5
paintings each month. It was mutually agreed that the size of the paintings was not essential, only the aesthetic
value was as the price of each painting was to be paid based on the aesthetic value of the painting. B failed to
produce 5 paintings at the end of the month. Can B claim that the contract is uncertain?
(a) Yes, B can claim that the contract is uncertain, as the aesthetic value of the painting is very subjective and
arbitrary; therefore, there is a grave uncertainty as to the prices of the paintings.
(b) Yes, B can claim that the contract is uncertain, as the size of the painting was not determined. In case
of paintings, size is an essential and it cannot be left out even upon mutual agreement.
(c) No, the number of paintings the time of delivery and even the price is certain as A can be asked to give
the price of the painting based on its aesthetic value any time required, thus there is no uncertainty and the
contract is binding.
(d) No, in fact A can sue B for breach of contract, as the agreement between A and B is legally binding
and because there is no uncertainty.
32. PRINCIPLE: Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged
to be won on any wager.
FACTS: A and B agree that if B ends up marrying C she will pay A Rs 5000/-, however if she marries anybody
except C, A will pay B Rs 5000/-. B gets married to D. A however refuses to pay claiming that the agreement
between them is wagering. Will A succeed?
(a) Yes, this is clearly a wagering event as it is based on a future uncertain event.
(b) No, here as marriage is a certain event from which B stands to lose nothing, the contract is not of a
wagering nature.
(c) Yes, here as there is a promise to pay money is conditional on an uncertain event, it is a wagering
agreement.
(d) No, here as the event to take place is in B’s hand it is not a wager.

7
 LA: 7 (Law of Contracts–II)
Faculty Notes

33. PRINCIPLE: Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged
to be won on any wager. A lottery is a game of chance. Such a transaction is not only void but also illegal under
section 294-A of IPC.
EXPLANATION: If the government authorizes a lottery, the only effect of such permission is that the person
conducting the lottery and the buyer of lottery tickets will not be guilty of the criminal offence under Sec 294-A of
IPC.
FACTS: A runs a government authorized city lottery in Jodhpur, one B who lives in Pali purchases a ticket to A’s
lottery for the cash prize of Rs 5,00,000/-. The ticket that B purchased is declared to win the lottery. However at the
time of payment A refuses to pay saying that the lottery is only for residents of Jodhpur. Can B sue A for breach of
contract?
(a) Yes, B can sue A as this is a valid contract the lottery being government authorized, A cannot breach
the contract on the basis of B’s residential location.
(b) No, B cannot sue A as though the contract is valid, city lotteries are place centric. So if A runs a
lottery in Jodhpur, it is available only to residents of Jodhpur and therefore B is not eligible for the lottery.
(c) Yes, B can sue A as the agreement is illegal under IPC even if A and B may not face jail time.
(d) No, B cannot sue A as the transaction of lottery in this case might not be illegal but it is still void.
34. PRINCIPLE: If an agreement is based on happening of a future event it is a contingent contract. A contingent
contract is a contract to do or not to do something, if some event, collateral to such contract, does or does not
happen. Contingent contracts are valid.
FACTS: A and B enter into a contract whereby B will work for A without pay for 6 months if A will give an
interest free loan to B’s wife if and when B dies. Is this a contingent contract?
(a) Yes, as the contract is based on an uncertain future event of B’s death.
(b) No, as the contract is not based on an uncertain event.
(c) No, as the uncertain event is not collateral to the contract.
(d) Yes, as the contract is based on an uncertain future event collateral to the contract.
35. PRINCIPLE: A Contingent agreement, contingent upon an event that is impossible is void.
FACTS: Ram and Shyam stay in Allahabad. They enter into an agreement wherein Ram agrees to sell his ancestral
palatial house to Shyam if Shyam becomes President of USA. Is this agreement valid?
(a) Yes, the contingent event is not impossible.
(b) Yes, the contingent event is just very remote and unlikely but not impossible.
(c) No, the event is so remote that it will be deemed to be impossible event.
(d) Insufficient data.
36. PRINCIPLE: A contract which ceases to be enforceable by law due to impossibility of performance after the
formation of the contract (supervening impossibility), is void.
FACTS: A, a ship owner contracts to take in cargo for B to a port in a neighbouring foreign country XYZ. The
Government of A & B’s country declares a possibility of going to war with XYZ country within a few months. A
immediately after this announcement refuses to take B’s cargo to XYZ, just a week before it was due. A explains
that due to impending war like situation with XYZ he will be sending none of his ships to the country anymore.
Can B sue A for breach of contract?
(a) No, though the contract was valid when it was formed the impending war gives rise to impossibility of
performance and hence it is now void.
(b) No, wars always lead to suspension of trade between countries at war with each other. The
performance of a trade contract has become impossible in war like situation.
(c) Yes, A is bound to carry on his trade obligations even in war time, for till both the government does
not explicitly declare a ban on trade, war cannot be made a ground for supervening impossibility.

8
 LA: 7 (Law of Contracts–II)
Faculty Notes

(d) Yes, impending war after a period of few months does not give rise to any definite impossibility, that can
be deemed sufficient to term the contract between A & B void.
37. PRINCIPLE: A contract which ceases to be enforceable by law due to impossibility of performance after the
formation of the contract(supervening impossibility), is void.
FACTS: Dexter entered into a contract with Dee Dee Company whereby the Dee Dee co. would supply Dexter
with 50 bales of cotton cloth of Victoria mills brand. Victoria mills and Dee Dee co. entered into a separate contract
whereby Victoria mills was to supply 50 bales to Dee Dee co. The Victoria mills failed to perform their contract
with Dee Dee Company and supplied only 20 bales of cotton. Subsequently Dee Dee Co. also ended up supplying
only 20 bales to Dexter. Can Dexter sue Dee Dee Co. for breach of contract?
(a) No, Dexter cannot sue Dee Dee Co. as due to Victoria mill’s breach, it has become impossible for Dee
Dee Co. to perform the contract.
(b) No, Dexter cannot sue Dee Dee Co. as there contract has become invalid due to supervening
impossibility. However, Dexter may be compensated from the amount Dee Dee Co. receives from
Victoria Co. for breach of contract.
(c) Yes, Dee Dee Co. failed to keep a check on whether or not Victoria mills were ready with Dee Dee
Co. order in time. A company cannot claim supervening impossibility for its own act of negligence.
(d) Yes, this is merely a commercial hardship that has occurred it cannot be deemed an impossibility that
will make the contract between Dexter and Dee Dee Co. void.
38. PRINCIPLE: A contract which is valid and binding on the parties when originally entered, may become void due
to subsequent illegality.
FACTS: A entered into a contract with B regarding sale of logs of the Sal trees growing only in the forest near
A’s village. Before A could hire and send wood cutters to cut the trees, government of that state banned the cutting
of trees in the entire area. A thus claimed that he is not bound to fulfill his contractual obligation now as the
contract has become void due to subsequent illegality. Will A succeed?
(a) Yes, A will succeed as the ban on cutting of trees in that area has given rise to subsequent illegality
making performance of it unlawful and thus the contract is now void.
(b) No, the ban makes cutting of trees only in that area void, but A can cut trees from some other area and
thus fulfill his obligation under the contract. The subsequent illegality is not affecting the performance of
contract here.
(c) No, A may be banned from cutting trees but he can still procure wood logs from other traders of Sal
wood in the country and fulfill his obligations under the contract.
(d) Yes, since the ban came into existence even before he could hire the woodcutters, the performance of
his promise under the contract has indeed become unlawful.
39. PRINCIPLE: A voidable contract becomes void, when the party, whose consent is not free repudiates the
contract.
FACTS: Mohan by threatening to murder Feroz’s 2 year old son Shahid, makes him agree to sell his car worth Rs
3,00,000/- for a sum of only Rs1,00,000/- to Mohan. When Shahid grows up and comes to know about the
incident. He sues Mohan seeking to repudiate the contract as it was entered upon by coercion. Decide.
(a) Shahid will succeed as the contract was indeed entered upon by coercion and as Feroz’s consent was
not free the contract will be declared void.
(b) Shahid will succeed as free consent is an essential of the contract and absence of the same renders a
contract void ab initio.
(c) Shahid will lose as the contract would have become void only if Feroz had chosen to repeal it within
reasonable time.
(d) Shahid will lose as he is not a party to the contract and has no right to file a case for repudiation of the

9
 LA: 7 (Law of Contracts–II)
Faculty Notes

contract.
40. PRINCIPLE: An illegal agreement is void ab-initio. An agreement is illegal if its object or consideration is
unlawful.
FACTS: A, B and C enter into an agreement of the division among them of gains to be acquired by A’s frauds as
long as B and C they keep A’s real identity a secret. Is this an illegal agreement?
(a) No, here the fraud committed by A is neither the object nor the consideration of the contract.
Therefore technically this contract is not illegal.
(b) Yes, this is an illegal agreement as the objective and considerations of this agreement both are unlawful.
(c) No, this is not an agreement at all as there is no consideration whatsoever flowing from B and C to A.
Keeping secrets is not a ‘real’ consideration. Therefore, there is no agreement here at all to be deemed
illegal.
(d) Only A is liable for the fraud and as committing fraud is not the object of the agreement, the
agreement between A,B and C is not an illegal agreement.
41. The similarity between void contracts and void agreements is
(a) They both are valid when made and continue to be valid till repudiates( i.e. cancelled or repealed) by
the aggrieved party.
(b) No damages can be claimed in either.
(c) There are technical defects in both that render them void.
(d) Neither of them give rise to any legal consequences.
42. An agreement is illegal and void if its objects or consideration-
(i) Is of such a nature that, if permitted, it would defeat the provisions of any law
(ii) Is opposed to public policy
(iii) An agreement with a minor
(iv) Is regarded as immoral by majority of the society.
(a) i and ii
(b) i, ii and iv
(c) i, iii and iv
(d) All of them
43. PRINCIPLE: Agreements collateral to illegal agreements are invalid.
FACTS: Sun borrowed money from Moon to pay to Star for a bet he lost with Star, Moon knew why Sun had
borrowed money from him. Later on Sun refuses to pay back the borrowed sum to Moon . Can Moon sue Sun for
breach of contract?
(a) Yes, the wagering agreement between Sun and Star is not an illegal agreement therefore the collateral
agreement between Sun and Moon is not invalid.
(b) Yes, the agreement between Sun and Moon is not collateral to the wagering agreement it was formed
later. Hence contract between Sun and Moon is separate and valid.
(c) No, the wagering agreement between Sun and Star is illegal and therefore the collateral agreement
between Sun and Moon is invalid.
(d) No, Sun and Moon’s agreement is facilitating the performance of Sun and Star’s illegal agreement.
Therefore Sun and Moon’s agreement is essentially illegal too.
44. PRINCIPLE: an agreement, the meaning of which is not certain or capable of being made certain is void.
FACTS: A and B, who were brothers, entered into an agreement which stated that A would sell his entire
share of the ancestral property to B. The agreement did not mention the specific details (like survey
number) of the property.

10
 LA: 7 (Law of Contracts–II)
Faculty Notes

(a) The contract will be void since it is vague.

(b) The contract will be void because it is not possible to ascertain the property which is being referred to.
(c) The contract will be void since it is illegal.
(d) The contract is valid since there is clarity about the property sought to be sold.

45. FACT: Akbar enters into an agreement with Birbal that if he pays Akbar a premium of Rs. 500 per annum and
Birbal’s house is devastate by fire within one year of entering into agreement, Akbar shall make good the loss
suffered by Birbal.
PRINCIPLE: If any person enters into wagering or betting agreements, such agreements would be illegal an
cannot be given effect for enforcing obligations.
(a) The agreement entered between Akbar and Birbal is a wagering agreement and even if Birbal’s house is
devastated by fire he cannot claim price of the house against Akbar.
(b) The agreement entered into between Akbar and Birbal is a valid contract and can be enforced if Birbal’s
house is devastated by fire within one year of entering this agreement.
(c) Akbar and Birbal are betting thus this agreement is not a contract.
(d) None of the above.
46. FACTS: Alexander deals in coconut oil only and having showrooms and offices all around the country. The
registered office is in Bangalore. One day he received a call from Suresh, a merchant from Delhi. Suresh is a
dealer in edible oils. Suresh said. ‘Please send me 1,000 tons of oil’ and without standing which oil he wants, he
put down the phone.
PRINCIPLE: Agreements, the meaning of which is not certain, or capable of being made certain, are void.
(a) Alexander should immediately supply 1,000 tons of coconut oil, as a contract has taken place.
(b) Alexander should not supply any oil because Suresh has not made it clear as to which oil he wants.
(c) Alexander should call up Suresh and ask him which oil he wants.
(d) None of the above.
47. PRINCIPLE: Agreements, the meaning of which are not certain or capable of being made certain, are void.
FACTS: A lease agreement between the landlord and tenant provided that the tenant would spend his own money
in renovating the house and adjust it against the monthly rent of Rs. 4000/-. The tenant in the course of renovation
covered the courtyard, which was open; and for covering the courtyard, spent Rs. 1 lakh. When he sought to adjust
it against the monthly rent, the landlord argued that the renovation did not include covering the courtyard. The
landlord’s submission was that the contract was void on account of uncertainty.
(a) The clause concerning renovation is valid, because the cost incurred was clearly identified.
(b) The clause concerning renovation is void, because the landlord and tenant had different perceptions
thereof.
(c) The landlord must have taken care to define renovation; and or his oversight, he cannot blame tenant.
(d) None of the above.

Object of Agreement
48. PRINCIPLE: The object of an agreement is lawful unless it is forbidden by law; is of such a nature that, if
permitted it would defeat the provisions of any law; is fraudulent; involves or implies injury to the person or
property of another person; the court regards it as immoral; it is opposed to public policy.
A was arrested by the police for committing an offence and was subsequently granted bail by the court.
One of the conditions imposed by the court for granting bail was that A arrange for a surety for Rs.

11
 LA: 7 (Law of Contracts–II)
Faculty Notes

50,000. A approached B to be a surety. B agreed, but insisted that they enter into a contract whereby A
would deposit Rs. 50,000 into B’s account, which would be returned to A by B after the case was over.
(a) The contract would be void since effect is to defeat the provisions of the Cr.P.C.
(b) The contract would be void because A cannot enter into a contract when a criminal case is going on
against him.
(c) The contract would be void because the court is not party to it.
(d) The contract would be valid.
49. PRINCIPLE: The object of an agreement is lawful unless it is forbidden by law; is of such a nature that, if
permitted it would defeat the provisions of any law; is fraudulent; involves or implies injury to the person or
property of another person; the court regards it as immoral; it is opposed to public policy.
A and B, a Hindu couple were married to each other. Owing to differences between them, they decided to
get divorced. They entered into a contract laying down the conditions that both parties had to adhere with.
One of the terms of the contract was that their children would not be entitled to claim the ancestral
property of A, the husband.
(a) The contract will be void since the children are not a party to the contract.
(b) The contract will be void since its terms since it is opposed to the personal laws of the parties.
(c) The contract will be valid.
(d) The contract will be void since a woman cannot enter into a contract with her husband.
50. PRINCIPLE: The object of an agreement is lawful unless it is forbidden by law; is of such a nature that, if
permitted it would defeat the provisions of any law; is fraudulent; involves or implies injury to the person or
property of another person; the court regards it as immoral; it is opposed to public policy.
The BCCI decided to hold an auction to sell IPL team. 12 bidders registered for the auction. Unknown to
the BCCI, these 12 bidders had entered into a contract that they would not bid more than a certain amount.
(a) The contract will be void because BCCI is not a party to it.
(b) The contract will be void since the object of the contract is to cause a loss to the BCCI.
(c) The contract will be void since the maximum number of parties to a contract.
(d) The contract will be valid.
51. PRINCIPLE: Two persons agree on the same thing in the same sense shall make a contract.
FACTS: A known that B has two cars Ambassador and Maruti. B takes A from a party to make him reach home in
his Ambassador car. While going they are discussing about the comparative advantages and disadvantages of the
two cars. B suggests selling his spacious car. While discussing he thinks Maruti is also quite comfortable and
spacious. A asked for the price B replied Rs hundred and twenty thousand. B said I shall buy. Afterwards, A wants
to get the Maruti car by paying hundred and twenty thousand, whereas B says he wished to sell only the
Ambassador car.
(a) It is a valid contract because the consideration is absolutely certain.
(b) It is a voidable contract and it is the option o sufferer party to declare it valid or void.
(c) It is an uncertain agreement and hence it is void.
(d) The agreement was induced by mutual mistake hence it is void.

12
 LA: 7 (Law of Contracts–II)
Faculty Notes

13