CS Found Law MCQ Notes

PANCHAKSHARI’S PROFESSIONAL ACADEMY Pvt. Ltd.
Your Lifelong knowledge Partner

CS Foundation Law Notes
Chapter 9 4. Partnership is the relation between persons

who have agreed to share the profits of a
THE INDIAN PARTNERSHIP ACT, 1932 business carried on by………….acting for
THIS CHAPTER COVERS MCQs ON: all.
a) All
Nature of partnership b) Any of them
Essentials of a partnership c) All or any of them
True test of partnership d) None of above
Classification of partnership 5. In order that persons may become partners,
Actual, active or ostensible partner it is essential that…………………..
Sleeping or dormant partner a) There must be at least two persons
Nominal partner b) There must be a relationship arising out
Partner in profits only of an agreement between two or more
Sub-partner person
Partner by estoppels or holding out c) The agreement must be to share the
Minor admitted to the benefits of partnership profits of a business
Rights and duties of partners d) All of above
Relation of partners to third parties 6. In order that persons may become partners,
Dissolution of partnership it is essential that………………
a) There must be at least two persons
b) The business must be carried on by all
or any of them acting for all
NATURE & CLASSIFICATION OF A
c) The agreement must be to share the
PARTNERSHIP
profits of a business
1. The Partnership Act, 1932 deals with…….. d) All of above
a) Partnership in general 7. Which of the following are the essentials of
b) Partnerships between individuals partnership?
c) Joint ventures a) Association of two or more persons
d) Business collaborations b) Agreement/ contract
2. The partnership Act, 1932 came into force c) Carrying on business
on……………….. d) All of above
a) 1st day of April 1932 8. Persons who have entered into partnership
b) 1st day of October 1932 with one another are called
c) 1st day of January 1932 individually………
d) 31st day of December 1932 a) Firm
3. The partnership Act extends to…………… b) Co-owner
a) The whole of India c) Firm name
b) The State of Jammu & Kashmir d) Partner
c) The whole of India except the State of 9. Persons who have entered into partnership
Jammu & Kashmir with one another are collectively
d) The whole of India except the State of called……..
Jammu & Bihar a) Firm
b) Co-owner
1
c) Firm name 16. Person entering into partnership contract

d) Partner may be ……………
10. The name under which partnership a) Natural person
business in carried on is called………… b) Artificial person
a) Firm name c) Natural person or artificial person or
b) Firm some natural person and other artificial
c) Business name person
d) Owners name d) None of above
11. A firm is the name of………….. 17. Section 5 of the Act states that the relation
a) The partners of partnership arises from…………..
b) The minors in the firm a) Status
c) The business under which the firm b) Contract birth
carries on business c) All of above
d) The collective name under which it 18. In which of the following case there is no
carries on business partnership?
12. Partnership firm is separate legal entity a) The members of a HUF carrying on a
apart of its partners. family business
a) True b) Burmese Buddhist Husband and wife
b) False carrying on business
c) Partly true c) Both (a) & (b)
d) Partly false d) None of above
13. A partnership firm cannot use the word 19. An agreement between the partners may be
“Limited” as a part of its name. …………..
a) True a) Express
b) False b) Implied
c) Partly true c) Express or implied
d) Partly false d) Neither (a) nor (b)
20. Partnership agreements may be
ESSENTIALS & TRUE TEST OF PARTNERSHIP expressed…………….
14. One of the essential elements of partnership a) In writing
is that there must be a contract b) Orally
between……….. c) Either (a) or (b)
d) Neither (a) nor (b)
a) Two persons
b) Two or more person 21. Partnership agreement must be…………
a) A valid agreement
c) One or more persons
d) None of above b) For a lawful object
15. Unless there are at least two persons there c) Between the persons competent to
contract
cannot be a partnership.
a) True d) All of above
b) False 22. As per Section 2 (b) of the Act the term
c) Partly true “business” includes every……………..
d) Partly false a) Trade
b) Occupation
2
c) Trade, occupation and profession 29. Sharing of profits implies sharing of losses
d) None of above as well, unless agreed otherwise.
23. Which of the following purpose is a) True
permissible in a partnership? b) False
a) Business purpose c) Partly true
b) Social purpose d) Partly false
c) Religious purpose 30. Which of this arrangement indicates a
d) Charitable purpose partnership?
24. To constitute a partnership, the parties must a) Ram agrees with Shyam a goldsmith, to
have agreed to carry on a business and to buy and furnish gold to Shyam to be
share profits in common. worked upon by him and sold, and that
a) True they shall share the resulting profit or
b) False loss.
c) Partly true b) Ram and Shyam agree to work together
d) Partly false as carpenters but Ram shall receive all
25. Sharing of profits also involves sharing of profit and shall pay wages to Shyam.
losses. c) Ram and shyam are joint owners of a
a) True ship.
b) False d) Ram, a publisher, agrees to publish at
c) Partly true his own expense a book written by
d) Partly false Shyam and to pay Shyam half the net
26. Sharing of profits is a…………….. evidence profit.
of the existence of partnership. 31. N and Z, the co-owners of a house, use the
a) Conclusive house as a hotel managed either by
b) Prima facie themselves or by a duly appointed mange
c) Not acceptable for their common profit. Is there a
d) Collaborative partnership relation between the parties?
27. The sharing of profits arising from property, a) Yes
by persons holding a joint or common b) No
interest in that property, does not of itself c) Partly yes
make such those persons, Partner. d) Can’t say
a) True 32. The true test of existence of partnership lies
b) False in…………..
c) Partly true a) Mutual agency relationship
d) Partly false b) Written contract
28. To form a partnership, the parties should c) Sharing of profits & losses
share……………. d) None of above
a) Only losses 33. As per mutual agency principal each partner
b) Only profits is…………..
c) Both profits and losses a) Agent for other partner
d) Profits and losses but some partners b) Principal for other partner
may get a share only in the profits. c) Agent and principal for other partner
d) None of above
3
34. In determining whether a group of persons d) None of above

is or is not a firm or whether a person is or 40. A particular partnership…………
is not a partner in a firm, regard shall be had a) Is void
to……………………. b) Is voidable
a) Sharing of profits c) Will stand dissolved when the adventure
b) Written contract is completed.
c) Real relation between the parties d) Should be entered into only between
d) Provisions of the partnership Act three persons.
35. A minor may be admitted to the benefits of a 41. Where no provision is made by contract
partnership with the consent of………….. between the partners for the duration of
a) Majority partners their partnership or for the determination of
b) All other partners their partnership, the partnership is called.
c) 75% partners ……….
d) None of above a) Partnership at will
36. As relations of partners interse are that of b) Particular partnership
agency, no consideration is required to c) Partnership for fixed duration
create the partnership. d) None of above
a) True 42. A partnership is deemed to be a partnership
b) False at will when…………
c) Partly true a) No fixed period has been agreed upon
d) Partly false for the duration of partnership
37. The partnership deed is also called b) There is no provision made as to the
as………… determination of partnership in any other
a) Partnership agreement way.
b) Constitution of partnership c) Both (a) & (b)
c) Articles of partnership d) None of above
d) All of above 43. Where the partnership is at will, the firm
may be dissolved by……….giving notice in
writing to all the other partners of his
CLASSIFICATION OF PARTNERSHIP intention to dissolve the firm.
a) Any partner
38. A partnership may be……………. b) Two partners
a) For particular adventure c) Three partners
b) For fixed period d) Four partners
c) A partnership at will 44. Where the partnership is at will, the firm
d) Any of the above may be dissolved by any partner giving
39. When two or more person agree to do notice in writing to ……………of his
business in a particular adventure or intention to dissolve the firm.
undertaking, such a partnership is a) Any one of the partner
called………….. b) All the other partners
a) Partnership at will c) Two partners
b) Particular partnership d) Three partners
c) Partnership fixed duration
4
45. Where the partnership is at will, the firm is d) True

dissolved as from………….. 51. Registration is required for HUF.
a) The date mentioned in the notice as the a) False
date of dissolution b) True
b) If no such date is metioned, as from the c) Partly true
date of communication of the notice d) Partly false
c) (a) or (b) 52. All partners are equally entitled to a right of
d) None of above management of the business whereas right
of management of joint family business
CO-OWNERSHIP & PARTNERSHIP generally vests in ………….
a) Male member
46. Co-ownership is not always the result of an
b) Karta
agreement; it may arise………….
a) By the operation of law c) Major male member
b) From status d) Minor male member
53. HUF is governed by………..
c) By the operation of law or from status
a) The Indian Partnership Act, 1932
d) None of above
47. A co-owner is………….of the other co- b) Hindu Law
owner(s). c) The companies Act, 1956
a) Not the agent d) None above
54. Ever partner is personally liable for the
b) The agent
c) Undisclosed agent debts of the firm; in a joint family business
d) Undisclosed principal only………is personally liable.
48. A and B are joint owner of a house. They a) Male member
b) Karta
rent it out to C and divide the net rent
c) Major male member
equally. A & B are ……………
a) Partners d) Minor male member
b) Co-owner 55. A minor is a member of a joint family firm
c) Principal & agent from the………….by virtue of his status, but
he is not personally liable.
d) Consignor & Consignee
a) Very day of his birth
DIFFERENCE BETWEEN HUF & PARTNERSHIP b) Day he becomes major
c) Day he complete 21 years
49. Partnership is created by status i.e. by birth d) None of above
of male child in the family. 56. A partner………….the accounts of the firm.
a) False a) Can demand
b) True b) Cannot demand
c) Partly true c) Both (a) & (b)
d) Partly false d) (a) or (b)
50. There is no restriction as to maximum 57. A co-parcener…………..ask for accounts
number of members for HUF. a) Cannot
a) Partly true b) Can
b) Partly false c) Both (a) & (b)
c) False d) (a) or (b)
5
DIFFERENCE BETWEEN COMPANY & 63. Affairs of company are managed by………
PARTNERSHIP a) Board of trustee
b) Board of committee
58. A partnership firm has no separate c) Board of Directors
existence apart from its members. Whereas d) Shareholders
a company is a…………distinct from its 64. A partner can transfer his interest so as to
member. substitute the transferee in his place as the
a) Do not have separate legal entity partner, without the consent of all the other
b) Separate legal entity partners; a member of company cannot
c) Non profit making organization transfer his share to any one he likes.
d) None of above a) False
59. Partnership is governed by Partnership Act, b) True
1932. Whereas a company is Governed c) Partly true
by………. d) Partly false
a) The Companies Act, 1961
b) The Companies Act, 1956 CHANGE IN A FIRM
c) The Companies Act, 1957
d) The Companies Act, 1975 65. A change in the nature of the business can
60. Registration of partnership is not only be brought about by the consent
compulsory but registration of company of……………….
is…………. a) Majority partners
a) Optional b) All the partners
b) Compulsory c) Two partners
c) Compulsory in some cases d) Five partners
d) Optional but compulsory in some cases 66. Where a partnership firm is formed for a
61. Minimum capital for partnership is not particular undertaking or undertakings, it
specified under Partnership Act, 1932 but proceeds to carry on other undertaking or
minimum capital for private company is Rs. undertaking, in that event the
…………. And for public company is Rs. mutual………….of the partners in respect of
………. Under the Companies Act, 1956 the other adventures or undertakings are
a) 5,00,000, 1,00,000 the same as those in respect of the original
b) 1,00,000, 3,00,000 adventures of undertaking.
c) 1,00,000, 5,00,000 a) Rights
d) 3,00,000, 5,00,000 b) Duties
62. Minimum two persons are required to from c) Rights and duties
partnership but minimum numbers of d) Duties & liabilities
member required to from a company are; in PARTNERSHIP PROPERTY
case of private company…………& in case
of public company. ……. 67. It is open to the partners to agree among
a) 2 & 7 themselves as to………………., although
b) 7 & 2 employed for the purpose of the firm.\
c) 3 & 8 a) What is to be treated as the property of
d) 3 & 7 the firm,
6
b) What is to be separate property of one 72. ………….are those who invest money in the
or more partners firm’s business and take their share of
c) (a) & (b) profits but do not participate in the
d) None of above functioning and management of the
68. In the absence of any such agreement, business.
express or implied, the property of the firm a) Active partner
is deemed to include…………… b) Sleeping or dormant partner
a) All property, rights and interests which c) Nominal partner
have been brought into the common d) Partner in profit only
stock for the purposes of the partnership 73. Personal who do not invest or participate in
by individual partners, whether at the the management of the firm but only give
commencement of the business or their name to the business or firm are
subsequently added thereto known as……………
b) Those acquired in the course of the a) Active partner
business with money belonging to the b) Sleeping or dormant partner
firm c) Nominal partner
c) The goodwill of the business d) Partner in profits only
d) All of above 74. A partner who is entitled to share in the
69. The property of the firm belongs to the firm profits of a partnership firm without being
and not to the individual partner or partners. liable to share the losses, is called
a) True a…………….
b) Partly true a) Active partner
c) False b) Sleeping or dormant partner
d) Partly false c) Nominal partner
70. Property of the firm shall be held by use of d) Partner in profits only
the partners…………. 75. Which of the following partner can retire
a) Exclusively for business purposes without giving public notice?
b) For business purposes as well as a) Active partner
private purposes of the partners b) Sleeping or dormant partner
c) For the private purposes of the partners c) Nominal partner
d) For charitable purposes d) Partner in profits only
76. When a partner of a firm agrees to share hi
KINDS OF PARTNER own share of profit with an outside, it
71. …………are the ordinary types of partners called……………
a) Co-partnership
who invest money into the business of the
firm, actively participate in the functioning b) Undisclosed partnership
and management of the business and share c) Profit sharing scheme
d) Sub-partnership
its profits or losses.
a) Active partner 77. A sub-partner can bind the firm or other
b) Sleeping or dormant partner partners by his acts.
c) Nominal partner a) False
d) Partner in profits only b) Partly false
c) Partly true
7
d) True c) By conduct
78. Sub-partner has no rights or duties towards d) Any of the above
the firm and does not carry any liability for 82. A person, who, by words spoken or written
the debts of the firm. or conduct represents himself or knowingly
a) False permits himself to be represented as a
b) Partly false partner in the firm is called…………
c) Partly true a) Sleeping partner
d) True b) Working partner
79. Identify the incorrect sentence. c) Sub-partner
a) A sub-partner is not connected with the d) Partner by estoppels
firm. 83. A introduces B to C as a partner in his
b) A sub-partner has no relationship with business. B, in fact, was not a partner bu he
other partners in the firm. did not deny the statement. C advanced a
c) A sub-partner has a right in the firm’s loan to A. A could not repay the loan. C can
business. hold B responsible for the repayment of loan
d) A sub-partner can claim his agreed because………….
share from the partner with whom he a) B is a sleeping Partner
entered into sub-partnership. b) B is a Sub-partner
80. If the behavior of a person arouses c) B is a Dormant Partner
misunderstanding that he is a partner in a d) B is a Partner By Estoppel
firm (when actually he is not), such a person 84. A partner who has not entered into a
is stopped from later on denying the partnership agreement and conducts or
liabilities for the acts of the firm. Such represents himself as a partner in a firm is
person is called……………and is liable to all called………….
third parties. a) Sleeping partner
a) Sleeping partner b) Working partner
b) Partner by estoppels c) Sub-partner
c) Working partner d) Partner by holding out
d) Sub-partner 85. Which of the following partners are not
81. The law relating to partners by holding out is liable in relation to the firm?
contained in Section 28, which lays down a) Partner by holding out
thus.”Anyone who by words, b) Working partner
……………represents himself, or knowingly c) Sub-partner
permits himself to be represented to be a d) Partner by estoppels
partner in a firm, is liable as a partner in that 86. Rohit is not a partner in a particular firm.
firm to anyone who has on the faith of any But, he represents himself or knowingly
such representation given credit to the firm, permits himself to be represented as a
whether the person representing himself or partner of that particular firm to Sanjay, who
represented to be a partner does or does on the faith of such a representation gives
not know that the representation has credit to the firm. Is Rhoit liable as a partner
reached the person so giving credit”. in the firm?
a) Spoken 87. A, B and C are partners in a firm. A
b) Written introduces D to X as a partner in business.
8
D, in fact, was not a partner in the firm’s b) False

business. D did not deny this statement. X c) Partly true
advanced a loan of Rs. 20 lakhs to the firm. d) Partly false
On firm’s failure to repay the loan X wants 91. Which of the following statement is incorrect
to hold D responsible for the repayment of as to a minor’s position in a partnership
the above loan. Referring to the provisions firm?
of the Indian Partnership Act, 1932 decide a) Minor is admitted to a share of
whether X would succeed in recovering the partnership profits.
loan from D. b) Minor is personally liable to contribute to
a) No. D is not liable the losses.
b) A has to repay the loan c) Minor is entitled to a share of the firm’s
c) Yes. D is liable as a partner by holding property.
out d) Minor can inspect and copy any of the
d) None of above firm’s accounts.
88. A and B entered into an agreement to carry 92. Within…………..period on his attaining
on a business of manufacturing and selling majority or obtaining knowledge that he has
toys. Each one of them contributed Rs. 35 been admitted to the benefits of the
lakhs as their capital with a condition that A partnership, whichever is later, a minor may
and B will share the profits equally, but the give public notice of his decision to continue
loss, if any is to be borne by A alone. or withdraw from the firm.
Referring to the provisions of the Indian a) Three months
Partnership Act, 1932 decide whether there b) Six months
exists a partnership between A and B. c) Eight months
a) There is no partnership between A and d) Nine months
B. 93. Failure by a minor to give public notice
b) A is sub-partner of B within 6 months will have the following
c) There is partnership by holding out effect………………..
d) There is partnership between A and B. a) The partnership firm stands dissolved.
A is partner in profit only. b) Minor automatically cecomes partner.
c) Minor automatically ceases to be a
MINOR AS A PARTNER partner.
89. For admitting a minor into the benefits of the d) The partnership becomes an illegal
association
partnership, which of the following is
required? 94. When the minor elects not to become a
partner, his rights and liabilities………
a) Consent of majority partners
b) Consent of parent or guardian a) Continue to be those of a minor up to
c) Consent of all the partners the date of giving public notice.
b) Are the same as that of all other partner.
d) None of above
90. Minor partner is entitled to his agreed share c) Become ineffective since the
and can inspect books of account of the partnership is invalid.
firm. d) After the date of dissolution of firm.
a) True
9
95. When the minor elects not to become a admitted to the benefits of the
partner, his share is not liable for any acts of partnership.
the firm done…………… c) His hare of profits and property remains
a) After his admission to benefits of the same as was before, unless altered
partnership by agreement.
b) After the date of giving public notice d) All of above
c) After the date of attaining majority 100. If minor elects not to become a partner,
d) After the date of dissolution of firm. then:
96. A minor is personally liable for the debts of a) His rights and liabilities shall
the firm. continue to be those of a minor up to
a) Correct the date of his giving public notice.
b) Incorrect b) His share shall not be liable for any
c) Partly correct acts of the firm done after the date of
d) Partly incorrect the public notice.
97. Where a minor on attaining majority, elects c) He is entitled to sue the partners for
to become a partner, he does not becomes his share of the property and profits
personally liable as other partners to the in the firm.
third parties for all the acts of the firm done d) All of above
since he was admitted to the benefits of
partnership. RIGHTS OF PARTNERS
a) Correct 101. ……………has a right to take part in the
b) Incorrect conduct and management of the business.
c) Partly correct a) Every partner
d) Partly incorrect
b) Sub-partner
98. If minor becomes or elects to become a
c) Partner by holding out
partner, his position will be………. d) Substituted partner
a) His rights and liabilities will be similar to 102. ……………, has a right of free access to
those of a full-fledged partner. all records, books and account of the
b) He will be personally liable for all the
business and also to examine and copy
acts of the firm, done since he was first them.
admitted to the benefits of the a) Every partner
partnership. b) Sub-partner
c) His hare of profits and property remains
c) Partner by holding out
the same as was before, unless altered d) Substituted partner
by agreement
103. Every partner whether active or
d) All of above dormant, has a right of free access to
99. If minor becomes or elects to become a all………. Of the business and also to
partner, his position will be………..
examine and copy them.
a) His rights and liabilities will not be a) Records
similar to those of a full-fledged partner. b) Books
b) He will not be personally liable for all the c) Records, books and account
acts of the firm, done since he was first d) None of above
10
104. Every partner is entitled to share in the the conduct of the firm’s business. However,
profits……….., unless different proportions the Partners may agree that some partners
are stipulated. need not indemnify the firm.
a) In proportion to capital a) True
b) Equally b) Partly true
c) In proportion to balance in current c) False
accounts d) None of the above
d) None of above 110. Partner shall indeminify the firm for any
105. Where a partner has advanced any loan loss caused to it by his………….in the
to the firm and the agreement provides for conduct of the firm’s business.
interest, but does not specify any rate, the a) Negligence
rate shall be………….. b) Interference
a) 6% c) Willful neglect
b) 8% d) None of the above
c) 9% 111. A partner has no power to act in an
d) 5% emergency for protecting the firm from loss.
106. A partner claim interest on a) True
capital…………. b) Partly true
a) If there is loss c) False
b) If there is profit d) None of the above
c) If there is profit and there is an 112. Every partner has a right to retire by
agreement to pay it giving notice where the partnership is at will.
d) None of above a) True
107. Subject to contract between the b) Partly true
partners, where a partner is entitled to c) False
interest on his capital, such interest shall be d) None of the above
payable. 113. Which of the following is not a right of
a) Only out of profits partner?
b) Only out of capital a) Every partner has a right to continue in
c) First out of profits and then out of capital the partnership and not to be expelled
d) Firs out of capital and then out of profit from it.
108. Subject to contract between the b) A partner has power to act in an
partners, for taking part in the conduct of the emergency for protecting the firm from
business, a partner is……….. loss.
a) Not entitled to receive any c) Every partner is entitled to share in the
remuneration. profits equally
b) Entitled to reasonable remuneration. d) Every partner is entitled to the
c) Entitled to remuneration based on introduction of a new partner into the
profits firm without consent other partner.
d) Entitled to remuneration in the ration of 114. An incoming partner will be liable for
their capital. debts or liabilities of the firm before he
109. Every partner shall indemnify the firm for becomes a partner.
any loss caused to it by him willful neglect in a) True
11
b) Partly true d) None of the above

c) False 121. Where the outgoing partner carries on a
d) None of the above competing business, which of the following
115. In good faith and based on the contract is permissible?
between partners, a partner may be a) Use of firm’s name
expelled from the firm by……….. b) Holding out as carrying on the business
a) Unanimous consent of all the partners. of the firm.
b) Majority of the partners c) Soliciting the custom of the firm’s
c) Any of the working partners customers/ suppliers etc.
d) Any of the dormant partners. d) Advertising such competing business.
116. When a partner is expelled otherwise
than in good faith, it is……………. DUTIES OF PARTNERS
a) Valid 122. Every partner is bound to carry on the
b) Voidable business of the firm to the…………
c) Null and void
a) To the advantage of the working
d) None of above
partner.
117. The invalid expulsion of a partner gives b) For reasonable advantage
him a right to claim damages. c) For the advantage of society
a) True d) To the greatest common advantage
b) Partly true
123. Which of the following is not covered by
c) False general duties of partners?
d) None of the above a) To carry on the business of the firm to
118. ABC & Co., a firm consists of three the greatest common advantage of the
partners A, B and C having one-third share
firm.
each in the firm. Advise A and B whether
b) To be just and faithful to each other.
they can do so. c) To arrange for audit of accounts of the
a) Yes firm.
b) No d) To keep and render true, proper and
c) A & B have to retire from the firm.
correct accounts of the partnership.
d) None of the above 124. Which of the following is not covered by
119. When a partner is expelled otherwise the general duties of partners?
than in good faith, it is null and void. He a) To claim remuneration for the services
continues to be a partner.
rendered to the firm.
a) True b) To render true accounts and full
b) Partly true
information of all things affecting the firm
c) False to any partner or his legal
d) None of the above representative.
120. The outgoing partner cannot carry on a
c) To carry on the business of the firm to
competing business or advertise such the greatest common advantage.
business. d) To be just and faithful to each other.
a) True 125. A partner can make secret profits.
b) Partly true a) True
c) False
12
b) Partly true d) For charitable purposes.

c) False 131. Every partner is bound to indemnify the
d) None of the above firm for any loss caused by………..in the
126. Every partner must account for any conduct of the business.
benefits derived from the partnership a) Fraud
business without the consent of the other b) Misrepresentation
partners. c) Mistake
a) True d) Undue influence
b) Partly true 132. For loss caused to the firm by his fraud
c) False in the conduct of the business, every
d) None of the above partner shall…………..
127. Which of the following statement is a) Indemnify the firm
incorrect? b) Indemnify the other partner
a) Every partner must be just and faithful to c) Indemnify all the retiring partners
other partners. d) Indemnify only the working partners
b) A partner is bound to keep and render 133. ……….can assign or transfer his
true, proper and correct accounts of the partnership interest to any other person, so
partnership. as to make him a partner in the business.
c) A partner can compete with the firm, a) No partner
without the consent of the other b) Every partner
partners. c) Working partner
d) To carry on the business of the firm to d) Nominal partner
the greatest common advantage. 134. A partner may assign the profits and
128. Every partner is bound to share in the partnership assets.
attend………..to his duties, in the conduct of a) True
the business. b) Partly true
a) Systematically c) False
b) Diligently d) None of the above
c) Sincerely 135. Which of the following statement is
d) Effectively correct in relation to assignment of profit by
129. In the absence of an agreement ot the partner?
contrary, every partner is bound to share a) The assignee will have no right to ask
losses………….. for the accounts or to interfere in the
a) Equally management of the business.
b) In proportion to capital b) The assignee would be entitled only to
c) In proportion to their private assets share the actual profits from the
d) None of above partners.
130. Property of the firm shall be held by use c) On dissolution of the firm, the assignee
of the partners……………. will be entitled to the share of the assets
a) Exclusively for business purposes. and also to accounts but only from the
b) For business purposes as well as date of dissolution.
private purposes of the partners. d) All of above
c) For the private purposes of the partners.
13
136. A and B, who work in partnership, deal business of the kind carried on by the firm
in purchase and sale of cloth. B starts cloth bind the firm and his partners
manufacturing business individually. A files unless:……….
a suit against B for sharing of profits of cloth a) The partner so acting has no authority to
manufacturing business with him. Will he act for the firm in that matter
succeed? b) The person with whom he is dealing
a) A partner can carry on business which is knows that he has no authority
of the same nature as and competing c) Does not know or believe him to be a
with that of the firm. Hence, A will partner.
succeed. d) All of above
b) A can also separately start cloth 140. This authority of partner may be……….
manufacturing business and he can a) Express
earn the profit. Hence he cannot b) Implied
recover. c) (a) or(b)
c) A partner shall not carry on business d) None of above
which is of the same nature as and 141. Authority is said to be express when it is
competing with that of the firm, he shall given by words,……………
account for the same and pay all such a) Spoken
profits to the firm. Cloth manufacturing is b) Written
different activity and not similar to c) (a) or (b)
purchase and sale of cloth. Hence, A d) None of above
will not succeed. 142. Where authority of a partner is conferred
d) None of above by mutual agreement, it is called as……….
a) Implied authority
RELATION OF PARTNERS TO THIRD PARTIES b) Express authority
(EXPRESS & IMPLIED AUTHORITY) c) Ostensible authority
137. Every partner is an agent of d) Apparent authority
the……….for the purpose of the business of 143. The implied authority of a partner is also
know as…………….
the firm.
a) Firm a) Ostensible authority
b) Other partners b) Apparent authority
c) Firm and of other partners c) (a) or (b)
d) None of above
d) None of above
138. Every partner is an agent of the firm and 144. Where authority of a partner is not
conferred by mutual agreement, but acts of
of other partners for
a) The purpose of the management of the partner which are exercised in ordinary
firm. course of business and which bind the firm
are known…………..of partner.
b) The purpose of other partners.
c) The purpose of liability to third parties a) Implied authority
d) The purpose of the business of the firm. b) Ostensible authority
139. The acts of every partner who does any c) Apparent authority
act for carrying on in the usual way the d) (a) or (b) or (c)
14
145. Which of the following conditions is d) Borrowing money on behalf of the firm.
necessary for the exercise of implied 150. Which of these acts falls outside the
authority? implied authority?
a) The act must relate to the business of a) Pledging goods of the firm as security.
the firm. b) Drawing, accepting and endorsing
b) The act must be done in the firm’s negotiable instruments.
business name. c) Acquire immovable property on behalf of
c) The act must be done in the usual way the firm.
of carrying on the firm’s business. d) Hiring solicitors to defend actions
d) All of above against the firm.
146. To bind the firm under implied authority, 151. Which of these acts are within the
the act must be done in the…………of implied authority?
carrying on the firm’s business. a) Settlement of accounts with third
a) Regular way parties.
b) Usual way b) Open a bank account on behalf of the
c) Routine way firm in the partner’s own name.
d) Extraordinary way c) Compromise or relinquish any claim or
147. Nitin, a partner of a firm dealing in portion of claim by the firm.
computers gives an order for wine worth Rs. d) Submit to arbitration, a dispute relating
10,000 in firm’s name. Discuss the liability? to the business of the firm.
a) The firm is liable to pay Rs. 10,000. 152. Which of these acts are within the
b) The firm can sale the wine to other. implied authority of a partner?
c) It does not relate to normal business of a) Acquire immovable property on behalf of
the firm. The firm will not be bound by it the firm.
as act is not within implied authority of a b) Borrowing money on behalf of the firm.
partner. c) Enter into partnership on behalf of the
d) None of above firm.
148. Which of these acts falls outside the d) Transfer immovable property belonging
implied authority? to the firm.
a) Purchase goods dealt or used by the 153. Which of these acts are within the
firm on behalf of the firm. implied authority of a partner?
b) Sale of the goods of the firm. a) Enter into partnership on behalf of the
c) Receiving payments of debts due to the firm.
firm and issuing receipt for it. b) Submit to arbitration, a dispute relating
d) Withdraw any suit or proceeding filed on to the business of the firm.
behalf of the firm. c) Pledging goods of the firm as security.
149. Which of these acts falls outside the d) Open a bank account on behalf of the
implied authority? firm in the partner’s own name.
a) Appointment of employees to carry on 154. Which of these acts are within the
the firm’s business. implied authority of a partner?
b) Admit any liability in a suit or a) Receiving payments of debts due to the
proceedings against the firm. firm and issuing receipt for it.
c) Pledging goods of the firm as security.
15
b) Open a banking account in his own firm including liabilities arising from
name on behalf of the firm contracts as well as torts (Section 25).
c) Withdraw a suit or proceeding filed on a) Acts
behalf of the firm b) Omissions
d) Transfer immovable property belonging c) Acts or omissions
to the firm d) None of above
155. The partners, by mutual agreement, 160. All partners are liable jointly and
can…………..the implied authority of any severally for all acts or omission binding on
partner. the firm including liabilities arising
a) Restrict from……………(Section 25).
b) Extend a) Offers
c) (a) or (b) b) Contracts
d) None of above c) Acceptance
156. The implied authority of any partner may d) Contracts as well as torts
be…………… 161. An act to be binding on the firm, it is
a) Restricted by contract between the necessary that the partner doing the act on
partners. behalf of the firm must have done that
b) Extended by contract between the act……………….
partners. a) In the name of the firm
c) Either extended or restricted by contract b) On behalf of the firm
behalf of the firm. c) Not in his personal capacity
d) Can be extended but not restricted by d) All of above
contract between the partners.
157. Where there is no restriction on implied LIABILITY OF THE FIRM FOR TORTS
authority, any act done by a partner which
162. Every partner is liable for the………….of
falls within his implied authority, binds the the other partners in the course of the
firm, except………….. management of business.
a) When there is a fraud a) Negligence
b) When there is a willful neglect
b) Fraud
c) When the third party dealing with the c) Negligence and fraud
firm knows of the restriction. d) Mistakes
d) When the third party induced the partner
into such act. LIABILITY OF AN INCOMING PARTNER
158. N & Z are partners in a firm dealing in
stationery. N placed order in the firm’s name 163. As a general rule, an incoming partner
and on the firm’s letter pad for 10 bags of is………………for the debts incurred before
wheat to be supplied at his residence. he joined the firm as a partner
a) The firm is not liable for N’s act a) Liable
b) The firm is liable for N’s act. b) Not liable
c) A has acted within his implied authority c) (a) or (b)
d) None of above d) (a) & (b)
159. Al partners are liable jointly and 164. As a general rule, an incoming partner is
severally for all…………….binding on the not liable for the debts incurred…………..
16
a) After he joined the firm as a partner b) All debtors of the firm

b) Before he joined the firm as a partner c) Other partners of the firm
c) Before some other partner joins with as d) Government
a partner
d) None of above LIABILITY OF AN OUTGOING / RETIRING
165. As a general rule, an incoming partner is PARTNER
not liable for the debts incurred, however,
170. An outgoing partner remains liable for
he may liable for past debts if it is agreed the partnership debts……………….
between………………. a) Contracted while he was a partner
a) The creditor of the firm b) For past & future debts
b) The partners existing at the time the
c) Incurred after he ceased to be a partner
debt was incurred
d) None of above
c) The incoming partner 171. An outgoing partner remains liable for
d) All of above the partnership debts contracted while he
166. The liability of a new partner generally
was a partner. He may, however be
commences from……………….
discharged if it is agreed between………….
a) The date of his admission. a) The creditor of the firm
b) The first date of the financial year in b) The other partners existing at the time
which he was admitted. the debt was incurred
c) Any day after his admission as he so
c) The outgoing partner
decides. d) All of above
d) Any day to be decided by the Registrar 172. Retiring partner continues to be liable
of Firm. for acts of the firm done……………
167. Normally, a incoming partner is liable for
a) Up to the date of giving public notice of
all acts done by the firm even before his
retirement.
admission. b) Up to the close of the financial year in
a) True which he retires.
b) Partly true c) Up to the date of admission of a new
c) False
partner.
d) None of the above d) All of the above
168. Where a new partner specifically agrees 173. Public notice of retirement should be
to bear past liabilities, third parties cannot given by…………………
hold a new partner liable since there
a) All the partners of the reconstituted firm.
is……………… b) By the retiring partner or any partner of
a) No consideration
the reconstituted firm.
b) No mutual agency c) Any partner of the reconstituted firm.
c) No valid partnership agreement d) Retiring partner only.
d) No privity of contract between the new
174. Where the continuing partners carry on
partner and such third parties. the business of the firm, the outgoing
169. Where a incoming partner specifically partner whose claim is not settled, is entitled
agrees to bear past liabilities, he will be to……………………
liable for such liabilities to…………….
a) All creditors of the firm
17
a) Share of profits since date of cessation d) Dissolution of firm name

as partner. 179. Any change in the relations of partners
b) 6% interest p.a. on the unsettled is called…………..This may happen due to
amount. admission, retirement or death of partner.
c) Both (a) and (b) a) Dissolution of partnership
d) Either (a) or (b) at his option. b) Dissolution of firm
c) Reconstitution of firm
DEATH OR INSOLVENCY d) Dissolution of firm name
175. The estate of a partner who dies or who 180. Business of firm is completely stopped,
becomes insolvent, is not liable for its assets are realized, liabilities paid off and
surplus distributed among partners
partnership debts contracted………………
according to their share in firm’s property.
a) after the date of the death or insolvency
b) Before the date of the death or This is known as……………
insolvency a) Dissolution of partnership
b) Dissolution of firm
c) After the 1st day of financial year in
which he dies or becomes insolvent
d) All of above d) Dissolution of firm name
176. The estate of a deceased partner is 181. A,B,C are partners on death of B, A and
liable for any act the firm done after his C continue the firm’s business. This is a
case of…………..
death.
a) True a) Dissolution of partnership
b) Partly true b) Dissolution of firm
c) False c) Death of partnership
d) All of above
d) None of the above
182. In which of the following case the
177. P,Q and R as are in partnership Q dies
on 15th June, which of the following dissolution of partnership takes place?
statement is true? (even when there is no dissolution of the
a) Q’s estate is not liable at all. firm)
a) By the expiry of the fixed term for which
b) Q’s estate is not liable for any acts of
the firm done after 15th June. the partnership was formed.
c) Q’s estate is liable for all acts up to the b) By the completion of the adventure.
end of the financial year when the death c) By the death of a partner.
d) All of above
occurred.
d) Q’s estate is liable only up to the 183. In which of the following case the
dissolution of partnership takes place?
previous financial year.
(even when there is no dissolution of the
DISSOLUTION firm)
a) By the retirement of a partner.
178. Dissolution of partnership between all b) By the insolvency of a partner.
the partners of a firm is called……….. c) By the death of a partner.
a) Dissolution of partnership d) All of above
b) Dissolution of firm
18
184. A firm may be dissolved c) If the business of the firm becomes

where………..agree that it shall be illegal because of some subsequent
dissolved. events, such as change of law
a) All the partners d) All of above
b) Majority of partners 190. Where the partnership is at will, the firm
c) Partners by majority may be dissolved at any time, by any
d) 3/4th partners partner giving notice in writing of his
185. A partnership firm with one partner can intention to dissolve the firm, to………..
continue. a) All the other partners
a) False b) Majority other partners
b) Partly false c) 3/4th partners
c) True d) None of above
d) None of above 191. In which of the following case, the Court
186. If all partners, or all but one partner, of may, at the suit of a partner, dissolve a
the firm are declared insolvent………….. firm?
a) Firm is also declared insolvent a) If a partner has become of unsound
b) Solvent partner has to repay the debts mind, the firm is dissolved on a petition
of the firm made by any of the other partners or by
c) Firm is automatically dissolved the next friend of the insane partner.
d) None of the above b) a partner becomes permanently
187. A firm is compulsorily dissolved incapable of performing his duties as a
if………….. partner.
a) All partners are adjudicated insolvent c) If a partner is found guilty of conduct
b) All of the partners but one, are which is likely to affect the carrying on of
adjudicated insolvent. business of the firm then application to
c) Both (a) & (b) Court shall be made by any partner who
d) Either (a) or (b) is not guilty of misconduct for dissolution
188. A, B and C are in partnership A and C of firm.
are adjudicated insolvent, while B wants to d) All of above
continue the firm. 192. In which of the following case, the Court
a) Firm is also declared insolvent. may, at the suit of a partner, dissolve a
b) B has to repay the debts of the firm. firm?
c) Firm is automatically dissolved and a) partner willfully and persistently commits
hence B cannot continue. breach of partnership agreement as
d) The Court has to give order for management
dissolution. b) Partner conduct himself in such a way
189. A firm is compulsorily dissolved that it is not reasonably practicable for the
if…………. other partners to carry on business in
a) All partners are adjudicated insolvent partnership with him.
b) All of the partners but one, are c) The firm has been continuously
adjudicated insolvent. suffering losses and in future also the
business cannot be carried on expect a t a
loss
19
d) all of above 197. If the firm has been continuously

suffering losses and it is apparent that in
193. In which of the following case, the Court future also the business cannot be carried
may, at the suit of a partner, dissolve a on except at a loss, the Court cannot order
firm? dissolution of the firm.
a) If it can be proved to the satisfaction of a) True
the court the it is just and equitable to b) Partly true
dissolve the firm c) False
b) If a partner has become of unsound d) None of the above
mind, the firm is dissolved on a petition 198. Firm is automatically/compulsory
made by any of the other partners or by the dissolved, if ……………
next friend of the insane partner. a) All partners, or all but one partner, of
c) Partner conducts himself in such a way firm are declared insolvent.
that it is not reasonably practicable for the b) Some event happens which makes it
other partners to carry on business in unlawful for business of the firm to be
partnership with him. carried on or for the partners to carry it
d) All of above on in partnership.
c) (a) or (b)
194. The Court may dissolve a firm if a d) None of above
partner………..commits breach of 199. In which of the following situations the
agreements relating to management of the firm will not be compulsorily dissolved?
affairs of the firm or the conduct of the firm’s a) All partners or any one of the partners is
business. declared insolvent.
a) Wilfully b) The business of the firm becomes
b) Persistently unlawful.
c) Either (a) or (b) c) The partnership has various adventures
d) Both (a) and (b) & one such adventure become illegal.
195. Firm may be dissolved…………… d) The decision is taken by all the partners
a) With the consent of all the partners to dissolve the firm.
b) In accordance with the contract 200. If at the time of admission partner pays
between them premium then on dissolution, he is entitled
c) (a) or (b) to demand the return of a proportion of the
d) None of above premium if the partnership was for a fixed
196. The Court may dissolve a firm if a term and was dissolved before the expiry of
partner conduct himself in such a way that if that term, unless dissolution was caused
is not reasonably practicable for the other by………….
partners to carry on business in partnership a) Agreement
with him. b) Misconduct of the party seeking return
a) With the consent of all the partners of the premium
b) In accordance with the contract between c) Death of a partner
them d) All of above
c) (a) or (b)
d) None of above
20
201. In setting the accounts of a firm after 205. Upon dissolution, the firm’s assets shall
dissolution, losses, including deficiencies of be first applied in paying the debts of the
capital, shall be paid…………… firm to third parties, shall thereafter be
a) Out of profits applied in payment of partners loan, shall
b) Out of capital then be applied in payment of partners
c) By the partners individually in the capital and still surplus remains it should
proportions in which they were entitled used for……………
to share profits a) In paying the debts of the firm to third
d) First out of profits, next out of capital, parties
and, lastly, if necessary, by the partners b) Payment of partners loan
individually in the proportions in which c) Payment of partners capital
they were entitled to share profits d) Distribution of surplus to partners in
202. Upon dissolution, the firm’s assets shall profit sharing ration.
be first applied in………….. 206. Upon dissolution, which is the proper
a) In paying the debts of the firm to third order for application of the Firm’s assets?
parties I. Payment of partners loan
b) Payment of partners loan II. In paying the debts of the firm to third
c) Payment of partners capital parties
d) Distribution of surplus to partners in III. Distribution of surplus to partners in
profit sharing ration. profit sharing ratio
203. Upon dissolution, the firm’s assets shall IV. Payment of partners capital
be firm applied in paying the debts of the a) I, IV, III, II
firm to third parties, shall thereafter be b) II, I, IV, III
applied in……………. c) II, I, III,IV
a) In paying the debts of the firm to third d) I,II,III,IV
parties 207. The private property of a partner should
b) Payment of partners loan be used to………..
c) Payment of partners capital a) Pay his private debts first and.
d) Distribution of surplus to partners in b) If there is any surplus it can be used to
profit sharing ration. pay firms liabilities
204. Upon dissolution, the firm’s assets shall c) (a) and (b)
be first applied in paying the debts of the d) None of above
firm to third parties, shall thereafter be 208. Firm’s assets should be first used to
applied in payment of partners loan, shall pay……………
then be applied in payment of partners a) Firm’s liabilities
capital. b) Private liabilities
a) In paying the debts of the firm to third c) Firm’s liabilities and if surplus remains
parties then it can be used to pay his private
b) Payment of partners loan liabilities of partner.
c) Payment of partners capital d) (a) or (b)
d) Distribution of surplus to partners in 209. Which of the following is prepared only
profit sharing ratio. at the time of dissolution of the firm?
a) Revaluation Account
21
b) Realization account earning capacity over a normal return on

c) Profit & Loss Adjustment Account investment.
d) All of the above a) Image of firm
210. ………….rule is applicable at the time of b) Goodwill
any partner becoming insolvent. c) Work quality
a) Garner vs. Murray d) None of the above
b) Derry vs. Peek 215. Which of the following is the right of
c) Salomon vs. A. Salomon & Co. Ltd. buyer of goodwill?
d) Mohiri Bibi vs. Dhamodas Ghose a) Represent himself in continuing the
211. Garner vs. Murray requires………. business
a) That the solvent partners should bear b) Maintain his exclusive rights to the use
the loss arising due to insolvency of a of the firm name
partner in their last agreed capital ratio c) Solicit former customers of the business
b) That the solvent partners should bring in and restrain the seller or the goodwill
cash equal to their respective shares of from doing so.
the loss on realization d) All of above
c) Both (a) & (b) 216. The vendors (partnership firm) may
d) None of above enter into competition with the purchaser
212. In which of the following case Garner vs. unless he is prevented by a valid restraint
Murray rule is not applicable? clause in the contract of sale.
a) Only one partner is solvent a) True
b) All partners are insolvent. b) False
c) Partnership deed provides for a specific c) Partly true
method to be followed in case of d) None of above
insolvency of a partner
d) All of the above REGISTRATION OF THE FIRM
213. When the partners capital accounts are 217. Registration of firm does not create
fixed, as per the decision in the Garner vs. partnership.
Murray case, any loss arising due to the
a) True
capital deficiency in the insolvent partners’ b) Partly false
capital accounts is to be borne by solvent c) False
partners in the ration of ………….. d) None of above
a) Profit sharing ratio
218. A partnership firm has to be
b) Scarifying ratio compulsorily registered in order to
c) Gaining ratio
commence its business.
d) Last agreed capital ratio a) True
GOODWILLL b) Partly true
c) False
214. ………….may be described as the d) None of the above
aggregate of those intangible attributes of a 219. Registration of firm may be effected at
business which contribute to its superior any time during the continuance of
partnership.
22
a) True c) False
b) Partly true d) None of the above
c) False 225. A partner of an unregistered firm cannot
d) None of the above sue the firm or any other partner of the firm
220. Which of the following is not required to to enforce a right………………
be given in an application for registration of a) Arising from a contract
a firm? b) Conferred by the Partnership Act
a) Firm name c) Either (a) or (b)
b) Place of business or principal place of d) Both (a) and (b)
business 226. An unregistered firm cannot file a suit
c) Names of any other places where the against a third party to enforce any right
firm carries on business. arising from a contract.
d) Details of capital contribution of a) True
partners. b) Partly true
221. Which of the following is not required to c) False
be given in an application for registration of d) None of the above
a firm? 227. An unregistered firm suffers from the
a) Firm name following disabilities-
b) Date when each partner joined the firm. a) No suit between partners and firm
c) Date of birth of each partner of the firm. b) No suit by firm on a third party
d) Duration of the firm. c) No claim of set-off
222. Application for registration of firms d) All of the above
should be signed by……………. 228. In which of the following case there is no
a) All the partners or their agents. bar on the right of third-parties to sue the
b) Majority of the partners of their agents. firm or any partner.
c) All working partners of their agents. a) A suit for the dissolution of a firm
d) All minor partners. b) A suit for rendering of accounts of a
223. Application for registration of firms dissolved firm
should be signed by……………… c) A suit for realization of the property of a
a) All the partners. dissolved firm.
b) Specially authorized agents of all the d) All of the above.
partners. 229. In which of the following case there is no
c) Bothe (a) and (b) bar on the right of third-parties to sue the
d) Either (a) or (b) firm or any partner.
a) A uit or claim of set-off, the value of
EFFECTS OF NON-REGISTRATION which does not exceed Rs. 100.
224. A partner of an unregistered firm can b) A proceeding in execution or other
proceeding incidental to or arising from
sue the firm or any other partner of the firm
to enforce a right arising from a contract or a suit or claim for not exceeding Rs.
a right conferred by the partnership Act. 100.
a) True c) A suit by a firm which has no place of
b) Partly true business in the territories to which the
Indian Partnership Act extends
23
d) All of the above • Contract of indemnity and guarantee

230. Non-registration of a firm does not affect • Contract of bailment and pledge
the rights of the firm to institute a suit or • Law of agency
claim of set-off not exceeding…………
a) Rs. 100. MEANINF & NATURE OF CONTRACT
b) Rs. 1,000 1. The law relating to contracts is contained in
c) Rs. 10,000 …….
d) Rs. 50,000 (a) The Indian Contract Act, 1862
231. An unregistered firm can bring a suit to (b) The Indian Contract Act, 1952
enforce a right arising otherwise than out of (c) The Indian Contract Act, 1872
(d) The Indian Contract Act, 1972
contract e.g., for an injunction against a 2. The Indian Contract Act extends to ……..
person for wrongful infringement of trade (a) Whole of India
mark etc. (b) Whole of India excluding State of Delhi
a) True & Maharashtra
b) False (c) Whole of India excluding State of
c) Partly true Jammu & Kashmir
d) None of above (d) Whole world
232. A firm is merely a collection of partners 3. The Indian Contract Act, 1872 came into
and cannot bring a suit for libel or slander. force on the first day ……
a) True (a) 1st of September, 1872
b) False (b) 1st of October, 1930
c) Partly true (c) 1st of July, 1932
d) None of above (d) 1st of September, 1972
4. A contract is an agreement creating and
defining obligations between the parties.
Chapter 10 This definition of contracts is given by ……..
THE INDIAN CONTRACT Act, 1872 (a) Sir Fredrick Pollock
(b) Salmond
THESE CHAPTER COVERS MCQs ON: (c) Anson
• Meaning and nature of contract (d) Sibble
• Agreement 5. A contract is an agreement enforceable at
• Obligation law, made between two or more persons, by
• Rights and obligation which rights are acquired by one or more to
• Essential elements of a valid acts or forbearances on the part of the other
contract or others. This definition of contract is given
• Flaws in contract by ……
• Void agreement (a) Sir Fredrick Pollock
(b) Salmond
• Voidable contract
(c) Anson
• Illegal agreement
(d) Sibble
• Discharge or termination of contracts
• Illegal agreement
• Discharge or termination of contracts
24
6. Every agreement and promise enforceable (b) Rejected

at law is a contract. This definition of (c) Avoided
contract is given by …….. (d) Rounded
(a) Sir Fredrick Pollock 13. Section 2(b) of the Indian Contract Act,
(b) Salmond 1872, defines ….
(c) Anson (a) Offer acceptance
(d) Sibble (b) Proposal
7. As per Section 2(h), a contract is an (c) Acceptance
agreement enforceable by ….. (d) Invitation to make an offer
(a) Third party 14. A proposal, when accepted, becomes a
(b) Law ……
(c) One party (a) Offer
(d) Both parties (b) Agreement
8. Law of contract covers ….. (c) Contract
(a) Personal obligation (d) Promise
(b) Private obligation 15. The meeting of the minds is called ……
(c) Contractual obligation (a) Jus in rem
(d) Obligation imposed by third parties (b) Consensus-ad-idem
AGREEMENT (c) Jus in personam
9. As per Section 2(e) of the Indian Contract (d) Void ab initio
Act, 1872 …… forming the consideration for 16. As per Consensus-ad-idem both the parties
each other, is an agreement. to an agreement must agree about the
(a) Every promise subject matter of the agreement ……
(b) Every offer (a) In the same sense
(c) Every promise and every set of (b) At the same time
promises (c) Both (a) & (b)
(d) None of above (d) (a) or (b)
10. Contract = Agreement + ------- 17. Mr. Chetan owns two horses named
(a) Enforceability by law Rajhans and Hansraj, is selling horse
(b) Enforceability by parties Rajhans to Mr. Pavan. Mr. Pavan thinks that
(c) Enforceability by Parliament he is purchasing horse Hansraj. The
(d) All of above following is missing …….
11. Agreement = ……… + Acceptance (a) Jus in rem
(a) Consent (b) Consensus-ad-idem
(b) Silence (c) Jus in personam
(c) Offer (d) Void ab initio
(d) None of above 18. Which of the following is not contract?
12. According to Section 2(b) of the Indian (a) Social obligation
Contract Act, 1872 when the person to (b) Obligation imposed on Mr. A by Mr. B
whom the proposal is made signifies his under an agreement enforceable under
assent thereto, the proposal is said to be law
…….
(a) Accepted
25
(c) Obligation imposed on Mr. A by Mr. A month. Later parties separated and the
under an agreement enforceable under husband failed to pay the amount. This is
law ……
(d) All of above (a) Contract
19. Mr. Parag invites Ms. Dhanshri to a dinner. (b) Not a contract
It is …….. (c) Agreement enforceable by law
(a) Social obligation only (d) None of above
(b) Social obligation enforceable by law
(c) Social obligation not enforceable by law ESSENTIAL ELEMENTS OF A VALID
(d) Ms. Dhanshri must go to dinner CONTRACT
20. Mr. Invites Mr. B for his son’s wedding. Mr.
B accepts the invitation. In this case, there 25. Which of the following is essential element
is ….. of valid contract …..?
(a) Legal agreement (a) There must be offer and acceptance
(b) Social agreement (b) There must be intention to create legal
(c) Legal obligation on the part of Mr. B to relationship
attend wedding ceremony (c) There must lawful consideration
(d) (a) & (c) (d) All of above
21. Mr. A invites Mr. B for coffee in a restaurant 26. Which of the following is /are essential
and Mr. B accepts the invitation. On the element of valid contract ………
appointed date, Mr. B goes there bur Mr. A (a) The parties must have legal capacity to
is not found. In this case ……. contract
(a) Mr. B has no remedy against Mr. A (b) There must be free & genuine consent
(b) Mr. B has to wait for another invitation (c) There must lawful object
from Mr. A (d) All of above
(c) Mr. B can sue Mr. A for honoring his 27. Which of the following is / are essential
words element of valid contract ……..
(d) Mr. A has to invite Mr. B again, to (a) There must be free & genuine consent
perform the promise. (b) There must be offence
22. All agreements are not contract but all …. (c) There must not be intention to create
Are agreements. legal relationship
(a) Offer (d) All of above
(b) Acceptance 28. This of the following is / is essential of valid
(c) Obligation contract ……
(d) Contracts (a) Consideration
23. Every contract is an agreement but every (b) Free consent
agreement is not a contract. (c) Capacity of parties
(a) True (d) All of above
(b) False 29. This of the following is essential element of
(c) Partly true valid contract ……
(d) None of above (a) The parties must have legal capacity to
24. A husband promised to pay his wife a contract
household allowance of Rs2,500 every (b) There must be free & genuine consent
26
(c) There must be lawful object (a) Offeror

(d) All of above (b) Proposer
(c) Promiser
OFFER OF PROPOSAL (d) All of above
30. The term “Proposal” used in the Indian 35. The person making the offer / proposal is
Contract Act, 1872 is synonymous with the known as ……..
term ……. (a) Promisee
(a) Contract (b) Promisor
(b) Offer (c) Participator
(c) Agreement (d) Principle
(d) None of above 36. The person to whom the offer is made is
31. Proposal or offer is defined in …… known as ……
(a) Section 2(a) (a) Offeree
(b) Section 2(b) (b) propose
(c) Section 2(c) (c) Promise
(d) Section 2(d) (d) All of above
32. Indian Contract Act, 1872 defines the term 37. An offer may be ……
proposal (offer) as …….. (a) Express offer
(a) A person is said to have made a (b) Implied offer
proposal, when he, “signifies to another (c) (a) or (b)
his willingness to do a particular thing (d) None of above
only”. 38. An offer inferred from the circumstances or
(b) A person is said to have made a conduct of the parties is known as …….
proposal, when he, “signifies to another (a) Express offer
his willingness to do or to abstain form (b) Implied offer
doing a thing, with a view to obtaining (c) (a) or (b)
the assent of that other, to such act or (d) None of above
abstinence he is said to make a 39. When offer is made to a definite person or
proposal”. group of person is known as ……..
(c) A person is said to have made a (a) Express offer
proposal, when he, “signifies to another (b) Implied offer
his unwillingness for not doing a (c) Specific offer
particular thing”. (d) General offer
(d) None of above 40. Which of the following is implied offer?
33. Mr. A says to Mr. B, “will you purchase may (a) A says to B will you purchase my car for
car for Rs.5,000?” In this case a Mr. A is Rs.20,000
making …… (b) A advertises in newspaper offering
(a) Offer Rs.500 to anyone who returns his lost
(b) Acceptance dog.
(c) Asking question to B (c) Transport Company runs a bus on
(d) None of above particular route.
34. The person marking the offer is known as (d) Husband promises to wife to pay Rs.500
………. p.m.
27
41. Specific offer can be accepted by …….. 48. Offer should not contain a term ….. of which
(a) Any person may be assumed to amount to acceptance.
(b) Only by person to whom it is made (a) Non compliance
(c) Any person who hears the offer (b) Compliance
(d) All of above (c) Which is positive condition
42. A general offer can be accepted by ….. (d) Negative condition
(a) Any person to whom communication 49. An offer may be distinguished from ……
reaches (a) A declaration of intention
(b) Only by person to whom it is made (b) An announcement
(c) A person who lives neater to person (c) Both (a) & (b)
making offer (d) None of above
(d) All of above 50. An offer may be distinguished from …….
43. Offer must be such as in law is capable of (a) An invitation to make an offer
being ……. (b) To do business
(a) Accepted (c) Both (a) & (b)
(b) Unambiguous (d) None of above
(c) Certain 51. Which of the following is / are example of
(d) All of above invitation to make an offer?
44. Terms of offer must be ….. (a) Distribution of price list by a seller
(a) Definite (b) Menu card of a restaurant showing the
(b) Unambiguous rates of food items
(c) Certain (c) Employment advertisement
(d) All of above (d) All of above
45. Which of the following can be treated as 52. Which of the following is / are example of
offer? invitation to make an offer?
(a) A declaration of intention & an (a) Railway time table showing the timing of
announcement trains and respective fares.
(b) An invitation to make an offer or to do (b) Issue of prospectus by a public
business company inviting the public to subscribe
(c) Newspaper advertisement for share or debenture
(d) None of above (c) Distribution of price list by a seller
46. Offer to be completed must be ……. (d) All of above
(a) Communicated 53. An auctioneer advertised in the newspaper
(b) Not required to be communicated that a sale of office furniture will be held at
(c) Declared Bangalore Ajay, a broker of Mumbai,
(d) None of above reached Bangalore on the appointed date
47. Offer must be made with a view to ….. and time. But the auctioneer withdrew all
(a) Obtaining the assent of party to whom it the office furniture from the auction sale.
likely to be make. The broker sued for his loss of time and
(b) Rejected by other party expenses. Will be succeed?
(c) Make trouble to other party (a) Yes. Such an auction is an offer hence
(d) All of above Ajay will succeed in getting
compensation from the auctioneer
28
(b) No. Such an auction is not an offer; it is (b) If offer is accepted in the mode
only an invitation to offer. Ajay will not prescribed or of no mode is prescribed
succeed in getting compensation from in some usual and reasonable manner
the auctioneer. (c) If acceptor fails to fulfill a condition
(c) Both (a) & (b) precedent
(d) None of above (d) None of the above
54. When two parties make identical offers to 60. An offer comes to an end ……
each other, in ignorance of each other’s (a) By communication of notice of
offer, the offers are …… revocation by the offer or
(a) Counter offers (b) Lapse of time
(b) Cross offers (c) By non-fulfillment of a condition
(c) Specifics offers precedent by the offer
(d) General offers (d) All of above
55. Making cross offers does result into valid 61. An offer comes to an end ……
contract. (a) By death or insanity of the offeror.
(a) True (b) If a counter offer is made.
(b) False (c) If an offer is not accepted according to
(c) Partly true the prescribed or usual mode.
(d) Partly false (d) All of above
56. Offer to an original offer is know as ……. 62. An offer comes to an end ……..
(a) Counter offer (a) By change in law
(b) Cross offer (b) By non-fulfillment of condition precedent
(c) Specific offer by offeree
(d) General offer (c) By communication of notice of
57. When counter offer is made, original offer revocation by the offerror
…… (d) All of above
(a) Becomes effective
(b) Comes to an end ACCEPTANCE
(c) Becomes valid contract
(d) All of above 63. Which of the following definition of
acceptance is correct as per Section 2(b)?
LAPSE OF OFFER & REVOCATION OF OFFER (a) A proposal or offer is said to have been
accepted when the person to whom the
58. An offer that has been communicated proposal to do something
properly continues as such until ……. (b) A proposal or offer is said to have been
(a) It lapses accepted when the person to whom the
(b) It is revoked proposal is made signifies his assent to
(c) It is rejected or accepted the proposal to do or not to do
(d) Any of the above something subject to certain condition.
59. An offer comes to an end ……. (c) A proposal or offer is said to have been
(a) If offer is accepted within the specified accepted when the person to whom the
time proposal is made or any other person
29
signifies his assent to the proposal to do (b) Acceptance must not be according to
or not to do something. prescribed mode
(d) None of above (c) Acceptance must be within a reasonable
64. Acceptance may be …… time
(a) Express only (d) All of above
(b) Implied only 71. Which of the following statement is true?
(c) Express or implied (a) An offer cannot precede acceptance
(d) None of above (b) Acceptance must be given before the
65. Offer is a train of gun power while offer lapses of before offer is withdrawn
acceptance is lighted match (c) Acceptance can be implied from silence
(b) False 72. Which of the following statement is true?
(c) Partly true (a) Acceptance must be qualified
(d) None of above (b) Acceptance need not be communicated
66. When offer is made to particular person it to the offer or
can be accepted by ….. (c) Acceptance must be according to the
(a) Any person from public mode prescribed / usual and reasonable
(b) Any member of his family mode.
(c) Him alone (d) All of above
(d) Any of above 73. Which of the following statement is true?
67. General offer can be accepted by …… (a) Acceptance must be given within a
(a) Any person form public to whom the prescribed time
communication offer reaches (b) Acceptance cannot precede an offer.
(b) Particular person (c) Acceptance must show an intention on
(c) Family members of person making offer the part of the acceptor to fulfill terms of
(d) None of above the promise
68. Which of the following statement false? An (d) All of above
acceptance …… 74. Which of the following statement is true?
(a) Must be communicated (a) Acceptance must be given by the party
(b) Must be absolute & unconditional to whom the offer is made
(c) Must be accepted by a person having (b) Acceptance must be given before the
authority to accept offer lapses or offer comes to an end.
(d) May be presumed from silence of (c) Acceptance cannot be implied from
offeree. silence
69. Acceptance must be given within ……. (d) All of above
(a) One year from the date of receiving offer 75. Which of the following statement is
(b) Prescribed time incorrect?
(c) If no time limit is prescribed, it must be (a) Acceptance can precede an offer
given within a reasonable time (b) Acceptance must be given before the
(d) (b) or (c) offer lapses or before offer is withdrawn
70. Which of the following sentences is true? (c) Acceptance can be implied from silence
(a) Acceptance must not be communicated (d) (a) & (c)
to the offer
30
76. Which of the following statement is (c) Essential

incorrect? (d) None of above
(a) Acceptance must not be given within a 81. An agreement made without consideration
prescribed time. is ……..
(b) Acceptance cannot precede an offer. (a) Illegal
(c) Acceptance must be not show an (b) Voidable
intention on the part of the acceptor to (c) Void
fulfill terms of the promise (d) Social
(d) All of above 82. Consideration may be form of …..
(a) Right
STANDING OFFERS, TICKETS & CONTRACTS (b) Forbearance
BY POST (c) Detriment
(d) Any of the above
77. A tender to supply goods as and when 83. Consideration may be defined as ……
required, amounts to a ……. (a) Something for anything
(a) Standing offer (b) Something for nothing
(b) Personal offer (c) Something in return
(c) Private offer (d) Something for money
(d) None of above 84. Consideration must move at the desire of
78. A standing offer is also known as ……. …..
(a) A definite offer (a) Promise
(b) Continuing offer (b) Promisor
(c) Private offer (c) Debtor
(d) Personal offer (d) Third party
79. If a passenger on a railway train receives a 85. Consideration need not be …..
ticket on the face of which is printed “this (a) Inadequate
ticket is issued subject to the notices, (b) Adequate
regulations and conditions contained in the (c) Less than consideration that other party
current time-tables of the railway”. With has received
reference to above which of the following (d) Equal
statement is correct? 86. Which of the following statement is false?
(a) The regulations and conditions referred (1) Consideration must move at the desire
to are not deemed to be communicated of the promisor
(b) The regulations and conditions referred (2) Consideration need to be adequate
to are deemed to be communicated (3) Consideration must move from promise
(c) This may be treated as valid (4) Consideration may be in form of an act,
communication if offeree&offeror treats abstinence or forbearance or a return
as valid communication promise
(d) None of above (a) 1 & 2
80. Consideration is one of the …… element to (b) 2 & 3
support a contract. (c) 3 & 4
(a) Non-required (d) 4 & 5
(b) Not essential
31
87. Exceptions to rule-No consideration no 92. Consideration may be ……

contracts are contained in ……. (a) An act of abstinence
(a) Section 10 of Indian Contract Act, 1872 (b) Promise
(b) Section 25 of sale Goods Act, 1930 (c) (a) or (b)
(c) Section 25 of Indian Contract Act, 1930 (d) None of above
(d) Section 10 partnership Act, 1932 93. Consideration must be real.
88. Father promised to pay his son a sum of Rs. (a) True
1, 00,000 if the son passes CS examination (b) False
in first attempt. The son passed the (c) Partly true
examination in first attempt, but father failed (d) None of above
to pay the amount as promised. Which of 94. Consideration must not be ……
the following statement is correct in relation (a) Vague
to this case? (b) indefinite
(a) An agreement is void as it not supported (c) illusory
by consideration (d) All of above
(b) Agreement does not create legal 95. If the consideration is unlawful, the
relations between son & father agreement …….
(c) Son cannot recover Rs.1, 00,000 from (a) Void
father (b) Valid
(d) All of above (c) Enforceable
89. Which of the following statement is true? (d) All of above
(a) Consideration must result in a benefit to 96. An agreement without consideration is valid
both parties if it is ……. Between parties standing in a
(b) Past consideration is not consideration near relation to each other
in India. (a) Expressed in writing
(c) Consideration must be adequate (b) Registered
(d) Consideration must be something, (c) Is made out of natural love and affection
which a promisor is already bound to do. (d) All of above
90. Which of the following statement is false? 97. An agreement without consideration is valid
(a) Generally, a Stanger to a contract if it is made to compensate a person who
cannot sue. has already done something voluntarily for
(b) A verbal promise to pay time barred the promisor was legally compellable to do.
debt is valid. (a) True false
(c) Completed gifts need no consideration (b) Partly true
(d) No consideration is necessary to create (c) Partly false
an agency. (d) None of above
91. Which of the following statement is true? 98. In the case of gift actually made,
(a) There can be stranger to a contract consideration is necessary.
(b) There can be a stranger to a (a) True
consideration (b) False
(c) There can be a stranger to a contract & (c) Partly true
consideration (d) None of above
(d) None of above
32
99. A, for natural love and affection, promises to (b) False

give his son B Rs.10, 000. A put his promise (c) Partly true
to B into writing and registered it. This is (d) None of above
…… 104. An agreement to agree in the future
(a) Not a contract constitutes a binding contract.
(b) A contract (a) True
(c) Not valid contract (b) False
(d) None of above (c) Partly true
100. As per decision in Rajluckhy Deb v. (d) None of above
Bhoothnath, where a husband by a 105. A contract to contract is not a
registered document, after referring to contract.
quarrels and disagreement between himself (a) True
and his wife, promised to pay his wife a sum (b) False
of money for her maintenance and separate (c) Pertly true
residence; the promise was ……… (d) Partly false
(a) Enforceable, as it was a registered 106. A contract is always based upon
document. ……..
(b) Unenforceable, as it was not made for (a) An unqualified acceptance of a definite
love and affection. offer
(c) Enforceable, as it was a duty of (b) An intent to create legal obligations
husband to maintain his wife (c) Consideration
(d) None of above (d) All of above
101. A gratuitous promise to subscribe to
a charitable cause …….. FLAWS IN CONTRACT
(a) Cannot be enforced
(b) Can be enforced 107. The agreement may be treated as of
(c) Is valid contract no effect and it will then be known as ………
(d) None of above (a) Void contract
102. As per decision in KedarNath v. (b) Void agreement voidable contract
Gorie Mohan, in case of charitable (c) Illegal agreement
subscription where the promise on the 108. The law may give the party aggrieve
strength of promise makes a commitment the option of getting out of his bargain. That
i.e. changes his position to his detriment. is to say contract which is enforceable at the
Such gratuitous promise …….. option party are known as ……..
(a) Cannot be enforced (a) Void contract
(b) Can be enforced (a) or (b) (b) Void agreement
(c) None of above (c) Voidable contract
(d) Illegal agreement
TERMS MUST BE CERTAIN 109. A ………. Is one which is destitute of
all legal effects and not enforceable from
103. The Court will not enforce a contract the beginning itself.
the terms of which are uncertain (a) Void agreement
(a) True (b) Quasi contract
33
(c) Implied agreement (a) Fraud

(d) Voidable contract (b) Undue Influence
110. A void agreement ……. (c) Coercion
(a) Cannot be enforced (d) All of above
(b) Confers no rights on either party 117. The chief flaws in contract is / are
(c) Both (a) & (b) …….
(d) None of above (a) illegality
111. A contract which, ceases to be (b) Impossibility
enforceable by law is known as …… (c) Incapacity
(a) Void agreement (d) All of above
(b) Valid contract
(c) Valid agreement FLAW IN CAPACITY
(d) Voidable contract
112. …….. is an agreement, which 118. Who are not competent to make a
involves the transgression of, some rule of contract?
basic public policy and is criminal in nature (a) Minor
or immoral. (b) A person of unsound mind (i.e. lunatics,
(a) Valid contract idiots, drunken / intoxicated person)
(b) Implied agreement (c) A person who is disqualified to contract
(c) Voidable contract under any law.
(d) Illegal agreement (d) All of above
113. A …… is one which a party can put 119. Every person is competent to
to an end, if his consent was not free. contract if ……
(a) Void contract (a) He is major
(b) Void agreement (b) He is of sound mind
(c) Voidable contract (c) He has not been disqualified to contract
(d) Illegal agreement under any law
114. …….. is one which transaction (d) All of above
collateral to it also become tainted with 120. Which of the following persons are
illegality and are, therefore, not enforceable incompetent to contract?
(a) Void contract (a) Minors
(b) Void agreement (b) Persons of unsound mind
(c) Voidable contract (c) Persons disqualified to contract under
(d) An Illegal contract any law
115. …… is one which transaction’s (d) All of above
collateral to it also become tainted with 121. A minor is a person who has not
illegality and are, therefore, not enforceable completed ………
(a) Capacity (a) 16
(b) Mistake (b) 18
(c) Presentation (c) 14
(d) All of above (d) 25
116. The chief flaw in contract is / are 122. The person continues to be a minot
…… until he completes his age of ….. years
34
(a) 16 (a) Minor can enter into a contract of

(b) 18 partnership
(c) 21 (b) Minor cannot be adjudicated as
(d) 25 insolvent
123. The person continues to be a minor (c) Minor can be principle
until he completes his age of 21 years. (d) None of above
(a) In case a guardian has been appointed 129. In case of supply of necessary
to the minor goods or services, a minor is ……
(b) Where the minor is under the (a) Personally liable
guardianship of the Court of Wards (b) Liable through his guardian
(c) (a) or (b) (c) Liable to pay out of his property
124. It was laid down by the Privy Council 130. Which of the following does not
in …….. that a minor has no capacity to constitute necessary goods in relation to
contract and minors contract is absolutely contracts with minor ……..
void (a) A watch
(a) NohiriBibi v. DharmodasGhose (b) A bicycle
(b) Mohiri Rani v. Dharmodas Gore (c) Clothes
(c) MohiniBibi v. DharmeshGhose (d) Fancy coats
(d) Mohan Baba v. DharmodasGhose 131. Which of the following constitute
125. An agreement with or by minor is necessary service in relation to contract with
……. minor?
(a) Voidable at the option of minor (a) Education
(b) Void ab initio (b) Medical service
(c) Valid (c) Legal advice
(d) Illegal (d) All of above
126. Minor can be …… 132. When loan is taken by minor to
(a) Principle obtain necessaries he is …….
(b) Void ab initio (a) Personally liable
(c) Valid (b) Liable to pay out of his property
(d) Illegal (c) Liable through his guardian
127. Which of the following statement is (d) None of above
correct? 133. A minors liability for ‘necessaries’
(a) Minor can be promise or beneficiary supplied to him;
(b) Minor cannot ratify the agreement (a) Arises after he attains majority
entered during minority on attaining the (b) Is against only minors property
age of majority (c) Does not arises at all
(c) There can be no specific performance of (d) Arises if minor gives a promise for it.
the agreement entered into by him. 134. Which of the following statement is
(d) All of above not true about minor’s position in firm?
128. Which of the following statement is (a) Minor cannot become a partner in an
correct? existing firm
35
(b) Minor can become a partner in an who is a minor, is valid and enforceable at
existing firm law.
(c) Minor can be admitted only to the (a) True
benefits of any existing firm (b) False
(d) He can become partner on becoming a (c) Partly true
major (d) None of above
135. A minor is liable for the …… 140. Teji,a minor, broke his right leg in a
supplied to him football match. He engaged Curewell, a
(a) Necessaries doctor, to set it. In relation to this case
(b) Luxuries which of the following statement Is correct?
(c) Necessities (a) Doctor cannot have valid claim for his
(d) All the things service
136. A contract with the minor, which is (b) Doctor can recover the expenses
beneficial for him, is ……. froTeji’s parents
(a) Void ab initio (c) Contract with minor for rendering
(b) Voidable necessary service are valid and hence
(c) Valid Teji’s property will be liable be
(d) Illegal compensate doctor’s services.
137. An agreement by a parent or (d) None of above
guardian entered into on behalf of the minor 141. A person of unsound mind can enter
is binding on him provided it is for his into a contract.
benefit or is for legal necessity. (a) True
(a) True (b) False
(b) False (c) Partly true
(c) Partly true (d) None of above
(d) None of above 142. Ramlal, an adualt said to Munna, a
138. As per decision in Rose Fernandez minor, “I will not pay the commission, I
v. Joseph Gonsalves, if the parties are of promised you for selling my magazines. You
the community among whom it is customary are minor and cannot force me to pay.” In
for parents to contract marriage for their this case ………
children, then ……. (a) Minor should forge the commission.
(a) Such a contract would be bad in law and (b) Can recover the commission
no action for its breach would lie. (c) Minor should wait for attending majority
(b) Such a contract would be bad in law and (d) Minor should learn that, not to make a
parents are advised not to enter into contract with major
contract on behalf of minor. 143. A minor can make a contract fro his
(c) Such a contract would be good in law benefit with ……
and an action for its breach would lie, if (a) Major
the contract is for the benefits of the (b) Another minor
minor (c) Lunatic person
(d) All of above (d) Idiots
139. An agreement for service, entered 144. An agreement buy lunatic when he
into by a father on behalf of his daughter is of unsound mind is ……
36
(a) Valid (d) None of above

(b) Void 151. A contract with alien enemy is valid.
(c) Voidable (a) True
(d) Enforceable (b) False
145. An agreement by lunatic when he is (c) Partly true
of sound mind is …….. (d) None of above
(a) valid 152. A contract with an alien enemy
(b) void becomes ….. in the outbreak of war.
(c) voidable (a) Unenforceable
(d) enforceable (b) Enforceable
146. If a contract entered into by a lunatic (c) Valid
or person of unsound mind is for his benefit, (d) Acceptable
it …… 153. In Indian professional persons like
(a) Can be enforced Advocate & Doctors can sue their clients for
(b) Cannot be enforced their professional fees?
(c) Becomes voidable (a) True
(d) Becomes illegal (b) False
147. A person who is usually of sound (c) Partly true
mind, but occasionally of unsound mind (d) None of above
…….. 154. A corporation is an artificial person
(a) May enter into contract when is is of created by law and its capacity and powers
sound mind. to contract are limited by its ………
(b) May enter into contract when he is of (a) Charter
unsound mind (b) Memorandum of association
(c) Cannot enter into contract at all (c) (a) or (b)
(d) Can enter into a contract at all times but (d) None of above
can plead innocence. 155. Any contract beyond the power of
148. Who among the following is not Charter or MOA is ……..
disqualified by law to enter into contract? (a) Intra vires and valid
(a) 1 & 2 (b) Ultra vires and void
(b) 2 & 2 (c) Intra vires and valid
(c) 3 & 4 (d) Ultra vires and valid
(d) 1 & 4 156. In India there is difference between
149. Which of the following person is / are a man and a woman regarding contractual
treated as person of unsound mind? capacity.
(a) Idiots (a) True
(b) Drunken (b) False
(c) Lunatic (c) Partly true
(d) All of above (d) None of above
150. A contract with alien friend is valid.
(a) True MISTAKE
(b) False
(c) Partly true 157. Mistake may be …….
37
(a) mistake of Fact (d) Mistake as to Identify of particular

(b) Mistake of Law person
(c) Mistake as to Identify of particular 164. To be operative so as to render the
person contract void, the mistake must be ……..
(d) Any one of above (a) Of fact, and not of law or opinion
158. Mistake may be …… (b) The fact must be essential to agreement
(a) Mistake of Fact (c) Must be on the part of both the parties
(b) Mistake of Law (d) All of above
(c) Mistakes as to Identify of particular 165. Where both parties believe the
person subject matter of the contract to be in
(d) Any one of above existence but in fact, it is not in existence at
159. Mistake may be ……… the time of making the contract, there is
(a) Bilateral mistake ……
(b) Unilateral mistake (a) Mistake as to quantity of the subject
(c) (a) or (b) matter
(d) None of above (b) Mistake as to existence of the subject
160. A contract made by mistake about matter
Indian law, is ……… (c) Mistake as to quality of the subject
(a) Void matter
(b) Valid (d) Mistake as to Identify of particular
(c) Voidable person
(d) Enforceable 166. Where there is mistake as to
161. When there is mistake of law of existence of the subject matter, the contract
foreign country agreement is ……. is ………
(a) Void (a) Valid
(b) Valid (b) Voidable
(c) Voidable (c) Void
(d) Illegal (d) Illegal
162. Where both the parties to an 167. Where the parties are not in
agreement are under mistake as to matter agreement to the identity of the subject
of fact essential to the agreement there is matter there is …..
…… (a) Mistakes as to quantity of the subject
(a) Unilateral mistake matter
(b) Mistake of foreign law (b) Mistake as to existence of the subject
(c) Bilateral mistake matter
(d) Mistake as to identify of particular (c) Mistake as to quality of the subject
person matter
163. When in a contract only one of the (d) Mistake as to identify of the subject
parties is at mistake it is called as ……. matter
(a) Unilateral mistake 168. Mistake as to identify of the subject
(b) Mistake of foreign law matter, the contract is ……….
(c) Bilateral mistake (a) Valid
(b) Voidable
38
(c) Void 173. In order to avoid a contract on the

(d) Illegal ground of misrepresentation, it is necessary
169. The facts of Henkel v. pape were: P to prove that …….
wrote to H inquiring the price of rifles and 174. In order to avoid a contract on the
suggested that he might buy as many as 50. ground of misrepresentation, it is necessary
On receipt of a reply he wired send 3 rifles. to prove that ……..
Due to the mistake of the telegraph clerk the 175. The aggrieved party, in case of
message transmitted to H was send the misrepresentation by the other party can:
rifles. H dispatched 50 rifles. There was …….
…… (a) A void or rescind the contract
(a) No contract between the parties (b) Accept the contract but insist that he
(b) Contract between the parties shall be placed in the position in which
(c) Contract between the parties and P is he would have been if the
liable to pay for 50 rifles representation made had been true.
(d) None of above (c) Both (a) & (b)
(d) (a) or (b)
MISREPREDENTSTION & FRAUD 176. The aggrieved party, in case of fraud
by the other party can: …….
170. ………. Is a false statement which (a) A void or rescind the contract
the person making it honestly believes to be (b) Accept the contract but insist that he
true. shall be placed in the position in which
(a) Fraud he would have been if the
(b) Misrepresentation representation made had been true.
(c) Coercion (c) Both (a) & (b)
(d) Undue influence (d) (a) or (b)
171. As per Section 17, which of the 177. Ajeet, owner of an apple orchard,
following acts committed by a party to a believes that all the apple trees in his
contract with intent to deceive other party or orchard are fruit-bearing trees. However, he
induce him to enter into the contract will be has no sufficient ground for his belief. Even
treated as fraud? then, Ajeet states to Balajeet that his
(a) Knowingly making a false statement orchard has all fruit-beating trees. Induced
(b) Actively concealing a material fact by this statement, Baljeet purchases the
(c) Making a promise without any intention orchard. Later on, it is found that only 50%
of performing it trees are fruit-bearing. In this case Ajeet has
(d) All of above made …….
172. When one of the party to contract (a) Fraud
committees a misrepresentation or fraud, (b) Misrepresentation
contract is ….. at the option of party (c) Coercion
misrepresented or defrauded. (d) Undue influence
(a) Voidable 178. K, who is-trying to sell an unsound
(b) Void horse, forges a Veterinary Surgeon’s
(c) Illegal certificate stating the horse to be sound and
(d) Unlawful pins it on the stable door. P comes to
39
examine the horse but the certificate goes (d) Undue influence
unnoticed by him. P buys the horse and 182. The chief ingredient(s) of a fraud is /
finds later on the horse to be unsound. P are:
wants to avoid the agreement. Will he (a) a false representation or assertion
succeed? (b) Made with the intention that it should be
(a) Yes. P will succeed as P was influenced acted upon
by it. (c) The representation must have actually
(b) No. P will not succeed for though K induced the other party to enter into the
attempted to defraud by putting up the contract and so deceived him
surgeon’s forged certificate as to the (d) All of above
soundness of the horse, P was not
influenced by it. 183. As general rule, mere silence
(c) Both (a) & (b) amount to fraud?
(d) None of above (a) True
179. Generally the injured party can only (b) False
avoid the contract and cannot get damages (c) Partly true
for innocent misrepresentation. (d) None of above
(a) True 184. In which of following case silence
(b) False amounts to fraud?
(c) Partly true (a) If having regard to the circumstances of
(d) None of above the case, it is the duty of the person
180. In which of the following case, keeping silence to speak
damages are obtainable if there is (b) Where silence is, in itself, equivalent to
misrepresentation. speech
(a) From a promoter or director who makes (c) If seller fails to inform the buyer as to a
innocent misrepresentation in a latent defect his silence amounts to
company prospectus inviting the public fraud
to subscribe for the shares in the (d) All of above
company 185. Fraud …… implies intent to …….,
(b) Against an agent who commits a breach which is lacking if it is …….
of warranty of authority Misrepresentation
(c) Negligent representation made by one (a) Deceive, innocent
person to another between whom a (b) Innocent, innocent
confidential relationship, like that of a (c) Deceive, deceive
solicitor and client exists (d) Innocent, Deceive
(d) All of above 186. In ….. The plaintiff can avoid or
181. …….. is an untrue statement made rescind the contract. In ……, the plaintiff
knowingly or without belief in its or can claim damages as well.
recklessly, carelessly whether it be true or (a) Fraud, true presentation
false with the intent to deceive (b) Misrepresentation, fraud
(a) Fraud (c) Fraud, misrepresentation
(b) Misrepresentation (d) None of above
(c) Coercion
40
187. ………. May lead to prosecution for (c) Coercion

an offence of cheating under the Indian (d) None of above
Penal Code. 193. Threat to commit suicide ……
(a) Fraud (a) Amounts to coercion
(b) Misrepresentation (b) Amounts to undue influence
(c) True presentation (c) Punishable under Indian Penal Code,
(d) None of above 1860
(d) (a) and (c) above
COERCION & UNDUE INFLUENCE 194. Mr. A threatens to kill Mr. B, if he
does not lend Rs.10, 000 to him. Mr. B
188. ………. Is the committing or agreed to lend the amount to Mr. A. in
threating to commit any act forbidden by the relation to this case which of the following is
Indian Penal Code, 1868? correct?
(a) Coercion (a) Mr. A employs coercion on Mr. B
(b) Fraud (b) Contract is voidable at the option of Mr.
(c) Misrepresentation B
(d) Undue influence (c) Mr. A must restore back the amount
189. A contract is said to be induced by lend to Mr. B
……., where the relations subsisting (d) All of above
between the parties are such that one of the 195. Which of the following relationship
parties is in a position to dominate the will of raise presumption of undue influence?
the other and uses that position to obtain an (a) Parent & child
unfair advantage over the other. (b) Guardian & ward
(a) Coercion (c) Trustee & beneficiary
(b) Fraud (d) All of above
(c) Misrepresentation 196. Which of the following relationship
(d) Undue influence does not raise presumption of undue
190. Consent is not said to be free when influence?
it is not caused by ……. (a) Religious adviser & disciple
(a) Coercion (b) Doctor & patient
(b) Undue influence (c) Solicitor & client
(c) Fraud (d) All of above
(d) All of above 197. Which of the following relationship
191. When a person is compelled to enter does not raise presumption of undue
into a contract by the use of force ……. Is influence?
said to be employed. (a) Finance & finance
(a) Fraud (b) Trustee & beneficiary
(b) Undue influence (c) Landlord & tenant
(c) Coercion (d) Parent & child
(d) Mistake 198. Which of the following relationship
192. Criminal act is involved in ……… does not raise presumption of undue
(a) Mistake influence?
(b) Misrepresentation (a) Debtor & creditor
41
(b) Parent & child (c) It is fraudulent

(c) Finance & finance (d) All of above
(d) (a) and (b) of above 205. If the object of an agreement is the
199. When there is undue contract is …… performance of an unlawful act, the
(a) Void agreement is ………
(b) Voidable at option of one party (a) Unenforceable
(c) Voidable at option both parties (b) Valid
(d) None of above (c) Voidable
200. Coercion is mainly of ….. character (d) enforceable
(a) Moral 206. The consideration or object of an
(b) Physical agreement is unlawful ………
(c) Illegal (a) If it involves or implies injury to the
(d) Moral as well as physical person or property of another
201. Undue influence is of …… character (b) If court regards it as immoral
(a) Moral (c) If it is opposed to public policy
(b) Physical (d) All of above
(c) Illegal 207. a agrees to pay Rs.1, 00,000 to B, if
(d) Moral as well as physical he procures an employment for A in Income
202. The principles to be applied to Tax Department. This agreement is …….
transaction with parda-nishin woman are (a) Void
founded on equity and good conscience and (b) Valid
accordingly a person who contracts with (c) Voidable
parda-nishin woman has to prove that …… (d) Contingent
(a) No undue influence was used 208. Atul, Bhuvan, Chinmay enter into an
(b) She had free and independent advice, agreement to cheat the people and to
(c) She had fully understood the contents of divided the gain acquired, but letter
the contract and exercised her free will Chinamay refuses to act, which of the
(d) All of above following is correct?
(a) As agreement is already entered,
LEGALITY OF OBJECT Chinmay must help to Atul & Bhuvan for
cheating the people.
203. One of the requisites of a valid (b) Atul & Bhuvan can continue to cheat the
contract is that the object should be ……. people and divide the gain between
(a) Lawful them.
(b) Unlawful (c) Agreement can be enforced against
(c) Illegal Chinmay.
(d) Unenforceable (d) Agreement is void and cannot be
204. Section 23 provides that the enforced, as the object is fraudulent.
consideration or object of an agreement is 209. An agreement which involves or
lawful unless …… implies injury to the person or property of
(a) It is forbidden by law another is …….
(b) It is of such nature that if permitted it (a) Valid
would defeat the provisions of law (b) Void
42
(c) Voidable 215. Consequence of illegal agreements

(d) Enforceable ……
210. An agreement as void of the object (a) An illegal agreement is entirely void
of agreement is ……… (b) No action can be brought by a party to
(a) Moral an illegal agreement.
(b) Immoral (c) Money paid or property transferred
(c) Lawful under an illegal agreement cannot be
(d) All of above recovered
211. An married women was given (d) All of above
money to enable her to obtain divorce form
her husband and then to marry the lender- AGREEMENTS OPPOSED TO PUBLIC POLICY
which of the following is correct?
(a) If women fail to give the money back he 216. Which of the following agreement
must marry the money lender. are void as being against public policy?
(b) Women should divorce with her (a) Agreement in restrain of parental rights
husband and should marry the money (b) Agreement in restraint of marriage
lender. (c) Marriage brokerage agreements
(c) Money lender can recover back the (d) All of following
amount. 217. Which of the following agreement
(d) Money lender cannot recover back the are void as being against public policy?
amount, as agreement is immoral. (a) Agreements in restraint of personal
212. Where the consideration is an act of freedom
sexual immorality, the agreement is …… (b) Agreement in restraint of trade
(a) Void (c) Agreement in restraint of trade
(b) Unlawful (d) All of above
(c) Immoral 218. Every agreement by which any one
(d) All of above is restrained from exercising a lawful ….. Of
213. A void contract is none which is any kind, is, to that extent, void.
destitute of legal effects altogether (a) Profession
(a) True (b) Trade
(b) False (c) Business
(c) Partly true (d) All of above
(d) None of above 219. Every agreement by which any one
214. An illegal contract too has no legal is restrained from exercising a lawful
effect as between the immediate parties to profession, trade or business of any kind is,
the contract, but has the further effect of to that extent ……..
tainting the collateral contracts also with (a) Voidable
illegality. (b) Void
(a) True (c) Illegal
(b) False (d) None of above
(c) Partly true 220. If a restraint is reasonable, it will be
(d) None of above valid. This was held in famous case ……
43
(a) Nordenfelt V Maxim Nordenfelt Guns parties promise to pay if the event does not
Co. happen is known as ……
(b) Salomon V Salomon& Co. Ltd. (a) Wagering agreement
(c) Mohiri Bibi V Dharmadas Ghose (b) Contingent contract
(d) All of above (c) Insurance contract
221. Agreements in restraint of trade are (d) Contract without consideration
valid, if restriction imposed are …… 226. One of the essential of wagering
(a) Unreasonable agreement is that, event must be …….
(b) Reasonable (a) Certain
(c) Conditional (b) Happening
(d) None of above (c) Not happening
222. Which of the following is correct? (d) Uncertain
(a) An agreement in restraint of trade is 227. Which of the following is /are
always void. essential of wagering agreement?
(b) An agreement in restraint of trade is (a) There must be a promise to pay money
void even if restriction imposed are or money’s worth.
reasonable (b) The event must be certain
(c) An agreement in restraint of trade is (c) Each party must win
valid even if restriction imposed was (d) All of above
unreasonable. 228. Which of the following is /are
(d) None of above essential of wagering agreement?
(a) Each party should must stand to win or
WAGERING AGREEMENTS, CONTINGENT loose
CONTRACTS & VOID AGREEMENTS (b) Neither party should have any control
over the event
223. Wagering agreements are nothing (c) Neither party should have any other
but ordinary …….. interest in the event
(a) Trading agreements (d) All of above
(b) Betting agreements 229. Which of the following is wagering
(c) Marketing agreements agreement?
(d) Financial agreements (a) Share market transaction
224. The essence of wagering is that (b) Insurance agreement
…… (c) Games of skill
(a) One party is to win and the other party (d) A lottery
should also win 230. Which of the following is wagering
(b) One party is to win and the other to lose agreements?
(c) Both party should win (a) A crossword competition involving a
(d) Both party should lose good measure of skill
225. In an agreement between two (b) Games of skill
parties one promises to pay money or (c) Share market transaction
money’s worth on the happenings of some (d) A between two persons on result of
uncertain event in consideration of the other cricket match.
44
231. According to Prize Competition Act, 237. Aniket and Parimal of Mumbai each
1955, Prize competition in game of skill are deposits Rs.5, 000 with Shyam to abide by
not wagers provided the amount of prize the result of bet between them. Aniket wins
does not exceed …… the bet. Who can recover the deposited
(a) Rs.500 amount from Shyam if it not paid to winner
(b) Rs.1, 000 ……
(c) Rs.1, 500 (a) Aniket
(d) Rs.1, 00,000 (b) Parimal
232. An agreement to pay prize (c) Both – Aniket & Parimal
exceeding …….. to the winner of horse race (d) Neither Aniket nor Parimal
not a wager. 238. Consider following agreements
(a) Rs.500 (i) A agrees to sell to B “ a 100 tons of oil”
(b) Rs.1000 (ii) A who is dealer in coconut oil only
(c) Rs.1, 500 agrees to sell to B”100 tons.
(d) Rs.1, 00, 000 (iii) A agrees to sell to B “100 tons of oil rice
233. Wagering agreements have been at a price to be fixed by C”
expressly declared to be …… in India. (iv) A agrees to sell to B, “My white horse
(a) Voidable for Rs.15, 000 or Rs.10, 000
(b) Valid Which of the above agreements are valid?
(c) Enforceable (a) 1 & 2
(d) Illegal (b) 2 & 3
234. In state of Maharashtra and Gujarat (c) 3 & 4
wagering agreements have been declared (d) 4 & 1
to be …… 239. Which of the above agreements are
(a) Voidable valid?
(b) Valid (a) Which is enforceable by law
(c) Enforceable (b) Which is not enforceable by law
(d) Illegal (c) Which is voidable at the option of one
235. Who of the following can recover the party
money deposited with stakeholder in case (d) Which is voidable at the option of both
of wagering agreements? parties
(a) Winner 240. Which of the following agreements
(b) Looser have been expressly declared to be void by
(c) Winner as well as looser the Indian Contract Act, 1872?
(d) Neither winner nor looser (a) Agreements in restraint of trade
236. Kalpesh agrees to sell to Umesh a (b) Agreements the meaning of which is
horse for Rs.50, 000 if it wins race and for uncertain
Rs.5, 000 if it does not. This is …… (c) Agreement by incompetent parties
(a) Contingent contract (d) All of above
(b) Uncertain agreement 241. Which of the following agreements
(c) Wagering agreement have been expressly declared to be void?
(d) Valid and enforceable agreement (a) Agreements made under a mutual
mistake of a fact.
45
(b) Agreement in restraint of marriage (d) Illegal agreement

(c) Wagering agreement 248. …….. is one in which, the promisor
(d) All of above binds himself to perform in any event
242. Ram agrees to sell to Rahim, “100 without any conditions.
tons of Oil”. The agreement is ……. (a) Wagering agreement
(a) Void (b) Contingent contract
(b) Enforceable (c) Absolute contract
(c) Illegal (d) Illegal agreement
(d) Enforceable 249. Contingent contract are ……..
243. Ram agrees to sell Rahim, “100 tons (a) Invalid
of oil”. Ram deals only in coconut oil. The (b) Illegal
agreement is ……… (c) Valid and enforceable
(a) Void (d) Void and not enforceable
(b) Enforceable 250. Which of the following can be
(c) Valid treated as contingent contract?
(d) (b) & (c) above (a) Goods sent on sale or return basis
244. Agreement the meaning of which is (b) A contracts to pay Rs.10, 000 if B’s
uncertain are ……. house is burnt
(a) Uncertain contracts (c) A agrees to sell certain piece of land to
(b) Valid B, in case he succeeds in his litigation
(c) Void concerning that land.
(d) (b) & (c) above (d) All of above
245. A agrees to sell to B “100 quintals of 251. In contingent contract event is ……..
rice” at a price to be fixed by C. this (a) Certain
agreement is …….. (b) Uncertain
(a) Voidable at the option of A. (c) Regular
(b) Voidable at the option of B (d) Must bound to happen
(c) Voidable at the option of C 252. In contingent contract performance
(d) Valid & enforceable by both the parties depends upon ….. in some event.
246. A agrees to sell to B, white horse for (a) Happening
Rs.5, 000 or Rs.8,000. The agreement is (b) Un-happening
……… (c) Happening and un-happening
(a) Valid (d) Happening or un-happening
(b) Void 253. In contingent contract event is …..
(c) Voidable (a) Past
(d) Illegal (b) Present
247. An agreement between two parties (c) Future
to do or not to do something, if some even (d) Past or future
collateral to such agreement, does or does 254. In contingent contract event must be
not happen, is known as ……. ……. To the contract
(a) Wagering agreement (a) Collateral
(b) Contingent contract (b) Past
(c) Absolute contract (c) Un-related
46
(d) Regular (d) Quasi contract

255. Contingent contract defendant on
happening of an uncertain future event QUASI-CONTRACTS & QUANTUM MERUIT
cannot be enforced until event has ……..
(a) Happened 261. Match the following
(b) Un-happened A. Contingent contract
(c) Become impossible B. Wagering agreement
(d) All of above C. Illegal Agreement
256. Contingent contract dependent on D. Void Agreement
happening of an uncertain future event (1) Wagering agreement
cannot be enforced until event has (2) Collateral agreements are also void
happened and if event becomes impossible, (3) Insurance contract
such contracts become …… (4) One party must win & other must loose.
(a) Enforceable (a) A. – (3), B. – (4), C. – (2), D. - (1)
(b) Voidable (b) A. – (2), B. – (4), C. – (3), D. – (1)
(c) Void (c) A. – (1), B. – (4), C. – (2), D. – (3)
(d) Valid (d) A. – (3), B. – (2), C. – (4), D. – (1)
257. An agreement to pay money worth 262. ……… are obligation created by law,
on the happing or non-happening of a regardless of agreement.
specified uncertain event is a ….. (a) Quasi contracts
(a) Wagering agreement (b) Contingent contracts
(b) Contingent agreement (c) Deemed contracts
(c) Quasi contract (d) Unforeseen contracts
(d) Uncertain agreement 263. In quasi contracts, obligations are
258. Which of the following contains also termed as ………
reciprocal promises? (a) Certain relations resembling those
(a) Contingent contract created by contracts
(b) Wagering agreement (b) Law of restitution
(c) Quasi contract (c) (a) or (b)
(d) None of above (d) None of above
259. A wagering agreement is …….., 264. Which of the following is quasi-
whereas a contingent is ……. contract?
(a) Void, valid (a) Supply of necessaries to persons
(b) Valid, void incapable of contracting
(c) Voidable, void (b) Reimbursement of person paying
(d) Void, voidable money due by another, in payment of
260. A agrees to construct a swimming which he is interested.
pool for B for Rs.8, 00,000. The payment is (c) Obligation of a person enjoying benefits
to be made by B only on the completion of of non-gratuitous act.
the pool. This is …….. (d) All of above
(a) Contingent contract 265. Which of the following is quasi
(b) Absolute contract contract?
(c) Wagering agreement
47
(a) Liability for money paid or thing 270. The expression “Quantum Meruti”
delivered by mistake or under coercion literally means ……..
(b) Responsibility of finder of goods. (a) As much as earned
(c) Supply of necessaries to person (b) As much as paid
incapable of contracting (c) As much as gained
(d) All of above (d) As much as left
266. If necessaries are supplied to 271. Quantum meruit means …….
persons incapable of contracting like minor (a) No consideration to contract
a person of unsound mind then …….. (b) Where there is right there is remedy
(a) Person supplying such necessaries is (c) As much as gained
entitled to be reimburse from the (d) As much as earned
property of such incapable person 272. When a person has done some work
(b) Minor or a person of unsound mind is under a contract, and other party either
personally liable to pay for it. repudiates the contract or some unexpected
(c) Such contracts are voidable at the event happens making further performance
option of minor or a person of unsound of contract impossible; then the party who
mind. performed the work, can claim remuneration
(d) All of above for work done. This is based on the principle
267. A person who is interested in the of ……….
payment of money which another is bound (a) Recession
by law to pay, and who therefore pays it, is (b) Quantum Meruit
entitled to be reimbursed by the other. (c) Injunction
(a) True (d) Specific performance
(b) False 273. To claim remedy under quantum
(c) Partly true meruti, the original contract …….
(d) None (a) Should remain intact
268. A person to whom money has been (b) Must have been discharged
paid, or anything delivered, by mistake or (c) Must be fully performed
under coercion is not required to repay or (d) All of above
return it. 274. If the original contract exists, the
(a) True aggrieved party can ……
(b) False (a) Resort to damages
(c) Partly true (b) Claim quantum meruit remedy
(d) None (c) Either (a) or (b)
269. If necessaries are supplied to (d) Both (a) and (b)
persons incapable of contracting like minor 275. The right to sue on quantum meruit
or a person of unsound mind then person lies with ……
supplying such necessaries is not entitled to (a) The party at fault i.e. who has not
be reimburse it. performed his promise
(a) True (b) The party who is not at fault i.e. who has
(b) False performed his part of the contract
(c) Partly true (c) Either (a) or (b)
(d) None (d) Both (a) and (b)
48
276. The right to claim on quantum meruit meruit, if following conditions are satisfied
arises …….. …..
(a) Out of the contract, like the right to (a) The contract is divisible
damages (b) The contract is partly performed
(b) On the quasi-contractual obligation (c) The party not in default has enjoyed the
which the law implies in the benefit of the part of the performance
circumstance (d) All of above
(c) Either (a) or (b) 281. If indivisible contract performed
(d) Both (a) and (b) completely but badly then party who has
277. Quantum Meruit is applicable i.e. performed the contract can claim the lump
there is a right to sue in case where …… sum, but other party can make deduction for
(a) Contract is discovered to be bad work.
unenforceable (a) False
(b) One party abandons performance (b) True
(c) Act is done without intention of (c) Partly false
gratuitousness (d) None of above
(d) All of above 282. A agreed to decorate B’s flat for a
278. If an agreement is discovered to be lump sum of Rs.3, 00,000. A did the work
void or becomes void, any person who has but B complained of faulty workmanship. It
received any advantages under such cost B Rs.50, 000 to remedy the defect. A
agreement or contract is bound to restore it, can recover from B …….
or to make compensation for it to the person (a) Rs.3, 00,000
form whom he received it. This is based on (b) Rs.50, 000
the principle of …….. (c) Rs.2, 50,000
(a) Specific performance (d) Rs.3, 50,000
(b) Rescission 283. A, a tradesmen, leaves goods at B’s
(c) Injunction house by mistake and B treats the goods as
(d) Quantum meruti his own, he is not bound to pay A for them.
279. C, an owner of a magazine, (a) False
engaged P to write a book to be published (b) True
by installments in his magazine. After a few (c) Partly false
installments were published, the magazine (d) None of above
was abandoned. In this case ……..
(a) P does not have any remedy against C DISCHARGE OF CONTRACT
(b) P can claim payment on quantum meruit
for the part already published 284. Discharge of contract means …… of
(c) P has to complete the book through his contractual relationship between the parties.
own magazine (a) Beginning
(d) P should not complete the book at all (b) Termination
280. Generally, no remedy is available to (c) Beginning of ending
defaulting party, but even defaulting party (d) (a) and (c) of above
may be entitled to get payment on quantum
49
285. A contract is said to be discharged 292. When one or more terms of the
when the rights & obligations created by contract is / are altered by the mutual
parties comes to …… consent of the parties to the contract …….
(a) start (a) Rescission
(b) end (b) Novation
(c) either (a) or (b) (c) Alternation
(d) neither (a) or (b) (d) Remission
286. A contract may be discharged by 293. ……… means acceptance of lesser
…… fulfillment of promise made.
(a) Performance (a) Rescission
(b) Agreement (b) Novation
(c) Impossibility (c) Alternation
(d) Any of the above (d) Remission
287. A contract may be discharged by 294. When there is abandonment of
…… rights by the parties to the contract by
(a) Lapse of time mutual consent, it is known as ………
(b) Operation of law (a) Alternation
(c) Breach of contract (b) Waiver
(d) Any of the above (c) Remission
288. Which of the following is usual mode (d) Merger
of discharge of contract? 295. When a inferior right accruing to a
(a) Performance party under a contract merges into a
(b) Agreement superior right. It is known as ……
(c) Impossibility (a) Alternation
(d) All of above (b) Waiver
289. Performance should be ….. (c) Remission
(a) Complete (d) Merger
(b) Precise 296. When Ram accept Rs.20, 000 in
(c) According to terms of the agreement discharge of whole debt of Rs.22, 000. It is
(d) All of above known as ……..
290. When a new contract is substituted (a) Rescission
for an existing one between the same (b) Novation
parties, it is known as ……. (c) Alternation
(a) Rescission (d) Remission
(b) Novation 297. Discharge by operation of law may
(c) Alternation include …….
(d) Remission (1) Death of parties
291. When all or some of the terms of the (2) Insolvency of parties
contract are cancelled. It Is known as ……. (3) Unauthorized alternation of the terms of
(a) Rescission written agreement
(b) Novation (4) Rights & liabilities becoming vested in
(c) Alternation the same person
(d) Remission (a) 1
50
(b) 1, 2 (c) Allowed, performance

(c) 1, 2, 3 (d) Allowed, non-performance
(d) 1, 2, 3, 4 304. Which of the following may be
298. A agree to deliver to B 5 bags of treated as suspiring impossibility?
wheat on next Monday. He does not deliver (a) Destruction of subject matter
the wheat on that day. There is ……. Of a (b) Death or incapacity in case of personal
contract. service
(a) Anticipatory breach (c) Change in law
(b) Actual breach (d) All of above
(c) Partly actual partly anticipatory breach 305. Which of the following may be
(d) None of these treated as supervening impossibility?
299. Anticipatory breach can occur in (a) Outbreak of war
case of ……….. (b) Non-occurrence of a particular state of
(a) Executed contract things.
(b) Executor contract (c) Destruction of subject matter
(c) Either (a) or (b) (d) All of above
(d) Neither (a) nor (b) 306. Which of the following cannot be
300. Which of the following rights can be treated as supervening impossibility?
exercised by party not in a breach in case (a) Difficult of performance
anticipatory breach of contract? (b) Commercial impossibility
(a) He can treat the contract as discharged (c) Impossibility arising due to failure of
(b) He can take legal action third person
(c) He can claim damages (d) All of above
(d) All of above 307. Which of the following can be
301. Impossibility which arises treated as supervening impossibility?
subsequent to the formation of contract is (a) Commercial impossibility
called as …….. (b) Destruction of subject matter
(a) Pre-contractual impossibility (c) Difficulty in performance
(b) Post-contractual impossibility (d) All of above
(c) Supervening impossibility 308. Gajodhar hired a shop from Shridhar
(d) (b) & (c) of above for 2 years and paid the rent of 2 years in
302. When there is supervening advance. After 1 year the shop was
impossibility subsequent to formation of destroyed by fire. Which of the following is
contract, then contract becomes ……. correct?
(a) Void (a) Destruction of shop by fire cannot be
(b) Voidable treated as supervening impossibility and
(c) Illegal contract is still alive
(d) Unlawful (b) Shridhar should arrange same quality of
303. As a general rule, impossibility of shop in other area.
performance of a contract is …… for ……. (c) Contract is discharged due to
Of a contract supervening impossibility and Gajodhar
(a) Excuse, performance can claim rent for un-expired part of
(b) No excuse, none-performance term.
51
(d) None of above (c) Is discharged

309. Match of the following (d) Is not discharged
(a) Novation 314. A contract is not frustrated by
(b) Rescission commercial impossibility
(c) Remission (a) True
(d) Alteration (b) Partly true
(1) One or more terms of contract are (c) False
altered by mutual consent of the parties (d) Partly false
(2) Substitution of new contract for existing 315. When war is declared between two
one. countries, parties would be ……..
(3) Cancellation of some of the terms of (a) Criminally prosecuted
contract. (b) Get discharged due to frustration
(4) Acceptance of a lesser fulfillment of the (c) Countries are liable to perform their
promise made. obligation
(a) A – (2), B – (3), C – (4), D – (1) (d) Discharged from criminal liabilities
(b) A – (2), B – (1), C – (4), D – (3)
(c) A – (3), B – (2), C – (4), D – (1) REMEDIES FOR BREACH OF CONTRACT
(d) A – (4), B – (3), D – (2), D – (1)
310. When a contract ceases to bind the 316. Where there is a right, there is ……..
parties to it, it is said to be ……. (a) Asset
(a) Discharged (b) Liability
(b) Performed (c) Another right
(c) Obliged (d) Remedy
(d) Rescinded 317. Where there is ……, there is remedy
311. A contract can be discharged by (a) Asset
……. (b) Liability
(a) Performance of the contract (c) Another right
(b) Frustration of the contract (d) Remedy
(c) (a) or (b) 318. Breaking of an obligation under a
(d) Neither (a) nor (b) contract is known as ……..
312. In which of the ways can a contract (a) Rescission
be discharged by operation of law? (b) Violability
(a) Unauthorized alteration of terms of a (c) Right
written document (d) Remedy
(b) Vesting of rights & liabilities in the same 319. Which of the following remedy is
person available when contract is broken by one of
(c) Bothe (a) and (b) the party?
(d) Neither (a) nor (b) (a) Rescission of contract
313. A contract becomes more difficult of (b) Suit for damages
performance due to some event or delays. (c) Suit for quantum meruit
The contract is ……… (d) All of above
(a) Becomes voidable
(b) Becomes void
52
320. Which of the following remedy is (c) Liability

available when contract is broken by one of (d) Teaching lesson to defaulting party.
the party? 327. Damages are awarded, when …….
(a) Rescission of contract (a) Party not in default makes a profit
(b) Specific performance (b) Injured party suffers any remote loss.
(c) Either (a) or (b) (c) Injured party suffers direct loss
(d) (a) & (b) (d) Injured party does not suffer any loss.
321. ………… means termination of 328. The rule relating to damages is
contract. based on the leading decision in ……
(a) Rescission (a) mohiti bibi Vs. Dharmodas Ghose
(b) Injunction (b) simpson Vs. London & N W Rail Co.
(c) Specific performance (c) Hadley Vs. Boxendal
(d) Quantum Meruit (d) Hadley Vs. Booker
322. When a contract is broken by one 329. The object of awarding damages for
party, the other party may sue to treat the breach of contract is …….
contract as …….. (a) To punish guilty party
(a) Void (b) To teach a lesson to defaulting party, so
(b) Voidable that he should make default in future
(c) Illegal (c) Both (a) and (b) above
(d) Rescinded (d) To put the injured party in the same
323. Which of the following remedy is position, so far as money can do.
available when contract is broken by one of 330. Vbi jus ibi remedium means ……..
the party? (a) No consideration no contract
(a) Rescission of contract (b) The law does not recognize what is
(b) Suit for damages impossible
(c) Suit for quantum Meruit (c) What is impossible does not create an
(d) All of above obligation
324. …….. means termination of contract (d) Where is right, there is remedy.
(a) Rescission 331. Damages which naturally and
(b) Injunction directly arose in the usual course of things
(c) Specific performance from the breach are known as ………
(d) Quantum meruit (a) Special damages
325. When a contract is broken by one (b) Ordinary damages
party, the other party may sue to treat the (c) Liquidated damages
contract as …… (d) Penalty
(a) Void 332. Ordinary damages = ……
(b) Voidable (a) Difference between contract price and
(c) Illegal market price on the date of contract
(d) Rescinded (b) Difference between contract price and
326. Damages under The Indian Contract market price on the date of breach
Act, 1872 are in the nature of …….. (c) Contract price (+) market price on the
(a) Penalty date of breach
(b) Compensation
53
(d) Contract price (X) market price on the 338. Damages which an aggrieved party
date of breach can claim in addition to ordinary damages
333. Ordinary damages are awarded for for any loss suffered owing special
such loss suffered by a party which is …… circumstances known to both the parties of
consequence of breach. the time of signing the contract are called
(a) Direct ……..
(b) Indirect (a) Nominal damages
(c) Remote (b) Liquidated damages
(d) All of above (c) Ordinary damages
334. Lala contracts to Buy 100 quintal of (d) Special damages
rice from Bala at Rs.950 per quintal, no time 339. Hadley Vs Baxendable is a famous
being fixed for delivery. Price to be paid of case on …….
the time of delivery. Afterward Lala informs (a) Breach of contract
to Bala that he will not accept the rice if (b) Mistake of fact
supplied to him. The market price of rice (c) Quantum meruit
when Lala informs Bala was Rs.920 per (d) No consideration, no contract
quintal. How much compensation in the 340. Special damages are awarded when
form of ordinary damages can be recovered there ………
by Bala from Lala (a) Are special circumstances
(a) 95, 000 (b) Is special loss
(b) 92, 000 (c) Is a notice of likely special loss
(c) 3,000 (d) All of above
(d) 98, 000 341. …………… are awarded with a view
335. Special damages can be claimed to punish the party in default
only if there exists …… (a) Liquidated damages
(a) Normal circumstances (b) Exemplary / vindictive damages
(b) Special circumstances (c) Nominal damages
(c) Normal as well as special circumstance (d) All of above
(d) Ordinary circumstance 342. …….. have no place in law of
336. In case of breach of contract, contract
compensation can be claimed for …….. (a) Ordinary damages
(a) Remote consequence of the breach (b) Liquidated damages
(b) The proximate and natural consequence (c) Nominal damages
of breach (d) Exemplary / vindictive dmaages
(c) Indirect consequence of breach 343. In which of the following
(d) All of above circumstancesCourt may award exemplary
337. Damages, which arise naturally in damages
usual course of things from breach, are (a) Breach of a promise to marry
called as ……. (b) Dishonor of a Cheque a banker
(a) General damages wrongfully when there is sufficient funds
(b) Special damages to the credit of customer
(c) Liquidated damages (c) Either (a) or (b)
(d) Penalty (d) Neither (a) or (b)
54
344. Damages, which are awarded to (c) Partly false

merely acknowledge that the plaintiff has (d) Partly false
proved his case and won are known as …… 350. When contract provides for payment
(a) Liquidated damages of certain amount in case of breach of
(b) Ordinary damages contract. These are termed as ……..
(c) Exemplary damages (a) Ordinary damages, special damages
(d) Nominal damages (b) Special damages, liquidated damages
345. When there exist special (c) Liquidated damages, penalty
circumstances and their existence is (d) Penalty, ordinary damages
communicated, party not in default can 351. The Court in India allow only …….
recover from party at default (a) Liquidated damages
(a) Ordinary damages (b) Penalty
(b) Special damages (c) Reasonable compensation
(c) Ordinary as well as special damages (d) Either (a) or (b)
(d) Ordinary and liquidated damages 352. Liquidated damages represent a
346. Nominal damages may be very sum which is ………
small, say, even a rupee or 0.25 paise (a) Disproportionate to damages likely to
(a) True accrue as a result of breach
(b) False (b) Fair & genuine pre-estimate of the
(c) Partly true probable loss that might ensue as a
(d) Partly false result of breach, if it take place
347. When damages are awarded simply (c) Naturally and directly arose in usual
to recognize the right of party to claim course of thing.
damages for the breach of the contract are (d) To be given for nay remote or indirect
called as …… loss of damage sustained by reason of
(a) Liquidated damages breach
(b) Exemplary damages 353. Penalty represents a sum which is
(c) Nominal damages ……..
(d) General damages (a) Disproportionate to damages likely to
348. When party has not suffered any accrue as result of breach
loss, but still he wants to prove that he is (b) Fair & genuine pre-estimate of the
right. In such case, he can claim …… probable loss that might ensue as a
(a) Liquidated damages result of breach, if it take place.
(b) Exemplary damages (c) Naturally and directly arose in usual
(c) General damages course of thing.
(d) Nominal damages (d) To be given for any remote or indirect
349. Where a party to the contract has loss or damage sustained by reason of
suffered substantial physical discomfort and breach.
inconvenience as result of breach of 354. Gita gives Sita a bond for the
contract, he can file a suit for claiming payment of Rs.1, 000 with interest at 12% at
compensation from party at fault. the end of six months, with a stipulation that
(a) True in case of default, interest shall be payable
(b) False
55
at the rate of 75% from the date of default 359. …….. Means an order of the Court
This is stipulation by way of ……… restraining a person from doing what he
(a) Liquidated damages promised not do to do.
(b) Penalty (a) Quantum Meruit
(c) Ordinary damages (b) Recession
(d) Special damages (c) Novation
355. A contract with B to pay Rs.1, 000 if (d) Injunction
he fails to pay B Rs.500. on given day, fails 360. Specific performance may be
to pay Rs.500 in that day. B is entitled to ordered by the Court ……
recover from compensation ………. (a) Contract is voidable in money is not an
(a) Of at least Rs.1, 000 adequate
(b) Of Rs.1, 000 (b) Where damages are not an adequate
(c) Of Rs.500 remedy
(d) Not exceeding Rs.1, 000 as the Court (c) When damages are an adequate
consider reasonable remedy
356. Court grants specific performance (d) When party in default is not ready to pay
when ……. damages
(a) Monetary compensation is an adequate 361. In which of the following cases,
remedy specific performance may be granted
(b) Monetary compensation is not an Court?
adequate remedy (a) Where compensation in money is not an
(c) When it not possible to calculate adequate relief
damages (b) Where there exists no standard ffor
(d) It was specifically agreed by the parties, ascertaining the actual damages.
at the time of making contract (c) Either (a) or (b)
357. The law relating to specific relief in (d) Neither (a) or (b)
India is contained in ………. 362. The law relating to specific relief in
(a) Indian Contract Act, 1872 India is contained in ……….
(b) Indian Contract Act, 1872 (a) The Indian Contract Act, 1872
(c) Partnership Act, 1932 (b) The Companies Act, 1956
(d) Specific Relief Act, 1963 (c) The partnership Act, 1932
358. Where a party is in breach of (d) The specific Relief Act, 1963
negative term of a contract and other party 363. Where the contracting parties agree
gets the order from Court restraining the in advance the amount payable in the event
party in breach from doing what he of breach, the sum payable is called …..
promised not to do. Such an order of the (a) Liquidated damages
Court is known as …….. (b) Nominal damages
(a) Injection (c) Special damages
(b) Order to enforce right (d) General damages
(c) Order to enforce negative right 364. A delivered goods to the Railway
(d) Order to enforce liability Administration to be carried to a place
where an exhibition was being held and told
the goods clerk that if the goods did not
56
reach the destination on the stipulated date (c) Prohibitory or mandatory

he would suffer a special loss. The goods (d) None of above
reached late, He was entitled to claim …..
(a) Liquidated damages CONTRACT OF INDEMNITY & GUARANTEE
(b) Nominal damages
(c) Special damages 371. As per Section 124 of Indian
(d) General damages Contract Act, 1872, a contract of ……. Is a
365. Exemplary damages are awarded to contract by which one party promise to save
punish the defendant and are not, as a rule, the other party from loss caused to him by
granted in case of breach of contract. Viz., the conduct of the promisor himself, or by
(a) Breach of promise to marry the conduct of any other person
(b) Wrongful dishonor of a customer’s (a) Indemnity
Cheque by the banker (b) Guarantee
(c) Both (a) & (b) (c) Specific performance
(d) None of above 372. The person who promises to make
366. ……. Consist of a small token the good loss is called as …..
award, e.g., a rupee of even 25 paise (a) Indemnified
(a) Liquidated damages (b) Indemnity holder
(b) Nominal damages (c) Indemnifier
(c) Special damages (d) Surety
(d) General damages 373. The person who loss is to be made
367. The Courts in England usually give good is called as ……
effect to liquidated damages, but they (a) Indemnified
always relieve against penalty (b) Indemnity holder
368. specific performance will not be (c) Indemnifier
ordered………. (d) (a) or (b)
(a) Where monetary compensation is an 374. As per Section 125 of Indian
adequate Contract Act, 1872, Indemnity-holder acting
(b) Where the Court cannot supervise the within scope of his authority is entitled to
execution of the contract recover
(c) Where the contract is for personal (a) All damages which he may be
service compelled to pay in any suit in respect
(d) All of above of any matter to which the promise to
369. ……….., is an order of a Court indemnify applies
restraining a person from doing a particular (b) All cost for defending or bringing any
act. suit if worked as a prudent person.
(a) An injunction (c) All sums which he may have paid under
(b) Specific performance the terms of any compromise of any
(c) Quantum meruit such suit.
370. Injunction may be …… 375. A contract of ….. is a contract to
(a) Prohibitory perform the promise made or discharge
(b) Mandatory
57
liability incurred by a third person in case of (c) Two parties, Four parties
his default (d) Four parties, two parties
(a) Indemnity 382. The liability of indemnifier is …..
(b) Guarantee (a) Primary
(c) Specific performance (b) Collateral
(d) Injunction (c) Secondary
376. The person on whose behalf (d) (b) or (c)
guarantee is given is called as …… 383. The liability of surety is …..
(a) Surety (a) Primary
(b) Principle debtor (b) Collateral
(c) Creditor (c) Secondary
(d) Indemnity holder (d) (b) or (c)
377. The person who gives guarantee is 384. The liability of the surety is co-
called as …… extensive with that of the principle debtor
(a) Surety unless the contract otherwise provides.
(b) Principle debtor (a) True
(c) Creditor (b) False
(d) Indemnity holder (c) Partly true
378. The person to whom guarantee is (d) None of above
given is called as ……. 385. When guarantee extents to a single
(a) Surety transaction it is known as a ……..
(b) Principle debtor (a) Continuing guarantee
(c) Creditor (b) Specific guarantee
(d) Indemnity holder (c) Unlimited guarantee
379. A and B go into a shop. A says to (d) Fidelity guarantee
the shopkeeper, “Let B have the goods, I 386. When guarantee extents to a series
will see you paid. This is ……. of transaction it is called as a ………
(a) Contract of guarantee (a) Continuing guarantee
(b) Contract of Indemnity (b) Specific guarantee
(c) Contract of Specific performance (c) Unlimited guarantee
(d) Contract of wagering (d) Fidelity guarantee
380. A and B go into a shop. A says to 387. A specifies guarantee is ……
the shopkeeper, “Let B have the goods, I (a) Irrevocable
will see you paid. This is ……… (b) Revocable
(a) Contract of guarantee (c) (a) or (b)
(b) Contract of Indemnity (d) None of above
(c) Contract of Specific performance 388. A continuing guarantee …… for
(d) Contract of wagering transaction which has already taken place.
381. There are ……. To the contract of (a) Cannot be revoked
indemnity while there are …… to the (b) Can be revoked
contract of guarantee (c) Cannot be performed
(a) Thee parties, Two parties (d) None of above
(b) Two parties, three parties
58
389. A continuing guarantee may be 395. After discharging the debt, the surety
revoked by the surety at any time, as to ………
……., by notice to the creditor (a) Steps into the shoes of the creditor
(a) Future transaction (b) Is subrogated to all the rights of the
(b) Past transaction creditor against the principle debtor
(c) Existing transaction (c) (a) or (b)
390. In which of the following 396. When a surety has paid more than
circumstances a continuing guarantee can his share of debt to the creditor, he has a
be revoked? right of contribution from the co-securities
(a) By notice of revocation by the surety who are equally bound to pay with him.
(b) By the death of the surety (a) False
(c) Both (a) & (b) (b) True
(d) None of above (c) Partly true
391. A surety is favored debtor (d) None of above
(a) True 397. A, B, and C jointly promise to pay D
(b) False the sum of Rs.3, 000. C is compelled to pay
(c) Party false the whole. A is insolvent but his assets are
(d) None of above sufficient to pay one-half of his debts. How
392. On payment of a guaranteed debt much is C entitled to receive from A’s estate
surety is subrogated all the rights of ……… and how much B?
(a) Creditor (a) C is entitled to receive Rs.500 from A’s
(b) Principle debtor estate and Rs.1, 250 from B.
(c) Other co-surety (b) C is entitled to receive Rs.1, 250 from
(d) None of above A’s estate and Rs.500 from B
393. On being sued by the creditor, the (c) C is entitled to receive Rs.1, 000 from
surety can rely on any …… which the A’s estate and Rs.1, 000 from B
debtor has against the creditor (d) C is entitled to receive Rs.500 from A’s
(a) Set-off estate and Rs.1, 000 from B.
(b) Counter claim 398. A surety may be discharged from
(c) Set-off or counter claim liability ……..
(d) None of above (a) By notice of revocation in case of a
394. U/s 141 is entitled to the benefit of continuing guarantee as regards future
every security which the creditor has transaction
against the principle debtor at the time when (b) By the death of the surety as regards
the contract of surety ship is entered into future transactions, in a continuing
whether the surety knows of the existence guarantee
of such security or not. (c) Any variation in the terms of the contract
(a) False between the creditor and the principle
(b) True debtor, without the consent of the surety
(c) Partly true (d) All of above
(d) None of above 399. A surety may be discharged from
liability
59
(a) If the creditor releases the principle 403. The contract of bailment may be
debtor, or acts or makes an omission ……
which results in the discharge of the (a) Express
principle debtor (b) Implied
(b) Where the creditor, without the consent (c) Deemed
of the surety, makes an arrangement (d) (a) or (b)
with the principal debtor for composition, 404. In contract of bailment, there is
or promises to give time or not to sue transfer of ……. In goods.
him, the surety will be discharged (a) Ownership
(c) If the creditor does any act which is (b) Possession
against the rights of the surety, or omits (c) Deemed ownership
to do an act which his duty to the surety (d) None of above
requires hi m to do, and the eventual 405. In contract of bailment, delivery may
remedy of the surety himself against the be ……..
principle debtor is thereby impaired (a) Actual
(d) All of above (b) Possession
(c) Deemed ownership
BAILMENT (d) None of above
406. In contract of bailment, …… is made
400. ……… is the delivery of goods, by by physically handing over the goods.
one person to another, for some purpose, (a) Constructive delivery
upon a contract that they shall, when the (b) Actual delivery
purpose is accomplished, be returned or (c) Symbolic delivery
otherwise disposed of, according to the (d) Deemed delivery
instructions of the person delivering them. 407. If no consideration passes from
(a) Indemnity bailor to bailee it is known as ……
(b) Bailment (a) Gratuitous bailment
(c) Guarantee (b) Non-gratuitous bailment
(d) Sale (c) Deemed bailment
401. In contract of bailment, person who (d) Actual bailment
delivers the goods is called as …… 408. If some consideration passes form
(a) Bailee bailor to bailee it is known as …….
(b) Bailor (a) Gratuitous bailment
(c) Pledger (b) Non-gratuitous bailment
(d) Pledgee (c) Deemed bailment
402. In contract of bailment, the person to (d) Actual bailment
whom the goods are delivered is called as 409. …….. is one in which neither the
…….. bailor nor the bailee is entitled to any
(a) Bailee remuneration
(b) Bailor (a) Gratuitous bailment
(c) Pledger (b) Non-gratuitous bailment
(d) Pledge (c) Deemed bailment
(d) Actual bailment
60
410. ….. terminates by the death of either 415. A hires a car in Delhi from B for
the bailor or the bailee going to Varanasi A drives with care but
(a) Gratuitous bailment meets with an accident while going to
(b) Non-gratuitous bailment Haridwar. Advise B.
(c) Deemed bailment (a) Yes. A is liable for the damage to B’s
(d) Actual bailment car
411. The bailee must take as much care (b) No. A is not liable for the damage to B’s
of the goods bailed to him as a …… would car.
like under similar circumstances of his own (c) A should pay extra changes for going to
goods of the same bulk, quality and value Haridwar
as the goods bailed (d) None of above
(a) Man of extra-ordinary prudence 416. Where the bailee, mixes the goods
(b) Man of ordinary prudence bailed with his own goods, with the Baylor’s
(c) Man of ordinary economic condition consent, both of them shall have interest in
(d) None of above ……..
412. The bailee is under a duty not to use (a) Proportion to their shares in the mixture
the goods in an unauthorized manner or for produced
unauthorized purpose. (b) Proportion to 40:60 in the mixture
(a) True produced
(b) False (c) Proportion to 60:40 in the mixture
(c) Partly true produced
413. If bailee uses the goods in an 417. Where the bailee, mixes the goods
unauthorized manner or for unauthorized bailed with his own goods, without the
purpose, the bailor can ……. bailors consent ……. Bound to bear the
(a) Terminate the bailment expenses of separation or division, and also
(b) Claim damages for any loss of any damage arising from the mixture
(c) (a) & (b) (a) Bailor
(d) None of above (b) Bailee
414. A lends his car to B for a drive by (c) Third person
him only. B allows C, an expert driver, to (d) Person separating the mixture
drive the car. C drives the car with care but 418. Bailee must not set up ………. To
hits with an electronic pole. The car the goods
damaged. A file suit against B claiming (a) Perfect title
damages. Will he succeed? (b) An adverse title
(a) Yes. B is liable for the damage to A’s (c) Defective title
car (d) Deemed title
(b) No. B is not liable for the damage to A’s 419. It is the duty of the bailee to return
car. the goods without demand ……..
(c) Yes. C is liable for the damage to A’s (a) On the expiry of the time fixed
car (b) When the purpose is accomplished
(d) None of above (c) (a) or (b)
(d) None of above
61
420. If bailee fails to return the goods, he 426. Right of general lien can be
shall be liable for any …… of the goods exercised by …..
even without negligence on his part. (a) Attorneys of High Court
(a) Loss (b) Policy brokers
(b) Destruction (c) Bankers
(c) Deterioration (d) All of above
(d) Loss, destruction or deterioration 427. Duties of bailor are …….
421. In the absence of any contract to the (a) In case of gratuitous bailment – to
contrary, the bailee is not required to return disclose known faults to bailee
to the bailor any increase, or profits which (b) In case of non-gratuitous bailment –
may have accrued from the goods bailed liable for damages whether or not he
(a) False was aware of the existence of faults
(b) True (c) To indemnify bailee for loss when
(c) Partly true bailors title is defective
422. If Ram leaves a cow in the custody 428. Duties of bailor are ………
of Shyam be taken care of and the cow a (a) To receive back goods on termination of
calf, Shyam is bound is deliver ……. To bailment
Ram (b) In case of gratuitous bailment – not to
(a) The cow disclose known faults to bailee
(b) The calf (c) In case of non-gratuitous bailment – no
(c) The cow as well as the calf liability for damages whether or not he
(d) Nothing was aware of the existence of faults
423. …… is a right to retain the property (d) All of above
of another for a general balance of accounts 429. Duties of bailor are …….
(a) Particular lien (a) In case of gratuitous bailment – bailor
(b) General lien shall repay all necessary expenses
(c) Deemed lien incurred by bailee for the purpose of
(d) Tangible lien bailment
424. ……… is a right to retain those (b) In case of non-gratuitous bailment –
goods in respect of which bailee have bailor is liable only extra-ordinary
rendered some service involving the expenses
exercise of labour or skill (c) In case of gratuitous bailment – to
(a) Particular lien disclose known faults to bailee
(b) General lien (d) All of above
(c) Deemed lien 430. A hires carriage of B. the carriage is
(d) Tangible lien unsafe though B does not know this. A is
425. Right of general lien can be injured. Is B is liable to A for the injury?
exercised by …….. (a) Yes. B is liable to A for the injury
(a) Bankers (b) O. B is not liable to A for the injury
(b) Factor (c) Partly yes
(c) Wharfingers (d) None of above
(d) All of above 431. The bailment terminates ……..
62
(a) Where the bailee wrongfully uses or (c) He cannot sell the goods found at all
dispose of the goods bailed (d) All of above
(b) As soon as the period of bailment 436. Finder of goods can sell the goods
expires or the object of the bailment found, if …………
has been achieved (a) Owner cannot be found with reasonable
(c) When subject matter of bailment is diligence
destroyed or by reason of change in its (b) Owner, if found, does not pay the lawful
nature, becomes incapable of use for charges of the finder
the purpose of bailment. (c) Goods are in danger of perishing
(d) All of above (d) All of above
432. The position of a finder of lost goods 437. Finder of goods can sell the goods
is exactly that of a ………… found, if the lawful charges of finder,
(a) Bailee amount to ……. Of the value of goods
(b) Surety (a) 2/3rd
(c) Consignee (b) 1/3rd
(d) Consignor (c) 1/4th
433. Responsibility of finder of goods: (d) 5/5th
…… 438. Ravi found a purse in a computer
(a) He need not to take care of goods as education center. He deposited the purse
man of ordinary prudence with proprietor of the center so that the real
(b) He must not to appropriate goods for his owner can claim. However, no one claimed
own use the purse. Ravi wants the purse back. Can
(c) He can mix the goods with his own he succeed?
goods. (a) Yes
(d) All of above (b) No
434. Responsibility of finder of goods (c) Partly yes
……. (d) None of above
(a) He must try to find out true owner and to 439. A common carrier has same
restore goods to the owner when the responsibility as that of an ordinary bailee
owner is traced. (a) False
(b) He must to appropriate goods for his (b) True
own use. (c) Partly true
(c) He must not mix the goods with his own (d) None of above
goods. 440. A common carrier includes ………
(d) All of above (a) Railways
435. Rights of finder of goods …….. (b) Carriers by inland navigation
(a) He has a right to retain the goods until (c) Carriers by sea
he receives compensation for trouble (d) (a) & (b)
and expenses incurred in preserving the 441. A common carrier does include
goods and finding out the owner. …….. and they can limit their liability
(b) He cannot sue the owner for payment of (a) Railways
any specific reward offered by the (b) Carries by inland navigation
owner. (c) Carriers by sea
63
(d) (a) & (b) (b) Pawnor

442. The liability of a hotel keeper is (c) (a) or (b)
governed by Section 151 and 152 of the (d) Bailee
Contract Act and is that of an ordinary 447. Person to whom goods are pledge is
bailee with regard to the property of the known as …….
guests (a) Pledge
(a) False (b) Pawnee
(b) True (c) (a) or (b)
(c) Partly true (d) Bailee
(d) None of above 448. The essentials ingredients of a
443. C stayed in a room in a hotel. The pledge: ………
hotel-keeper knew that the room was in an (a) The property pledged should be
insecure condition. While C was dining in delivered to the Pawnee
the dining room, some articles were stolen (b) Delivery should be in pursuance of a
from his room. State whether hotel-keeper contract
was liable for the loss? (c) Delivery should be for the purpose of
(a) Yes. Hotel-keeper is liable for the loss security
as he should have taken reasonable (d) All of above
steps to rectify the unsecured condition 449. Pawnee may retain the goods
of the rooms pledge for ……
(b) No. Hotel-keeper is not liable for the (a) Payment of the debt or the performance
loss even he has not taken reasonable of promise
steps to rectify the unsecured of the (b) Interest due on the debt
rooms. (c) All necessary expenses incurred by him
(c) Partly yes with respect to possession or for
(d) None of above preservation of goods pledged
(d) All of above
PLEDGE 450. Where the Pawnee incurs necessary
expenses to preserve the goods pledged
444. Pledge is a bailment of goods as with him, he is not entitled to receive such
security for payment of a ……… amount from the Pawnor.
(a) Debt (a) False
(b) Performance of a promise (b) True
(c) (a) or (b) (c) Partly true
445. A pledge is bailment for security 451. Pawnee may retain the goods
(a) False pledge as collateral security, or sell the
(b) True goods pledged by giving a reasonable
(c) (a) or (b) notice to the pawnor.
(d) None of above (a) False
446. Person who pledges the goods is (b) True
known as …… (c) Partly true
(a) Pledger (d) None of above
64
452. When there is a surplus on sale after (a) Bailee

due notice to the pawnor, the Pawnee shall (b) An agent
pay the excess to the pawnor. In case of (c) Bailor
deficit. Pawnor shall be liable for the (d) Indemnity holder
balance amount 457. A contract of agency may be ………
(a) False (a) Express
(b) True (b) Implied
(c) Partly true (c) (a) or (b)
453. Where the Pawnee does not give a 458. Agency may also arise by ……
reasonable notice to the pawnor, the sale is (a) Estoppel
valid, but Pawnee is liable to pay damages (b) Necessity
to pawnor (c) Ratification
(b) False 459. No consideration is necessary to
(c) Partly true create an agency
(d) None of above (a) True
454. The general rule is that onlyowner (b) False
can create of pledge. However even non- (c) Partly true
owner can create a valid pledge ………. (d) All of above
(a) A mercantile agent who is in 460. A contract of agency may be made
possession of goods or of document of ……….
title to goods, with the consent of owner (a) Orally
(b) When the pawnor has obtained (b) In writing
possession of goods under a voidable (c) (a) or (b)
contract by way of fraud, coercion, etc. (d) None of above
(c) Co-owner is in possession of goods 461. An authority is said to be ……..
with the consent of other co-owner when it is to be inferred from the
(d) All of above circumstances of the case, and things
spoken or written, or the ordinary course of
AGENCY dealings
(a) Express
455. ……… is the relationship between (b) Implied
two persons where one person is employee (c) (a) or (b)
by another to act on behalf of that another (d) None of above
with the third person. 462. Where a principle, by his word or
(a) Agency conduct, includes some third person to
(b) Bailment believe that acts or obligations of his agent
(c) Indemnity were within his authority, he shall be
(d) Guarantee estopped from denying it later. This known
456. …….. is a person employed to do as estopped from denying it later. This
any act for another, or to represent another known as ………
in dealing with third persons
65
463. A principle cannot deny the agent’s 475. When agent is appointed to do all
authority when he does some prior positive acts connected with a particular trade,
or affirmative act establishing the agency of business or employment, such agent is
the other person. This known as ……… known as ……..
464. When the husband and wife are 476. When agent is appointed to do all
living together and the husband does not acts for the principle, such agent is known
provide for her necessities, wife has an as ……
implied authority as an agent to pledge her 477. Agent who is authorized to sell
husband’s credit for bare necessaries goods or consign goods for the purpose of
465. The husband will not be liable as sale or to buy goods or to raise money on
agent if he shows that …….. the security of goods is known as ……..
466. In certain circumstances a person 478. A …….. is a person employed by,
who has been entrusted with anther’s and acting under the control o, the original
property, may have to incur unauthorized agent in the business of agency
expenses to protect or preserve it. This 479. Where an agent, holding authority to
known as …………. name another person, has named another
467. A horse sent by rail was not taken person accordingly, such person is known
delivery at the destination, The Station as …….. Such agent works under the
Master had to feed the horse. The station control and directions of principle
Master becomes an ……. And hence the 480. A …… is one who represents to be
owner shall compensate him. an agent of another when in reality he has
468. When the relationship arises not such authority from him at all.
between the persons as per provisions of 481. A mercantile agent includes ……
the present applicable laws, it is said to be 482. A ……. Is a mercantile agent
an …… employed to sell goods which have been
469. Where a person having no authority placed in his possession or contract to buy
purports to act as agent, or a duly appointed goods for his principle. He is the apparent
agent exceeds his authority, the principle is owner of the goods in his custody and can
not bound by the contract supposedly based sell them in his own name and receive
on his behalf. But the principle may ratify payment for the goods
the agents’ transition and so accept liability. 483. A …… is a mercantile agnet whose
This known as …….. ordinary course of business is to make
470. Requisites of valid agency by contracts with other parties for the sale and
ratification …….. purchase of goods and securities of which
471. Requisites of valid agency by he is not entrusted with the possession for
ratification …….. a commission called brokerage.
472. Requisites of valid agency by 484. A …… is a mercantile agent, who is
ratification ……. consideration of an extra remuneration
473. Ratification relates back to the date guarantees to his principle that the
of the act of agent purchasers who buy on credit will pay for
474. When agent is appointed to perform the goods they take.
a particular transaction, such agent is 485. An …… is an agent who sells goods
known as ……. by auction
66
486. Duties of an agent …… (c) By expiration of the period fixed for the
487. Duties of an agent ……. contract of agency
488. Duties of an agent ………. (d) All of above
489. Duties of an agent …….. 498. An agency comes to an end or
490. When the principle and his name are terminates ………..
disclosed to third parties, act of agent are (a) By the death of the principle or the
acts of principal. agency
491. Where the agent disclose the (b) By the insanity of either the principle or
identity of his principle, he is not personally the agent
liable, the principle, on being discovered, (c) By the insolvency of the principle, and is
will be responsible for the contract made by some cases that of the agent
the agent (d) All of above
492. If an agent contract in the capacity of Chapter 11
an agent but principle’s name is not given
then, principle is not continuous to be liable NEGOTIABLE INSTRUMENTS ACT, 1881
for all acts of the agent and agent will be
THIS CHAPTER COVERS MCQs ON:
held personally liable
493. In case of unnamed principle if agent Definition of a Negotiable Instrument
refuses to name the principle, the agent Important Characteristics of Negotiable
shall be personally liable. Instruments
494. If an agent commits a tort or other Classification of Negotiable Instruments
wrong (e.g. misrepresentation of fraud) Kinds of Negotiable Instruments
during his agency, whilst acting within the Promissory Notes
scope of his actual or apparent authority, Bills of Exchange
the principle is not liable Cheques
495. An agent personally liable …….. Modes of Crossing
496. Where the agent has himself an Negotiation
interest in the property which forms the Importance of Delivery
subject-matter of the agency, the agency Endorsement
cannot, in the absence of an express Acceptance of a Bill of Exchange
contract, be terminated to the prejudice of
such interest. This is known as ……… INTRODUCTION
(a) Agency is coupled with interest
1. The Negotiable Instruments Act, came into
(b) Agency by ratification
force on the………..
(c) Agency by emergency
a) 1.1.1881
(d) Agency by necessity
b) 1.2.1881
497. An agency comes to an end or
c) 1.4.1881
terminates ……..
d) 1.12.1981
(a) By the performance of the contract of
2. The Negotiable Instruments Act, 1881
agency
extends to the…………
(b) By an agreement between the principle
a) Whole of India excluding State of
and the agent
Jammu
67
b) Whole of India excluding State of a) The holder of the instrument is not

Jammu & Kashmir presumed to be the owner.
c) Whole of India b) They are conditionally transferable
d) Whole of India excluding State of Goa c) A holder in due course is entitled to sue
3. The Negotiable Instruments Act, 1881 on the instrument in his own name.
define and amend the law relating d) (a) & (b)
to…………… 8. Which of the following can NOT be
a) Promissory notes considered as characteristics of Negotiable
b) Bills of exchange Instruments?
c) Cheques a) A holder do not gets the instrument free
d) All of above from all defects of title of any previous
4. A “negotiable instrument” means a holder.
promissory note, bill of exchange or cheque b) The instrument is transferable till
payable either…………… maturity
a) To order c) They are freely transferable.
b) To bearer d) All of above
c) (a) or (b) 9. A negotiable instrument is freely
d) (a) and (b) transferable.
a) No
CHARACTERISTICS OF NEGOTIABLE b) Yes
INSTRUMENTS c) Partly yes
5. Which of the following can be considered as d) None of above
characteristics of Negotiable Instruments? CLASSIFCATION OF NEGOTIABLE
a) The holder of the instrument is INSTRUMENTS
presumed to be the owner.
b) They are not freely transferable. 10. A promissory note, bill of exchange or
c) They are transferable subject to cheque is payable to bearer when……….
restriction. a) It is expressed to be payable to a
d) (b) or (c) particular person.
6. Which of the following can be considered as b) It is expressed to be so payable
characteristics of Negotiable Instruments? c) The only or last endorsement on the
a) The holder in due course is entitled to instrument an endorsement in blank
sue on the instrument in his own name. d) (b) or (c)
b) The instrument is transferable till 11. A promissory note, bill of exchange or
maturity and in case of cheques till it cheque is payable to order……………, and
becomes stale. does not contain any words prohibiting
c) Both (a) & (b) transfer or indicating an intention that it shall
d) None of above not be transferable.
7. Which of the following can NOT be a) Which is expressed to be so payable
considered as characteristics of Negotiable b) The only or last endorsement on the
Instruments? instrument is an endorsement in blank
68
c) Which is expressed to be payable to a b) It must be drawn in India and made

particular person payable outside India and drawn on a
d) (a) or (c) person resident outside India.
12. A promissory note, bill of exchange or c) Either (a) or (b)
cheque drawn or made in India, and made d) None of above
payable, or drawn upon any person, 17. A promissory note or a bill of exchange
resident in India shall be deemed to payable after a fixed period, or after sight, or
be…………. on specified day, or on the happening of an
a) Foreign Instruments event which is certain to happen, is known
b) An inland instrument as a……………
c) Demand Instruments a) Time instrument
d) Bearer Instruments b) Demand Instruments
13. A promissory note, bill of exchange or c) Foreign Instruments
cheque drawn or made in……….., and d) An inland instrument
made payable, or drawn upon nay person, 18. The expression “after sight” in a promissory
resident in India shall be deemed to be an note means that……………..
inland instrument. a) The payment can be demanded without
a) India it has been shown to the maker.
b) Outside India b) The payment cannot be demanded on it
c) Undivided India unless it has been shown to the maker.
d) None of above c) The holder may treat the instrument, at
14. A promissory note, bill of exchange or his option, either as a bill of exchange or
cheque drawn or made in India, and made as a promissory note.
payable, or drawn upon any d) The payment cannot be demanded
person……….shall be deemed to be and 19. In the case of bill of exchange, the
inland instrument. expression “after sight” means………….
a) Resident in India a) After acceptance
b) Not ordinary resident in India b) After noting for non-acceptance
c) Non-resident in India c) After acceptance, or after noting for non-
d) Resident outside India acceptance or after protest for non-
15. An inland instrument is one which acceptance
is………….. d) None of above
a) Drawn and made payable in India 20. An instrument, which in form is such that it
b) Drawn in India upon some persons may either be treated by the holder as a bill
resident therein, even though it is made or as a note, is……………..
payable in a foreign country a) Inchoate or Incomplete Instrument
c) Either (a) or (b) b) Order Instruments
d) None of above c) An inland instrument
16. The essentials of a foreign instrument d) An ambiguous instrument
include that:……………. 21. Bill drawn to or to the order of the drawee or
a) It must be drawn outside India and by an agent on his principal, or by one
made payable outside or inside India branch of a bank on another or by the
69
direction of a company or their cashier are money to, or to the order of, a certain
also ambiguous instruments. person, or only to bearer of the instrument.
a) False a) A Bank note
b) True b) A currency note
c) Partly true c) A promissory note
d) None of above d) Bills of Exchange
22. When one person signs and delivers to 25. A promissory note is an
another a paper stamped in accordance instrument………containing an
with the law relating to negotiable unconditional undertaking, signed by the
instruments, and either wholly blank or maker to pay a certain sum of money to, or
having written thereon an imcomplete to the order of, a certain person, or only to
negotiable instrument, he thereby gives bearer of the instrument.
prima facie authority to the holder there of to a) In writing
make or complete, as the case may be, b) Made orally
upon it a negotiable instrument, for any c) Partly in writing
amount specified therein, and not d) None of above
exceeding the amount, covered by the 26. A promissory note is an instrument in writing
stamp. Such an instrument is containing…………….., signed by the
called……………… maker to pay a certain sum of money to, or
a) Inchoate or Incomplete Instrument to the order of, a certain person, or only to
b) Order Instruments bearer of the instrument.
c) An inland instrument a) Conditional undertaking
d) An ambiguous instrument b) Implied undertaking
23. A signs, as maker, a blank stamped paper c) An unconditional undertaking
and gives it to B and authorizes him to fill it d) Deemed undertaking
as a note for Rs. 500 to secure an advance 27. A promissory note is an instrument in writing
which ‘C’ is to make to ‘B’. ‘B’ fraudulently containing an unconditional undertaking,
fills it up as a note for Rs. 2,000 payable to signed by……………to pay a certain sum of
‘c’, who has in good faith advanced Rs. money to, or to the order of, a certain
2,000. Decide, whether ‘C’ is entitled to person, or only to bearer of the instrument
recover the amount, and if so, up to what a) The payee
extent? b) The holder
a) Rs. 500 c) The endorser
b) Rs. 1,500 d) The maker
c) Rs. 2,000 28. A promissory note is an instrument in writing
d) Rs. 1,000 containing an unconditional undertaking,
signed by the maker to pay………..to, or to
KINDS OF NEGOTIABLE INSTRUMENTS the order of, a certain person, or only to
24. ……………is an instrument in writing bearer of the instrument.
containing an unconditional undertaking, a) A certain type of goods
signed by the maker to pay a certain sum of b) A certain type of old coins
c) A certain sum of money
d) Any of above
70
29. A promissory note is an instrument in writing a) An express promise to pay

containing an unconditional undertaking, b) Clear undertaking to pay
signed by the maker to pay a certain sum of c) (a) or (b)
money……….. d) None of above
a) To, or to the order of, a certain person 36. The promissory not should be signed
b) Only to bearer of the instrument. by:…………
c) (a) or (b) a) Drawer
d) Bothe (a) & (b) b) Drawee
30. The person who makes or executes the c) Payee
note promising to pay the amount stated d) Promise
there in is called as …………… 37. ……………is an instrument in writing
a) The payee containing an unconditional order, signed by
b) The holder the maker, directing a certain person to pay
c) The endorser a certain sum of money only to or to the
d) The maker order of, a certain person or to the bearer of
31. The person to whom the amount is payable the instrument.
is called as……………. a) A bill of exchange
a) The payee b) A promissory note
b) The holder c) A cheque
c) The endorser d) Hundi
d) The maker 38. The person who draws the bill is known
32. Which of the following is/ are essential(s) of as………
promissory note? a) Drawee
a) It must be in writing. b) Drawere
b) An oral promise to pay will do. c) Payee
c) It must contain oral promise t pay. d) Endorser
d) All of above 39. The person on whom the bill is drawn is
33. Which of the following is/ are essential (s) of known as……………
promissory note? a) Drawee
a) It must be in writing. b) Drawer
b) It must contain an express promise or c) Payee
clear undertaking to pay. d) Endorser
c) The payee must be certain. 40. When the holder endorses the bill to anyone
d) All of above else he becomes the……………
34. Which of the following is/ are essential (s) of a) Endorsee
promissory note? b) Drawer
a) The maker must sign the promissory not c) Payee
in token of an undertaking to pay to the d) Endorser
payee or his order. 41. …………….is the person to whom the bill is
b) The maker must be a certain person endorsed.
c) The payee must be certain. a) Endorsee
d) All of above b) Drawer
35. Promissory note must contain……………… c) Payee
71
d) Endorser b) Goods
42. ……………..is the person to whom the sum c) Property
stated in the bill is payable d) Assets
a) Endorsee 49. Kavita draws a bill on Shyam for Rs 30,000.
b) Drawee Kuntal endorsed it to Ram. Ram endorsed it
c) Payee to Rahim. The payee of the bill will
d) Endorser be:………….
43. The bill is drawn as an order to drawee to a) Ram
pay certain amount to payee. If drawee b) Kavita
refuses to honour the bill, another person c) Shyam
may be named in the bill itself, as………… d) Rahim
a) Endorsee in case of need 50. A promissory note is a three-party
b) Endorser in case of need instrument.
c) Drawee in case of need a) True
d) Payee in case of need b) False
44. Essentials of a bill of exchange:………… c) Partly true
a) It must be signed by the drawer. d) Partly false
b) The parties must be certain. 51. In a bill of exchange there are there parties-
c) It must contain an unconditional order to drawer, drawee and payee.
pay money only and not merely a a) True
request. b) False
d) All of above c) Partly true
45. Essentials of a bill of exchange:…………. d) Partly false
a) The sum payable must also be certain. 52. A promissory note can be made payable to
b) It must comply with other formalities e.g. the maker himself.
stamps, date, etc. a) True
c) It need not be signed by the drawer. b) Fasle
d) (a) & (b) c) Partly true
46. A bill of exchange must d) Partly false
contain………….order to pay money only. 53. In a bill of exchange, the drawere and
a) A conditional payee may be the same person.
b) An unconditional a) True
c) A contingent condition b) Fasle
d) An implied c) Partly true
47. A bill of exchange must contain an d) Partly false
unconditional ………….to pay money only. 54. The liability of the maker of a pro-note
a) Request is………….
b) Order a) Secondary and conditional
c) (a) or (b) b) Primary and absolute
d) (a) & (b) c) Primary and conditional
48. A bill of exchange must contain an d) Secondary and absolute
unconditional order to pay……….only. 55. Foreign bill of exchange must be protested
a) Money for dishonor.
72
a) True 62. A bank draft can be drawn only by a bank

b) False on another bank, usually its own branch.
c) Partly true a) True
d) Partly false b) False
56. Normally foreign bills are drawn in sets c) Partly true
of……….. d) None of above
a) Four copies 63. A bank draft cannot be made payable to
b) Three copies bearer.
c) Two copies a) True
d) Ten copies b) False
57. A bill drawn and accepted for a genuine c) Partly true
trade transaction is termed as a…………. d) None of above
a) Foreign Bill 64. A …………is a bill of exchange drawn on a
b) Accommodation Bill specified banker and not expressed to be
c) Trade bill payable otherwise than on demand
d) Account sale a) Promissory note
58. …………..is a bill in which a person lends or b) Cheque
gives his name to oblige a friend or some c) Accommodation bill
person whom e knows or otherwise. d) Trade bill
a) Foreign Bill 65. ……………..means a cheque which
b) Accommodation Bill contains the exact mirror image of a paper
c) Trade bill cheque, and is generated, written and
d) Account sale signed in a secure system ensuring the
59. A bill which is drawn, accepted or minimum safety standards with the use of
endorsed…………..is called an digital signature (wit or without biometrics
accommodation bill. signature) and asymmetric crypto system;
a) With consideration a) A cheque in the electronic form
b) Without consideration b) A truncated cheque
c) (a) or (b) c) Bank draft
d) (a) and (b) d) Paper cheque
60. It is only the……………..who can ask for a 66. ……………means a cheque which is
duplicate bill, promissory note or cheque. truncated during the course of a clearing
a) Holder cycle, either by the clearing house or by the
b) Drawee bank wheter paying or receiving payment,
c) Endorser immediately on generation of an electronic
d) None of above image for transmission, substituting the
61. A bill of exchange is called a………..when a further physical movement of the cheque in
bill of exchange drawn by one bank on writing.
another bank, or by itself on its own branch, a) A cheque in the electronic form
a) Cheque b) A truncated cheque
b) Promissory note c) Bank draft
c) Bank draft d) Paper cheque
d) Accommodation bill
73
67. A cheque is a bill of exchange drawn on a BANKER

bank payable always…………….
a) On request 75. In which of the following case banker
b) On demand MUST refuse to honour the cheque?
c) On order a) When a customer countermands
d) Any of above payment i.e., where or when a
68. A cheque is a bill of exchange……………. customer, after issuing a cheque issues
a) Which is always drawn on a banker instructions not to honour it, the banker
b) Which is always payable on demand must not pay it.
c) (a) or (b) b) When the banker receives notice of
d) (a) and (b) customer’s death.
69. A cheque does not require acceptance. c) When customer has been adjudged an
a) True insolvent.
b) False d) All of above
c) Partly true 76. In which of the following case banker MUST
d) None of above refuse to honour the cheque?
70. Essential of a cheque:………… a) When the banker receives notice of
a) It is always drawn on a banker. customer’s insanity.
b) It is always payable on demand. b) When an order of the Court, prohibits
c) It does not require acceptance. payment.
d) All of above c) When the customer has given notice of
71. Stamp is required to be affixed on cheques. assignment of the credit balance of his
a) True account.
b) False d) All of above
c) Partly true 77. In which of the following case banker MAY
d) None of above refuse to honour the cheque?
72. A grace of 3 days is allowed in the case of a a) When the banker receives notice of
cheque. customer’s insanity.
a) True b) When an order of the Court, prohibits
b) False payment.
c) Partly true c) When the cheque is post-dated.
d) None of above d) When customer has been adjudged an
73. Notice of the dishonor of a bill is necessary, insolvent.
but not in the case of a cheque. 78. In which of the following case banker MAY
a) True refuse to honour the cheque?
b) False a) When an order of the Court, prohibits
c) Partly true payment.
d) None of above b) When the banker has no sufficient funds
74. A bill may be crossed, but not a cheque. of the drawer
a) True c) When customer has been adjudged an
b) False insolvent.
c) Partly true d) When a customer countermands
d) None of above payment i.e., where or when a
74
customer, after issuing a cheque issue b) An open cheque

instructions not to honour it , the banker c) (a) or (b)
must not pay it. d) (a) and (b)
79. A payment will be a payment in due course 84. …………is a direction to the paying banker
if:……………… to pay the money generally to a banker or to
a) It is in accordance with the apparent a particular banker, and not to pay
tenor of the instrument otherwise.
b) It is made in good faith and without a) A requesting
negligence b) A passing
c) It is made to the person in possession of c) A crossing
the instrument who is entitled as holder d) Any of above
to receive payment 85. Crossing is a direction to the paying banker
d) All of above that the cheque should be paid only
to………..
OVERDUE, STALE OR OUT-OF-DATE CHEQUES a) A banker
b) A specified banker
80. A cheque is overdue or becomes statute-
barred after…………….from its due date of c) (a) or (b)
issue. d) A customer
a) Six years 86. To restrain negotiability, addition of
words………….is necessary.
b) Three years
c) Six months a) Not negotiable
d) Three months b) Account payee only
81. In India, a cheque, which has been in c) (a) or (b)
d) None of above
circulation for more than…………., is
87. Which of following can be crossed?
regarded by banker as stale.
a) Six years a) Bill of exchange
b) Three years b) Promissory note
c) Six months c) Cheque
d) All of above
d) Three months
88. In general crossing a cheque bears across
CROSSING OF CHEQUES its face an addition of……………
a) Two parallel transverse lines
82. …………….can be presented by the payee b) Three parallel transverse lines
to the paying banker and is paid over the c) Four parallel transverse lines
counter. d) Two cross line
a) A crossed cheque 89. “Account Payee” crossing warns the
b) An open cheque collecting banker that the proceeds are to
c) (a) or (b) be credited only to the………….
d) (a) and (b) a) Account of the payee
83. ………………… cannot be paid across the b) Party named or his agent
counter but must be collected through a c) Account of the payee, or the party
banker. named, or his agent
a) A crossed cheque d) None of above
75
MATURITY d) 1st March, 2011

94. A negotiable instrument dated the 31st
1) When period of bill is stated in days, August, 2001, is made payable three
calculation will be in days, which include the
months after date. The instrument is at
date of payment but exclude the date of
transaction. maturity on…………
2) When period of bill is stated in months, a) 30th August, 2011
calculation will be in months ignoring the b) 3rd December, 2011
days in months. c) 1st December, 2011
3) If due date of bill falls on public holiday, the d) 31st December, 2011
due date will be preceding business day. 95. If the day of maturity falls on a public
4) If due date of bill falls on sudden public
holiday, the instrument is payable on
holiday, the due date will be next business
day. the………..
5) Days of grace are not allowed on bill a) Preceding business day.
payable on demand. b) Next business day.
6) If bill is drawn using words after sight then c) Next Monday
calculation will start from the date of d) Following day
acceptance. 96. If a bill is at maturity on a Sunday. It will be
deemed due on……….
90. The date on which payment of an a) Monday
instrument falls due is called its…………. b) Saturday
a) Event c) Friday
b) Maturity d) Partly on Saturday and partly on
c) Collection date Monday
d) Accounting date 97. If due date of bill falls on sudden public
91. Every instrument payable at………….is holiday, the due date will be………..
entitled to three days of grace. a) Preceding business day
a) A specified period after date b) Next business day
b) After sight c) Next Monday
c) A specified period after date or after d) Next day
sight 98. If due date of bill falls on……….., the due
d) Demand date will be preceding business day.
92. Days of grace are allowed for cheques. a) Public holiday
a) True b) Sudden public holiday
b) False c) Private holiday
c) Partly true d) Birthday
d) None of above 99. If due date of bill falls on…………., the due
93. A negotiable instrument dated 31st January, date will be next business day.
2011 is made payable at one months after a) Public holiday
date. The instrument is at maturity b) Sudden public holiday
on……………. c) Private holiday
a) 31st January, 2011 d) Birthday
b) 28th February, 2011
c) 3rd March, 2011
76
100. On 1.1.2011, X draws a bill on Y for Rs. c) 10.1.2011

20,000 for 3 months maturity date of the bill d) 11.1.2011
will be:………. 106. On 1.8.2011, X draws a bill on Y “for 30
a) 1.4.2011 days after sight”. The date of acceptance is
b) 3.4.2011 8.8.2011. The maturity date of the bill will
c) 4.4.2011 be……………
d) 4.5.2011 a) 8.9.2011
101. On 15.82011, X draws a bill on Y for 3 b) 10.9.2011
months for Rs. 20,000. 18th Nov was a c) 11.9.2011
sudden holiday, maturity date of the bill will d) 9.9.2011
be:…………… 107. On 18.2.2011 A draw a bill on B for Rs.
a) 17th Nov 10,000. B accepted the bill on 21.2.2011.
b) 18th Nov the bill is drawn for 30 days after sight. The
c) 19th Nov maturity date of the bill will b: ………….
d) 15th Nov a) 24.3.2011
102. On 16.6.2011 X draws a bill on Y for Rs. b) 22.3.2011
25,000 for 30 days. 19th July is a public c) 26.3.2011
holiday, maturity date of the bill will d) 21.3.2011
be…………. 108. Which of the following person do not
a) 19th July incur any liability as parties to negotiable
b) 18th July instruments?
c) 17th July a) Minors
d) 16th July b) Lunatics
103. X draws a bill on Y for Rs. 30,000 on c) Drunken person
1.1.2011. X accepts the same on 4.1.2011 d) All of above
for period of 3 months after date. What will
be the maturity date of the bill: ………. NEGOTIATION & ASSIGMENT
a) 4.4.05 109. A negotiable instrument may be
b) 3.4.05
transferred by………….
c) 7.4.05 a) Negotiation
d) 8.4.05 b) Assignment
104. X draws a bill on Y. X endorsed the bill c) Negotiation or assignment
to Z. The payee of the bill will be…………
d) Delivery
a) X 110. …………….is the transfer of an
b) Y
instrument a note, bill or cheque for one
c) Z person to another in such a maner as to
d) None convery title and to constitute the transferee
105. X draws a bill on Y for Rs. 20,000 on
the holder thereof.
1.1.2011 for 3 months after sight, date of a) Negotiation
acceptance is 6.1.2011. Maturity date of the b) Assignment
bill will be…………. c) Delivery
a) 8.1.2011 d) Sale
b) 9.1.2011
77
111. In case of assignment, there is a d) Blank or qualified

transfer of ownership by means of a 116. An endorsement is restrictive which
…………document. prohibits or restricts the further negotiation
a) Written of an instrument.
b) Registered a) True
c) Written and registered b) False
d) Stamped c) Partly true
d) None of above
ENDORSEMENT 117. An endorsement is conditional or
112. …………..means and involves the qualified which limits or negatives the
liability of the endorser.
writing of something on the back of an
a) True
instrument for the purpose of transferring
the right, title and interest therein some b) False
other person. c) Partly true
d) None of above
a) Endorsement
118. An endorser may limit his liability in any
b) Assignment
c) Handing over of the following ways:…………..
d) (b) & (c) a) By sans recourse endorsement
113. The person to whom the instrument is b) By making his liability depending upon
happening of a specified even which
endorsed is called the……….
a) Endorser may never happen
b) Endorsee c) (a) or (b)
c) Transferor d) None of above
119. When a person who has been a party to
d) Debtor
the negotiable instrument takes it again then
114. An endorsement is to be………..where
the endorser merely writes his signature on an instrument is said to have been………….
the back of the instrument, and the a) Assigned back
instrument so endorsed becomes payable b) Negotiated back
c) Sale back
to bearer, even though originally it was
payable to order. d) Transfer back
a) blank FORGED ENDORSEMENT
b) general
c) blank or general 120. Forgery conveys no title.
d) restrictive a) True
115. if the endorser signs his name and adds b) False
a direction to pay the amount mentioned in c) Partly true
the instrument to, or to the order of a d) None of above
specified person, the endorsement is said to 121. If an instrument be negotiated by means
be. of a forged endorsement, the endorsee
a) Blank or general acquires no title even though he be a
b) Special or in full purchaser for value and in good faith, for the
c) Conditional or qualified endorsement is a nullity.
78
a) True d) Correction of a mistake

b) False 127. Which of the following act will not be
c) Partly true treated as material alteration in relation to
d) None of above negotiable instrument?
a) Crossing a cheque
NOTING AND PROTEST b) Addition of the words “on demand” in an
instrument where no time of payment is
122. Noting is necessary in case of………..of
bill. staed.
a) Transfer c) Alteration of the sum payable
b) Assignment d) (a) & (b)
c) Endorsement HUNDIS
d) Dishonor
123. The………………is the formal notarial 128. ……………are negotiable instruments
certificate attesting the dishonor of the bill, written in an oriental language.
and based upon the noting which has been a) Hundis
effected on the dishonor of the foreign bill. b) Bank draft
a) Protest c) Cheque
b) Noting d) All of above
c) Writing 129. Which of the following is not covered
d) All of above under the Negotiable Instruments Act,
1881?
MATERIAL ALTERATION a) Promissory note
b) Cheque
124. A material alteration renders the
instrument………… c) Hundis
a) Void d) Bill of exchange
b) Voidable 130. Hundis are governed by
the……………in the locality.
c) Legal
a) Customs
d) Enforceable
125. Alteration of date, sum payable, time of b) Usages
payment, place of payment, name of parties c) Both (a) and (b)
d) None of above
or rate of interest will be treated as material
131. The hundis were in circulation in Inda
alteration.
a) True even before the present Negotiable
b) False Instruments Act, 1881 came into operation.
c) Partly true a) True
b) False
d) None of above
c) Partly true
126. Which of the following act will not be
treated as material alteration in relation to d) None of above
negotiable instrument? OFFENCES & PENALTIES
a) Alteration of the date of the instrument
b) Alteration of the sum payable 132. Offence of dishonor shall be punishable
c) Alteration of the place of payment with…………..
79
a) With imprisonment for a term which may

extend to Two years
b) With fine which may extend to twice the
amount of the cheque,
c) With imprisonment for a term which may
extend to Two years, or with fine which
may extend to twice the amount of the
cheque, or with both.
d) None of above
133. Merely because the drawer issued a
notice to the drawee or to the Bank for ‘stop
payment’, it would not preclude an action
under Section 138 by the drawee or holder
in due course.
a) True
b) False
c) Partly true
d) None of above
80

CS Found Law MCQ Notes

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

CS Found Law MCQ Notes

Hochgeladen von

Copyright:

Verfügbare Formate

PANCHAKSHARI’S PROFESSIONAL ACADEMY Pvt. Ltd.

Your Lifelong knowledge Partner

Chapter 9 4. Partnership is the relation between persons

c) Firm name 16. Person entering into partnership contract

34. In determining whether a group of persons d) None of above

45. Where the partnership is at will, the firm is d) True

D, in fact, was not a partner in the firm’s b) False

b) Partly true d) None of the above

b) Partly true d) For charitable purposes.

a) After he joined the firm as a partner b) All debtors of the firm

a) Share of profits since date of cessation d) Dissolution of firm name

184. A firm may be dissolved c) If the business of the firm becomes

d) all of above 197. If the firm has been continuously

b) Realization account earning capacity over a normal return on

d) All of the above • Contract of indemnity and guarantee

6. Every agreement and promise enforceable (b) Rejected

(c) There must be lawful object (a) Offeror

76. Which of the following statement is (c) Essential

87. Exceptions to rule-No consideration no 92. Consideration may be ……

99. A, for natural love and affection, promises to (b) False

(c) Implied agreement (a) Fraud

(a) 16 (a) Minor can enter into a contract of

(a) Valid (d) None of above

(a) mistake of Fact (d) Mistake as to Identify of particular

(c) Void 173. In order to avoid a contract on the

187. ………. May lead to prosecution for (c) Coercion

(b) Parent & child (c) It is fraudulent

(c) Voidable 215. Consequence of illegal agreements

(b) Agreement in restraint of marriage (d) Illegal agreement

(d) Regular (d) Quasi contract

(b) 1, 2 (c) Allowed, performance

(d) None of above (c) Is discharged

320. Which of the following remedy is (c) Liability

344. Damages, which are awarded to (c) Partly false

reach the destination on the stipulated date (c) Prohibitory or mandatory

(d) (a) & (b) (b) Pawnor

452. When there is a surplus on sale after (a) Bailee

b) Whole of India excluding State of a) The holder of the instrument is not

c) Which is expressed to be payable to a b) It must be drawn in India and made

29. A promissory note is an instrument in writing a) An express promise to pay

a) True 62. A bank draft can be drawn only by a bank

67. A cheque is a bill of exchange drawn on a BANKER

customer, after issuing a cheque issue b) An open cheque

MATURITY d) 1st March, 2011

100. On 1.1.2011, X draws a bill on Y for Rs. c) 10.1.2011

111. In case of assignment, there is a d) Blank or qualified

a) True d) Correction of a mistake

a) With imprisonment for a term which may

Das könnte Ihnen auch gefallen