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Business Regulatory Framework
Multiple Choice Questions
B.Com Semester -2
1) Law of contract is—

a) not the whole of agreements nor is it the whole law of obligations
b) the whole law of agreements
c) the whole law of obligations
d) none of the above.
2) A contract creates
a) rights in personam , b)rights in rem,
c)only rights and no obligations , d)only obligations and no rights.
3) An agreement is a voidable contract when it is –

a) enforceable if certain conditions are fulfilled.
B)enforceable by law at the option of the aggrieved party .
c) enforceable by both parties
d) not enforceable at all.
4) An agreement not enforceable by law is said to be

a) void , b)voidable, c)valid, d)unenforceable, do illegal.
5) A contract
a) may be void as originally entered into
b) may become void subsequent to its formation
c) cannot become void under any circumstances
d) may become void at the will of party.
6) The transactions collateral to an illegal agreement are

a) not affected in any manner , b)also tainted with illegality
c)voidable at the option of the plaintiff d)void
7) A contract is
a) a legal obligation b) an agreement plus a legal obligation
c) consensus ad idem, d) agreement plus a legal object.
8) Flaw in capacity to contract may arise from –

a) lack of free consent b) lack of consideration
c) minority d)absence of legal formalities.
9) Which of following result in an offer

a) A declaration of intention b)an invitation to offer,
c) an advertisement offering reward to anyone who finds lost dog of the advertise,
d) an offer made in a joke.
10) A specific offer can be accepted by

a)any person b)any friend of offerer
c) the person to whom it is made d)any friend of offeree.
11) A letter of acceptance sufficiently stamped and duly addressed is put into course of transmission. There
is
1 | Page Prepared by Uma kant(SRF, Research Scholar “LU”, MBA, MCom)

a) a contract voidable at the option of acceptor b)a contract voidable at the option of offerer,
c)no contract at all, d)a valid
12) Acceptance may be revoked by the acceptor

a)at any time b)before the letter of acceptance reaches the offerer
c)after the letter of acceptance reaches the offeree d)before the death of the acceptor.
13) An advertisement to sell a thing by auction is

a)an offer b)an invitation to offer
c)no offer at all d)a contract e) an obligation.
14) On the face of the ticket for a journey the words ―for conditions see back are printed in small print .The
passenger –
a) is bound by the conditions whether he takes care to read them or not.
b) is not bound by the conditions
c) may not take note of the conditions
15) An offer is made to Mani in crowd It –

a) can be accepted by him alone, b)may be accepted by any person who hears it.
C)may be accepted by his brother d)may be accepted by his friends.
16) An acceptance is not according to the mode prescribed but the offerer decides to keep quiet. In such a
case there is –
a) a contract, b) no contract,
c)a voidable contract, d) an unenforceable contract.
17) There is a counter-offer when

a) the offeree gives conditions for acceptance or introduces a fresh term in acceptance
b) the offerer makes a fresh offer
c) the offeree makes some query
d )the offeree accepts it.
18) A makes an offer to B on 10th by a letter which reaches B on 12 th B posts letter of acceptance on 14th
which reaches A on 16th . The communication of acceptance is complete as against A on –
a) 12th b) 14th c)16th
19) Consideration must move at the desire of –

a)the promisor, b) the promisee ,
c) promisor or any other third party , d)both the promisor and the promisee .
e)any third party
20) Consideration –
a)must move from the promisee , b)may move from the promisee or any other person
c)may move from the third party d) may move from the promisor.
21) Consideration
a)must be adequate to the promise made, b)need not be adequate to the promise made
c)must be of reasonable value d) must be of more value than the value of promise made.
22) Consideration must be something which the promisor –

a) is already bound to do , b)is not already bound to do.
c)may voluntarily do d)must not do.
23) Compromise of dispute claims –

a)is a good consideration for a contract b)is not a good consideration for a contract
c) results in a void agreement d)is not permitted by law.
24) A promise to compensate ,wholly or in part , a person who has already voluntarily done something for
the promisor is
a)enforceable b)not enforceable because it is without consideration,
c) void d) voidable.
25) A person who is not party to a contract

a)cannot sue, b)can sue ,
c) can sue only in well recognized cases d)none of these.
26) Consideration in a contract –

a) may be past ,present or future, b)may be present or future only.
c)must be present only. D)must be future only.
27) An agreement made without consideration is

a)valid, b)illegal , c)voidable d)void
28) A promise to subscribe to a charity .The promise is a

a) valid contract , b)voidable contract ,
c)void agreement d) void contract.
29) An agreement with or by minor is –

a)void b)voidable at the option of the minor
c) voidable at the option of the other party d) valid.
30) On attaining the age of majority a minor‘s agreement –

a) can be ratified by him b)cannot be ratified by him
c)becomes void d)becomes valid.
31) A minor , by misrepresenting his age , borrows some money –

a) he can be sued for the fraud, b)he cannot be sued for the fraud
c)he is liable to return the money d) None of the above.
32) A minor enters into a contract for the purchase of certain necessaries , in such case –
a) he is not personally liable to pay b)he is liable to pay
c)his estate is liable to pay d) his guardian is liable to pay.
33) A person is usually of sound mind , but occasionally of sound mind –

a) he may enter in to a contract when he is of sound mind ,
b) he may not make a contract even when he is of sound mind
c) he cannot enter into a contract at all.
d) None of the above.
34) A contract by an idiot is –

a) voidable b) enforceable c)invalid d)void
35) Contracts made before war with an alien enemy which are against public policy are –
a) suspended and are revived after the war is over. b) dissolved
c)not affected at all d)void
36) The contractual capacity of a company is regulated by –

a) its memorandum of association and the provisions of the companies act, 1956
b) the terms of contract entered into with a third party
c) its articles of association
d) its prospectus.
38) Flaw in a capacity to contract may arise from –

a) want of consideration b)unsoundness of mind
c)illegality of object d) uncertainty of object.
39) Where consent is caused by fraud or misrepresentation , the contract is –

a) voidable at the option of the aggrieved party b) void
c) unenforceable d) not affected in any manner .
40) Where both the parties to an agreement are under a mistake as a matter of fact essential to the
agreement ,the agreement I –
a) void b) voidable
c )illegal d) not affected at all.
41) Merely because a contract was caused by one of the parties to it being under a mistake as to a matter of
fact , it is not-
a) voidable b) void
c)affected at all d) none of the above.
42) Consent given to a contract under some misrepresentation by the other party makes the contract –
a) void b) invalid
c) unenforceable d) voidable
43) When a person positively asserts that a fact is true when his information does not warrant it to be so,
though he believes it to be true , there is –
a) misrepresentation b) fraud
c) undue influence d) coercion.
44) Fraud exists when it is shown that a false representation has been made
a) knowingly b)unknowingly
c)unintentionally d)recklessly , not caring whether it is true or false
45) A mere attempt at deceipt by a party to a contract –

a) is not fraud unless the other party is actually deceived
b) is fraud whether the other party has been deceived or not
c) amounts to misrepresentation
d ) none of the above.
46) When consent to an agreement is obtained by undue influence, the agreement is a –

a)contract voidable at the option of the party whose consent was so obtained
b) void contract.
C) valid contract
d)void agreement.
47) which of the following relationships raise presumption of undue influence?

a) landlord and tenant b)parent and child
c)doctor and patient d) Husband and wife
e) Fiancé and fiancée f) creditor and debtor.
48) If there is error in cause ,the contract I

a) void b) voidable
c) valid d)illegal

49) I there is error in consensus , the agreement is
a) void b)voidable
c)avoid d)illegal
e)not affected at all.
50) If there is a unilateral mistake as regards identity of a party caused by fraud of he other party , the
contract is –
a) void b) voidable
c)valid d)illegal
51) If there is a fraudulent misrepresentation as to the contents of a document , the contract is –

a) void b) voidable
c)valid d)illegal
52) If there is a fraudulent misrepresentation as to the character of a document , the contract is –

a) void b) voidable c)valid d)illegal
54) A promise made without the intention of performing it amounts to –

a)innocent misrepresentation b) fraud
c)negligent Misrepresentation d) wrongful misrepresentation
55) The unlawful detention of any property of a person to obtain his consent to a contract amounts to
a) misrepresentation b) fraud
c) undue influence d) coercion.
56) The collateral transactions to an illegal agreement are

a)Void, b) illegal, c)voidable , d)not affected at all
57) An agreement made with an alien enemy is

a)unlawful on the ground of public policy b)unlawful because it becomes difficult to be performed
c) valid, d)voidable.
58) A person enters into an agreement whereby he is bound to do something which is against his public or
professional duty. The agreement is –
a) void on the ground of public policy b) valid
c)voidable d) illegal
59) Regulation as to the opening and closing of business in a market are

a)not unlawful even if they are in restraint of trade . b)unlawful because they are in restraint of trade .
c) void d) not valid
60) An employee , by the terms of his service agreement , is prevented from accepting a similar engagement
after the termination of his service .The restraint –
a) valid b)void c) illegal d)unenforceable
62) A contract of life insurance is

a) a contract of indemnity b)not a contract of indemnity
c)a wagering agreement d)a contingent agreement.
63)an agreement the meaning of which is not certain ,is

a) void b) voidable c)valid d) illegal
64)Which of the following are wagering agreements,-

a) a crossword competition the prizes of which depend upon correspondence of the competitors solution
with a previously prepared solution,
b) picture puzzles ,
c) share market transactions in which delivery of stocks and shares is intended to be given and taken
d) a contract of insurance,
e) an agreement to buy a ticket for a lottery.
f) commercial transactions , if the intention is not to deliver the goods but only to pay the difference in
price
g) a crossword competition involving a good measure of skill for its successful solution.
65) An agreement to do an impossible act is,

a) void b) voidable c) illegal d) enforceable under certain circumstances.
66)A wagering agreement is .

a) forbidden by law, b) immoral,
c) opposed to public policy d) none of the above.
67) A contract of insurance is a –

a) contract of guarantee b ) contingent contract
c) wagering agreement d)unilateral agreement.
68)Which of the following are contingent contracts?

a)contract of insurance b)contract of guarantee ,
c)contracts for the sale of goods on credit d) Wagering agreements
69)A contingent contract is –

a) void b) voidable c)valid d) illegal
70)A contract to pay B Rs. 10,000 if B s house is burnt – This is a

a) wagering agreement b)void
c)voidable agreement d)contingent contract
e) contract of guarantee .
71)A agree to pay B Rs. 2000 if a certain ship does not return at Mumbai port within a year .A promise can
be enforced when the ship
a) arrives Mumbai a damaged condition during the years
b) is lost during the year
c) is sunk during the years
d) arrives Mumbai in a good condition during the year.
72) Promises forming consideration for each other are known as,
a)independent promises b)dependent promises
c)reciprocal promises. d)mutual promises
73)Each party is a promisor and a Promisee in case of –

a)past consideration b)present consideration
c)every contract d) reciprocal promises
74)When promisee refuses to accept performance from the promisor who offers to perform ,it is –
a)attempted performance , b) vicarious performance ,
c)tender d) frustration of contract.
75)Sale of goods for cash is an example of –

a)mutual and independent promises b) mutual and dependent promises
c) mutual and concurrent promises d)conditional and dependent promises,.
76)When a party to a contract transfers his contractual rights to another , it is known as ,-

a)rescission of contract b) waiver of contract
c)discharge of contract, d) assignment of contract.
77)Where the debtor does not expressly intimate or where the circumstances attending on a payment do
not indicate any intention , the creditor –
a)may apply it to any lawful debt due b)May apply it even to a time barred debt.
78)When two or more persons have made a joint promise ,then unless a contrary intention appears from
the contract, all such persons must fulfill the promise –
a) jointly b) severally c)jointly and severally d)jointly or severally
79) Assignment by operation of law takes place –

a)by the mutual consent of parties b)by the will of either party
c)when the subject matter of a contract ceases to exist d)by the death of a party to a contract.
80)A who owes Rs. 10000 to B dies leaving an estate of Rs. 6000. The legal representation of A are –
a)Liable for Rs. 10000 b) liable for Rs. 6000
c)not liable at all d) liable for Rs. 3000.
81) Owing to a strike in the factory of A , he is not able to supply the goods to B as per the terms of the
agreement > The agreement in such a case
a) is discharged b) is not discharged
c) becomes void d) is voidable at the option of A.
82) If a contract contains an undertaking to perform an impossibility , the contract is

a) void ab initio b)void
c)voidable at the option of the plaintiff d) illegal
83)An agreement to do an act impossible in itself –

a) is void, b) is voidable
c)is void ab initio d)becomes void when impossibility is discovered
84)If a new contract is substituted in place of an existing contract , it is called –

a)alteration b)rescission c) novation d)waiver , e)remission
86) A lends Rs. 500 to B . He later tells B that he need not repay the amount , the contract is discharged by –
a) breach b) waiver c) novation d) performance
87) A contract has become more difficult of performance due to some un-contemplated events or delays
.The contract –
a)is discharged b) is not discharged
c)becomes void d) becomes voidable.
88) Where a contract could not be performed because of the default by a third person on whose work the
promisor relied , it –
a) is not discharged b) is discharged
c)becomes void d)becomes voidable.
89) A creditor agrees with his debtor and a third party to accept that third party as his debtor . The contract
is discharged by, -
a) performance b)alteration
c)waiver d)remission
e) remission
91) A undertakes to paint a picture of B .He dies before he paints the picture . The contract –
a) is discharged by death
b) becomes voidable
c) becomes voidable at the option of the legal representatives of A .
d) will have to be performed by the legal representatives of A.
92) The court may grant rescission where the contract is

a) voidable at the option of the plaintiff b)void
c)unenforceable d) illegal
93) The foundation of modern law of dameges was laid down in , -

a) Tinn v . Hoffman b) Taylor v. caldwell
c)Hadley v. Baxendale d) Addis v. Gramophone
94) Specific performance may be ordered by the court when –

a) the contract is voidable b) damages are an adequate remedy
c)damages are not an adequate remedy d)the contract is uncertain.
95) The measure of damages in case of breach of a contract is the difference between the –
a)contract price and the market price at the date of breach
b) contract price and the maximum market price during the term of the contract
c) contract price and the price at which the plaintiff might have sold the goods ,
d) contract price and the price fixed by court.
96) The case of Hadley v. Baxendale (1854) deals with

a) anticipatory breach of contract. b) quantum of damages
c)supervening impossibility d)quasi contract.
97) Anticipatory breach of a contract takes place –

a)during the performance of the contract b)at the time when the performance is due.
c) before the performance is due d) at the time when the contract is entered into.
98) In case of a wrongful dishonor of a cheque by a banker having funds to the credit of the customer ,the
court may award----
a) ordinary damages , b) nominal damages
c)exemplary damages d) contemptuous damages.
99) Ordinary damages are damages which---

a) arise in the usual course of things from the breach
b) which are in the contemplation of the parties at the time when the contract is made
c) are agreed in advance
d) are given by way of punishment for breach of contract.
100) A agreed to sell 100 shares to B at Rs. 75 per share delivery to be given on the 1st march , B refused to
accept delivery on 1st march as price had gone down to Rs. 60 per share .Subsequently A sold these shares
at Rs.92 per share –
a) A cannot recover any damages from B
b) A will have to restore to BRs. 1700 i.e. the profit he made
c) A can recover damages to be determined by the President of the stock exchange.
101) Exemplary damages are –

a) allowed in case of dishounor of a cheque by a banker having sufficient funds
b) the difference between the contract price and the market price
c) allowed where in case of breach of a contract , the plaintiff has not suffered any loss.
D) none of these.

102) A quasi contract –
a) is a contract b) as an agreement
c)creates only legal obligation d)is none of these
103) when an agreement is discovered to be void ,any person who has received any advantage under such
agreement
a) is bound to restore it b) is not bound to restore it
c)is not bound to return it . d) may retain it
e) none of these
104) A minor has been supplied necessaries on credit

a) he is not liable b) he is personally liable
c) his estate is liable d) he is not personally liable
105) A person who finds good belonging to another and takes them into his custody ,is subject to the same
responsibility as a
a) bailee b) true owner c) bailor d) pledge.
106) A finder of lost goods is a –

a) bailor b) Baile c) true owner d) thief
107) Quantum meruit means –

a)a non gratuitous promise b)an implied promise
c)as much as earned d)as much as is paid.
108) A contract of indemnity is a –

a) a contingent contract b) wagering contract
c)quasi contract d) void contract
109) The definition of a contract of indemnity as given in the Indian contract act ,1872 includes
a)express promises to indemnity
b) implied promises to indemnity
c) cases where loss arises from accidents and events not depending on the conduct of the promisor or any
other person
d) cases where the loss is caused by the conduct of the promisor himself or by the conduct of any person
110) S and P go into a shop ,S says to the shopkeeper ,C let P have the goods and if he does not pay you , I
will ―This is a –
a)contract of guarantee b)contract of indemnity
c)wagering agreement d) quasi contract
111) Any variance made without surety‘s consent in the terms of the contract between the principal debtor
and the creditor discharges the surety –
a) as to transactions prior to variance b) as to transactions subsequent to variance
c) as to all transactions d) from his liability under the guarantee.
112) A guarantee obtained by a creditor by keeping silence as to material circumstances is –

a) valid b)voidable c)unenforceable d) invalid
113) Where there are co-sureties ,a release by the creditor of one of them –
a) discharges the other co-sureties b) does not discharge the other co-sureties
c)makes all the co-sureties immediately liable d) makes the contract of guarantee void.
114) The right of subrogation in a contract of guarantee is available to the

a) creditor b) principal debtor c) surety d)indemnified
115) The omission of the creditor to sue within the period of limitation –
a) discharges the surety b) does not discharge the surety
c) makes the contract of guarantee void d)makes the contract of guarantee illegal.
116) In a sale, the property in goods –

a) is transferred to the buyer ,
b) is yet to be transferred to the buyer
c) may be transferred at a future time
d) is transferred when goods are delivered to the buyer e)is transferred when the buyer pays the price
117) In a sale ,if the goods are destroyed , the loss falls on –
a) the buyer b) the seller
c) partly on buyer and partly on seller d)the seller if price has not been paid
e) by the buyer.
118) The term property as used in the sale of goods act 1930 means
a) possession b ) ownership
c) ownership and possession both d) the subject matter of contract of sale.
119) If a price is not determined by the parties in a contract of sale , the buyer is bound to pay –
a)the price demanded by the seller ,
b) a reasonable price
c) the price which the buyer thinks is reasonable
d) the price to be determined by a third independent person.
120) The doctrine of caveat emptor applies –

a) incase of implied conditions and warranties
b) when the buyer does not intimate the purpose to the seller and depends upon his own skill and
judgment
c) when goods are sold by sample
d) when goods are sold by description
BUSINESS LAW MCQs

1. The Contract Act of 1872 was enacted on
A. 25th April, 1872 B. 25th May, 1872
C. 25th June, 1872 D. None of above
2. The Contract Act 1872 was enforced on

A. First day of July, 1872 B. First August, 1872
C. 1st September, 1872 D. None of these
3. The Contract Act, 1872 consists sections

A. 238 B. 248 C. 266 D. None of these
4. Definitions are provided in section of The Contract Act

A. 2 B. 3 C. 4 D. None of these
5. When one person signifies to another his willingness to do or to abstain from doing any thing with a
view to obtaining the assent of that other person to such act or abstinence he is said to make a
A. Proposal B. Promise C. Both (a) and (b) D. None of these
6. When the person to whom the proposal is made signifies his assent thereto the proposal is said to be
accepted than its called

A. Proposal B. Promise C. Agreement D. None of these
7. The person making the proposal is called

A. Promiser B. Promisee C. Both of above D. None of above
8. The person to whom proposal is made is called

A. Promisor B. Promisee C. Both of above D. None of above
9. Every promise and every set of promises forming the consideration for each other
A. A proposal B. An offer C. An agreement D. None of above
10. There are essential ingredients of a contract

A. 2 B. 3 C. 4 D. None of above
11. The Indian Contract law is based on

(a) English law (b) Australian law
(c) American law (d) French law
12. Section 2(b) defines, "When the person to whom the proposal is made, signifies his assent thereto, the
proposal is said to be accepted. A proposal when accepted becomes a/an
(a) Contract (b) Agreement
(c) Promise (d) Offer
13. An advertisement inviting tender is

(a) An invitation for negotiations (b) A proposal
(c) An invitation for proposal (d) A promise
14. In order to convert a proposal into a promise, the acceptance must

(a) Be clear (b) Be absolute
(c) Be unqualified (d) Be absolute and unqualified
15. Goods displayed in a shop window with a price label will amount to
(a) Offer (b) Invitation to offer
(c) Acceptance of offer (d) None of these
16. The difference between an advertisement for sale and a proposal is

(a) No difference at all
(b) That a proposal becomes a promise as soon as the party to whom it is made accepts it but an
advertisement does not
(c) Every case will be viewed according to the circumstances
(d) None of these
17. An agreement to agree in future upon terms to be settled afterwards between the parties is
(a) Valid (b) Not valid (c) Illegal (d) Voidable
18. Cross offer do not constitute a contract because

(a) there is no acceptance (b) there is implied acceptance
(c) crossing implies cancellation (d) it amounts to counter offer
19. A contract or an obligation to perform a promise could arise in the following ways
(a) By agreement and contract (b) By standard form of contracts
(c) By promissory estoppel (d) None of the above
20. When the offers made by two persons to each other containing similar terms of bargain cross each
other in post, they are known as
(a) Cross offers (b) Implied offers
(c) Direct offers (d) Expressed offers
21. Communication of acceptance is not necessary

(a) By performance of conditions of the offer by offeree
(b) By acceptance of consideration by the offeree
(c) By acceptance of benefit/service by the offeree
(d) All the above
22. General offers open for world at large can be accepted by

(a) Any person in the world
(b) Any person within the country
(c) Any person who complies with the conditions of the offer
(d) Any person who reads the advertisement
23. When the proposal or acceptance is made other wise than words, the promise is said to be
(a) Expressed (b) Implied (c) Accepted (d) Rejected
24. If the communication is made by an un-authorised person, it does not result in a/an
(a) Contract (b) Agreement (c) Offer (d) Consideration
25. Which section of Law of Contract defines, "A proposal may be revoked at anytime, before the
communication of its acceptance is complete as against the proposer, but not afterwards."
(a) Section 5 (b) Section 4 (c) Section 6 (d) Section 7
26. A promisee is
(a) A person who makes a promise
(b) A person who monitors the statement of intentions of two parties
(c) A person to whom the promise is made
(d) None of these
27. Voidable contract is one

(a) Which is lawful
(b) Which is invalid
(c) Which is valid so long it is not avoided by the party entitled to do so
(d) None of these
28. An offer comes to an end by

(a) acceptance (b) communication
(c) revocation (d) none of the above
29. When counter offer is given, the original offer

(a) Lapses (b) Remains valid
(c) Is accepted and becomes a contract (d) The original offer can also be accepted
30. An advertisement for sale goods by auction

(a) Amounts to an invitation to offer (b) Amounts to an offer to hold such sale
(c) Amounts to an implied offer (d) Amount to a general offer
31) The promisee in a contract of indemnity, acting within the scope of his authority, is entitled to recover
from the promise :
A) All damages which he may be compelled to pay in any suit in respect to any matter to which he promise
to indemnity applies
B) All costs which he may be compelled to pay in any such suit
C) All sums which he may have paid under the terms any compromise of any such suit
D) All of the above
32) A contract to perform the promise, or discharge the liability, of a third person in case of default is
known as :
A) Contract of indemnity B) Contract of guarantee
C) Contingent contract D) Quasi contract
33) Section 128 of Indian Contract Act 1872 provides :

A) Surety's liability B) Continuing guarantee
C) Revocation of Continuing guarantee D) Consideration for guarantee
34) A guarantee which extends to a series of transaction is known as :

A) Specific guarantee B) Continuing guarantee
C) Both (A) and (B) D) None of the above
35) The death of the Surety operates in the absence of any contract to the contrary, as a Revocation of a
Continuing guarantee, so far as regards future transactions, it is given in :
A) Section 131 B) Section 132
C) Section 133 D) Section 134
36. The Sale of Goods Act, was enacted on

A. 15th, February, 1930 B. 15th, March, 1930
C. 15th, April, 1930 D. None of above
37. The Sale of Goods Act, was enforced on

A. 1st day of May, 1930 B. 1st day of June, 1930
C. 1st day of July, 1930 D. None of above
38. The sale of Goods Act, 1930 contains

A. 66 Sections B. 68 Sections
C. 70 Sections D. None of above
39. The Sale of Goods Act, 1930 is based on

A. US Sale of Goods Act B. English Sale of Goods Act
C. Indian Sale of Goods Act D. None of above
40. Section 2, of The Sale of Goods Act is about

A. Principles B. Definitions
C. Exceptions D. None of above
41. As per-section 2(1), a person who buys or agrees to buy goods is called
A. Buyer B. Seller C. Both (a) and (b) D. None of above
42. The voluntary transfer of possession from one person to another is called
A. Transfer B. Change of possession C. Delivery D. None of above
43. Section 2, sub-section , of the Sale of Goods Act, 1930 defines "Goods"
44. As per section 2, sub section 7 every kind of moveable property other than actionable claim and money
is called
A. Goods B. Future goods
C. Both (a) and (b) D. None of above
45. Future goods means goods to be manufactured or produced or acquired by the seller
A. In future prescribed time B. After making of contract
C. Before making of contract D. None of above
46. As per section 2 sub-section 8, of the Sales of Goods Act, insolvent means a person
A. Who has ceased to pay his debts in the ordinary course of business
B. Or can not pay his debts as they become due
C. Both (a) and (b)
D. None of above
47. The agent having in customary course of business as such agent authority either to sell goods or to
consign goods for the purpose of sale or to buy goods or to raise money on the security of goods is called
A. Agent B. Mercantile agent
C. Partner D. None of above
48. As per section 2(12), of the Sale of Goods Act, quality of goods include
A. State of goods B. Conditions of goods
49. The goods identified and agreed upon at the time a contract of sale is made are called
A. Ordinary goods B. Specified goods
C. Scheduled goods D. None of above
50. Section 4, of the Sale of Goods Act 1930, deals with

A. Sale B. Agreement to sell
51. As per section 4(2), of The Sale of Goods Act, a contract of sale may be
A. Absolute B. Conditional
52. There are , essential requisites of sale

53. According section 5(2) Subject to provision of any law for the time being in force a contract of sale may
be
A. Made in writing
B. By words of month
C. Partly in writing or partly in words of month
D. All of above ways
54. Section 12, of the Sale of Goods Act deals with

A. Condition in contracts B. Warranty in contracts
55. A stipulation in contract of sale with reference to goods which are the subject there of may be
A. A condition B. A warranty
56. As per the Negotiable Instruments Act 1882, the term negotiable means..
a) Money b) Transferable
c) Can be passed d) Bargaining
Negotiable term in Negotiable Instruments Act 1882 means the value in it which is transferable from one
person to another.
57. The term Negotiable Instruments is

a) A written document that transfers the value in it from one person to other
b) A written document entitled on an individual by delivery or endorsement
c) A written document, entitled on a person to receive money
d) All of the above
Explanation
The Negotiable Instrument is a written document, that entitles a person to a sum of money, which is
transferable from one party (payer) to another party (payee) by means of delivery or endorsement &
delivery. (Sec13)
58. Which of the followings is not the Negotiable Instruments...

a) Currency Note b) Promissory Note
c) Bill of Exchange d) Cheques
Explanation
Currency is a legal tender, guaranteed by the government to transfer value but the Negotiable Instruments
have following characteristics.
1- It is written document, signed and stamped by the maker/drawer
2- It has a specific payee to whom the value is transferable
3- Negotiable Instruments requires acceptance and endorsement
59. In Negotiable Instruments Act, the Bill of Exchange is covered under which section...
a) Section 4 b) Section 5
c) Section 6 d) Section 13
60. Which of the Followings are not the Negotiable Instruments as defined by the Statute...
a) Banker’s Note b) Promissory Note
c) Bill of Exchange d) Cheques
Explanation
According to Negotiable Instruments Act 1882, Promissory Note, Bill of Exchange and Cheques are the
instruments as defined by the statute (law). Banker’s note also performs like a Promissory Note and
guaranteed by the government, but Banker’s note is said to be the Negotiable Instruments by custom (trade
practices).
61. Which of the followings are defined as Negotiable Instruments by Custom (Trade Practices)...
a) Banker’s Note b) Share Certificates c) Share Warrants
d) Dividend Warrants e) All of the above
Explanation
The instruments which are not mentioned in the Negotiable Instruments Act, but are acquired as the
Negotiable Instrument by usage or custom of Trade.
62. According Negotiable Instruments Act, the Promissory Note is …

a) A document written and Signed by the payer/maker
b) Containing an unconditional undertaking
c) To pay a certain sum of money only to a specific person or the bearer
d) All of the above
63. Along with all the above conditions, the maker of the promissory note need to paste a revenue stamp on
it and sign across the stamp. The parties which are involved in the Promissory notes are...
a) The Maker b) The Payee
c) Endorsee d) All of the above
Explanation
The person who promises to pay money through Promissory Note is called as the maker (payer/drawer)
and the person to whom the money is to be received is called as Payee/Drawee.
64. As per Negotiable Instrument Act, the Promissory Note may also contain the promise of delivery of
things along with money...
a) True b) False
Explanation: As per Negotiable Instrument Act, The promissory note must be a legal tender (money) of
India. If the Promissory Note promises to pay something other than money is not a valid instrument
Ex: I promise to deliver 100 bags of wheat to ‘B’ and Rs. 50000 is not a valid promissory note.
65. Promissory note, prepared by ...

a) The Creditor b) The Debtor
c) The Surety d) The Seller
The promissory note is prepared by the payer in the consideration to make payment of a specific amount to
the seller. Hence Promissory note is prepared by the Debtor (payer/maker/drawer/buyer of goods).
66. When the payment is to be made immediately by means of Bill of Exchange, such bill is called as ...
a) Term Bill b) Faster Bill
c) Sight Bill d) Ready Bill
When the payment is to be made immediately by means of Bill of Exchange, such bill is called as Sight Bill.
67. When the payment is to be made on a fixed date by means of Bill of Exchange, such bill is called as ...
a) Term Bill b) Faster Bill
c) Sight Bill d) Ready Bill
When the payment is to be made on a fixed date by means of Bill of Exchange, such bill is called as Term
Bill.
68. The Bill of Exchange is Prepared by...

a) The Creditor b) The Debtor
c) The Surety d) The Buyer
The Bill of Exchange is prepared by the seller after selling the goods to a buyer, mentioning the sum of
money is receivable from the buyer. Since the Bill of Exchange is prepared to ensure the money receivable,
the maker of Bill of Exchange is called as the Creditor/Drawer/ Maker / Seller.
69. The payer of Bill of Exchange is also called as the Acceptor...

a) True b) False
Since the buyer has to make payment against the goods purchased, he will be the Payer. The Bill of
Exchange is prepared by the seller to receive money against goods sold, which the Buyer needs to accept to
make payment to the Seller, hence he also becomes the Acceptor. Since ‘B’ has to make payment to ‘S’, he
will be also the Drawee/ Debtor.
70. The person who is drawer of a Bill of Exchange is also a payee...

a) True b) False
Since the Bill of Exchange is prepared by the seller of goods to receive money from the buyer, hence the
drawer of Bill of Exchange will also become the payee. Sometimes the Drawer of Bill of Exchange can also
collect the money through his/her Agent.
71. The difference between the Promissory note and the cheque is...
a) The Cheque has limited validity
b) Cheques are drawn on a specific bank
c) Cheques can be crossed for safety purpose
d) Cheques do not have any grace period after its expiry
e) All of the above
72. Payment through bearer cheques are said to be the unsafe method.
a) True
b) False
• If a bearer cheque (non crossed) is lost, the finder can cash it, unless the bank is notified in time to stop
the payment.
• It does not require endorsement.
• If the bearer cheque is lost or payment is made to a wrong person, bank has no responsibility for it.
• It is not a safe method of payment
73. If the bearer cheque (non crossed) is lost or payment is made to a wrong person, bank can be held
responsible for it....
a) True b) False
Since the amount through bearer cheque is payable on demand to the bearer or to the presenter and It does
not require endorsement, if it is presented by a wrong person, banks will not ask for the identity proof,
hence, if the bearer cheque is lost or payment is made to a wrong person, bank has no responsibility for it.
74. Which of the followings is the characteristics of Negotiable Instrument

a) Freely Transferable
b) Title of the Holder must be free from all defects
c) The title of the Drawer must be free from all defects
d) All of the above
The Negotiable Instrument is considered to be valid if it is unconditional (freely transferable), and the title
of the holder and the drawer must be free from all types of defects, may it be name, signature, date etc.
75. Bill of Exchange drawn in Parts are called as...

a) Bills in Set b) Escrow
c) Documentary Bills d) Attached Bills
76. is a bill to which the document of title to the goods and other documents are attached ...
a) Bills in Set b) Escrow
c) Documentary Bills d) Attached Bills
Documents of title include a bill of lading, dock warrant, dock receipt, warehouse receipt, and order for the
delivery of goods, insurance of goods etc. Such bills are called as Documentary Bill.
77. A Negotiable Instrument which is delivered conditionally or for the purpose as a collateral security or
for the safe custody only and not for the purpose of transferring absolutely the property therein is called
as...
a) Custody Bill b) Escrow c) Bill in Sets d) Security Bills
Explanation
Escrow is a bond, deed, or other document kept in the custody of a third party and taking effect only when
a specified condition has been fulfilled.
FAQ on Negotiable Instruments Act, 1881

Drawer: The maker of a bill of exchange is called the ‘drawer’.
Drawee: The person who is to pay the money by the drawer is called the ‘drawee’,
Acceptor: If someone else accepts the money in place of the drawee then he is called the ‘ acceptor’.
Payee: Payee is the person to whom the money is to be paid as directed by the instrument. He is
considered to be the actual beneficiary. Where he signs his name and makes the instrument payable to
some other person, that other person does not become the payee.
Indorser: When the holder transfers the instrument to someone else, the holder becomes the ‘indorser’.
Indorsee: The person to whom the bill is indorsed is called an ‘indorsee’.
Holder: A person who is legally entitled to the possession of the negotiable instrument in his own name
and to receive the amount thereof, is called a ‘holder’.

78. On the face of cheque at the upper left corner two parallel lines with or without written words as ‘&
company’, such crossing is called as ...
a) Restrictive Crossing b) Special Crossing
c) Nominal Crossing d) General Crossing
79. On the face of cheque at the upper left corner two parallel lines with Bankers name and written words
as Not Negotiable’, such crossing is called as ...
a) Restrictive Crossing b) Special Crossing
c) Nominal Crossing d) General Crossing
80. When the cheque is not transferred physically to the drawee bank for the purpose of clearing, such
cheques are called as...
a) Truncated Cheques b) Electronic Cheques
c) ECS Cheques d) Duplicate Cheques
Explanation
Truncation means conversion into another form. In this case, the physical cheque is converted into an
electronic image, which is transferred to drawee bank for the purpose of clearing. Such process is called as
CTS- Cheque Truncation System. This allows to save time and cost of sending physical cheques for clearing
purpose.
81. In case of Cheque as Negotiable Instrument, the Payer’s (who prepares to cheque) bank is called as…
a) Drawer b) Drawee c) Indorser d) None of the above
Explanation
Drawee: is the Drawer’s Bank, where he/she has his/her bank account, who will make the payment on
account of Drawer.
82. In case of Cheque as Negotiable Instrument, the Payer- who prepares the cheque to pay the dues is
called as…
a) Drawer b) Drawee c) Payer d) Payee
Explanation
Drawer: is the person who is making the instrument for making the payment, is also called as holder by the
Drawer’s Bank.
83. In case of Cheque as Negotiable Instrument, the Person, on whose name the cheque is drawn, to pay the
dues is called as…
a) Drawer b) Drawee c) Payer d) Payee
Explanation
Payee: is the person, who is entitled to receive money.
84. Which of the followings is the reason for dishonor of cheque…

a) The Cheque is Ambiguous(uncertain)
b) Insolvency of the Drawer
c) Insufficient Balance in the Drawers account for clearing
d) Signature of the Drawer is not matching with the specimen
e) Presenting a post dated cheque before the mentioned date
f) All of the above
85. Which of the followings is the reason for dishonor of cheque…

a) The cheque is become Stale (Expired) (after 3 months)
b) Holder has given a notice of loss of cheque
c) Cheque is not presented in normal banking hours
d) Death of the payee, is informed to the bank
e) The drawer has issued a notice to the Bank to stop the payment
f) All of the above
86. Payment through the Negotiable Instrument valid till a specific period until its maturity (expiry), such
period/ course is called as…
a) Holder in Due Course b) Validity of Negotiable Instrument
c) Payment in Due Course d) None of the above
Explanation
The person who is entitled to receive the amount in Negotiable instrument, may receive the payment from
the date of its preparation or from the day it becomes payable until the period of validity/maturity/expiry.
Such period is called as Payment in due course, means not before and after the valid date.
87. A person, who is entitled to posses the instrument in his own name and also entitled to receive the
amount mentioned in it is called as.…
a) Holder b) Withdrawer c) Payer d) Claimant
Explanation
As per Sec (8) of Negotiable Instrument Act, Holder of Legally Approved Negotiable Instruments (i.e.
Cheque, Bills of Exchange & Pronote) is a person, who is entitled to posses the instrument in his own name
and also entitled to receive the amount mentioned in it.
88. As per Sec (8) of Negotiable Instrument Act, Holder of any Negotiable instruments has to satisfy
following conditions…
a) Must be entitled to receive the amount mentioned in it
b) Must have received the instrument in good faith
c) Must have certain consideration
d) The instrument must be obtained in due course of time
e) All of the above
89. The holder of the negotiable instrument has to present the instrument for the purpose of receiving the
claim (value or goods)…
a) True b) False
Explanation
The holder of the negotiable instrument has to present the instrument for the purpose of receiving the
claim (value or goods), called as Presentment. The presentment of negotiable instrument is made for
either; For Acceptance (Bill of Exchange) For Payment (Pronote & Cheque).
90. When the Negotiable Instrument is presented/sent by the payee to the drawer/payer for the purpose of
payment or acceptance, it is called as...
a) Encashing b) Demand c) Presentment d) Withdrawal
Presentment is simply a demand, by which holder of the instruments is required to do as per direction of
the instruments.
91. Negotiable instrument is said to be negotiated when the transferee (payee) becomes the holder of it.…
a) True b) False
The claimant (Payee) or presenter of the negotiable instrument must get the claim what is mentioned in
the instrument from the liable party (payer), then only it is said to be Negotiated (amount is transferred
from the payer to the payee).
92. The making, acceptance, or indorsement of the negotiable instruments like cheque, bill of exchange,
promissory note will be completed only by Delivery of it from the maker to the acceptor…
a) True b) False
Transferability is the most important aspect of negotiability. Hence unless the negotiable instrument is
delivered to the payee by the payer (pronote/cheque) or by the maker to the acceptor (Bill of exchange), it
can not become a negotiable instrument.
93. Presentment of the Negotiable instrument is Time Specific…

a) True b) False
Explanation
Every Negotiable Instrument is Time Specific, hence must be presented with the time period of payment in
due course.
Ex: In Pronote, the mentioned amount is payable after 2 months of the date of preparation. Suppose the
Pronote is prepared on 26/10/2018, it means, the payee can present the cheque after two month of its
making i.e. 26/12/2018. Cheque is prepared on 26/10/2018, it must be presented before 3 months from
its date of preparation i.e. before 25/01/2019.
94. The Negotiable Instrument may be dishonored either by …

a) Non Acceptance of Negotiable Instrument (Bill of Exchange)
b) Non Payment of mentioned value (Pronote/Cheque)
c) Both a & b
d) None of the above
If the Bill of Exchange is not accepted by the payer (buyer) for the purpose of payment of dues against
goods received or if payment is rejected by the payer against the pronote or cheque issued by them, is
called as dishonor of Negotiable Instrument.
95. In such case of dishonor of Bill of Exchange, the Drawer can go to the Notary Public in the court to file a
complaint by requesting to note the fact of non acceptance. It is called as …
a) Noting b) Protest c) Complaint d) Petition
If the Bill of Exchange is not accepted by the payer (buyer) for the purpose of payment of dues against
goods received, is called as dishonor of BoE. The drawer of BoE can then go to Public Notary to file a
complaint along with the facts.
96. The process in which the Notary Public writes the facts of dishonor on the Negotiable Instrument and
Sign & Seal it, is called as…
a) Protesting b) Noting c) Case Study d) All of the above
Notary Public issues a certificate mentioning the case of dishonor of
97. Negotiable Instrument along with Sign and Seal of the Notary Public by charging some fees (Noting
Charges)…
a) Noting c) Protest
b) Complaint d) Petition
After the noting process is done, before filing a case in the court, the payee, whose Negotiable Instrument is
dishonored, must get a certificate from the Public Notary, which contains all the facts related to dishonor of
Negotiable Instrument. It is called as Protest.
98. According to Thomas, a Negotiable Instrument recognized by custom or by law is…

a) Transferable by delivery or by delivery and endorsement
b) Without notice to the party liable, in such a way that the holder of it for the time being may sue upon it in
his own name.
c) The property in it passes to a bona fide transferee for the value free from equities and free from any
defect in the title of the person from whom it is obtained
d) All the above
99. When a bill is drawn, accepted, or indorsed without any consideration it is called as…
a) Escrow b) Factitious Bill
c) Accommodation Bill d) Clean Bill
Explanation
Suppose Akash asks for Rs. 2000 to Sagar as a loan. If Sagar lends Rs. 2000 to Akash, Sagar can ask Akash to
draw a bill on Sagar, which he will accept. Later Sagar would get the bill discounted from Akash’s bank
against given loan amount. It is called as Accommodation Bill.
100. If the bill is drawn on a fictitious name of the payer as well payee, such bill is called as fictitious bill.
a) True b) False
Explanation
Yes, It is a kind of fraud or dishonesty. Suppose a dishonest accountant prepares a cheque on the name of
Mr. Balaji and intends his boss to sign the cheque, saying, that the business is owing pay to Balaji. Boss was
having no idea about any such case or Balaji to whom the business is owning to pay some money. Such
payee is called as non existing or fictitious payee.
101. when no bills are attached to the bill for acceptance/payable sent to the payer, such bill is called as…
a) Clean Bill b) Clear Bill
c) Not Attachment Bill d) Escrow
When only a Bill of exchange is sent for the acceptance to the payer or a Pronote or Cheque is sent to the
payer without any attached bills like Invoice, insurance documents etc., such bill is called as Clean Bill.
101. The Negotiable Instrument while drafting (writing), becomes faulty, it is called as. …
a) Faulty Bill b) Ambiguous Bill
c) Dishonored Bill d) Escrow Bill
Explanation
Since Negotiable instrument is a written document, which is transferable from one person to the another
person, it must be free from all types of writing errors in the title of payer or payee. If there is any
defect/fault while writing the instrument, it is called as Ambiguous Bill
102. The Negotiable instrument drafted on the name of any peyee/bearer is incomplete in any respect is
called as…
a) Inchoate Instrument b) Ambiguous Instrument
c) Fictitious Instrument d) None of the above
Suppose the party, who is delivering a promissory note, write all the details and sign it but forget to stamp
it or in case of cheque write incomplete details of the payee, will be called as Inchoate
(Developing/Immature) Instrument.
103. The maturity of Pronote/Bill of Exchange is the date on which it falls to due (becomes payable).
a) True b) False
The Negotiable instrument must be payable either by demand or on specified day or after a specified date.
The day/date on which the value in the instrument becomes due/payable, is called as Maturity.
104. Which of the following are the instruments not entitled for days of grace (no grace period)…
a) Cheque
b) Sight Bill
c) On Demand Pronote
d) Bill of Exchange or Pronote, on which no time/date is mentioned
e) All of the above
Explanation
Cheque has a validity of 3 months from its date of preparation but is payable even on the date mentioned
on it, Sight bill is also the bill for immediate payment. On demand pronote/bill is also payable immediately
after its demand. Cheque expires in 3 months of its issue, has no grace period.
105. The Promissory Note can be dishonored by means of…

a) Non Payment (Section 92) b) Non Acceptance (Section 91)
c) Non Payment (Section 91) d) Non Acceptance (Section 92)
The promissory note is prepared by the payer/maker in consideration to the value received. Hence if he
fails to do the payment or denies to make payment, it is called as dishonor of Promissory Note.
106. A bill of exchange contains a/an…

a) Unconditional order b) Unconditional undertaking
c) Conditional undertaking d) Conditional order.
The bill of exchange contains an unconditional order to pay a certain amount on an agreed date while the
promissory note contains an unconditional promise to pay a certain sum of money on a certain date.
107. . If an instrument may be construed either as a promissory note or bill of
a) a valid instrument b) an ambiguous instrument
c) a returnable instrument d) none of the above.
The meaning of word construed (taken/seen/understood) as promissory note or bill of exchange, it is an
ambiguous instrument.
108. . If in an instrument the amount undertaken or ordered to be paid is stated differently in figures and in
words…
a) the instrument is void due to uncertainty
b) the amount stated in figure shall be the amount undertaken or ordered to be paid
c) the amount stated in words shall be the amount undertaken or ordered to be paid
The Negotiable Instruments must be freely transferable and unconditional from the make to the
received/bearer.
109 ........... gives only a general idea about securities.

(A) shelf prospectus (B) red herring prospectus
(C) abridged prospectus (D) deemed prospectus
110. The main advantage of ..............is that company can save underwriting expenses.
111. Prospectus by implication is also known as …......

112. Not less than........ Days notice for a general meeting of a company must be given.
(A) 10 (B) 15 (C) 21 (D) 30
113. The minimum number of members that must be present at a valid meeting is called………
(A) simple majority (B) quorum
(C) proxy (D) none of these
114. A proxy can vote in case of ……….

(A) poll (B) meeting (C) both (D) none
115. A special resolution is one to pass with the votes cast in favour must be ............ times the votes cast
against it.
(A) 2 (B) 3 (C) 4 (D) 6
116. A special resolution must be filed with the registrar for registration within ....... days.
(A) 10 (B) 15 (C) 21 (D) 30
117. To make the liability of directors unlimited a .......... resolution is required.

(A) ordinary (B) special (C) both (D) none
118. For declaration of dividend no ........ resolution is required.

(A) ordinary (B) special (C) both (D) none
119. A company can be wound up.

(A) Voluntarily by members. (B) By the order of the Tribunal.
(C) By Voluntary winding up by creditors. (D) By all the above methods.

120) Compulsory winding up means winding up.
(A) By the Tribunal. (B) By the members.
(C) By the Creditors. (D) All of them.
121. A company may be wound up by the Tribunal if.

(A) The company passes an ordinary resolution to this effect.
(B) The company does not commence its business within 6 months of its incorporation.
(C) Number of members reduced below 7 in the case of a private company.
(D) Company is unable to pay its debts.
122. As per Sec 439, who can file a petition to the tribunal for winding up?
(A) The registrar. (B) Company.
(C) Contributory. (D) Any one of these.
123. As per Sec.444 when the Tribunal makes an order for the winding up it should be communicated
within two weeks to.
(A) Official liquidator. (B) Company.
(C) Central Government. (D) National Company Law Board.
124. Official liquidators are appointed from a panel of.

(A) Professional firms of chartered accountants.
(B) Advocates.
(C) Company Secretaries.
(D) All.
125. Tribunal may appoint the official liquidator to be the liquidator provisionally at any time.
(A) After the presentation of petition for winding up.
(B) After making the winding up order.
(C) After dissolution.
(D) Before the statutory meeting.
126. The official liquidator after receipt of statement of affairs of the company must submit a preliminary
report to the Tribunal not later than ................. of the order.
(A) 6 month. (B) one year.
(C) two weeks. (D) one month.
127. On a winding up order being made, the company’s property comes under the custody of.
(A) Liquidator. (B) Tribunal.
(C) Central Government. (D) Share holders.
128. As per Sec.457, the statutory powers of the liquidator can be exercised.
(A) With the sanction of Tribunal.
(B) Without the sanction of the Tribunal.
(C) Some with and some without such sanction.
(D) With the sanction of the Central Government.
PRACTICE SETS’
1. Which of the following is correct?
a. Indian Contract Act 1882 b. Indian Contract Act 1972
c. Indian Contract Act 1872 d. Indian contract Act 1888
2. The law of contract is nothing but

a. a child of religion b. a child of commercial dealing
c. a child of economics d. a child of day to day politics
3. The Indian contract Act 1872 extends to

a. Whole of India b. Whole of India excuding J&K
c. North India d. South India
4. To form a valid contract, there should be atleast

a. two parties b. three parties
c. four parties d. five parties
5. Contractual rights and duties are created by

a. state b. statue
c. parties d. custom or usage
6. A contract is
a. agreement + offer b. agreement + consideration
c. agreement + enforceable by law d. none of the above
7. The correct sequence in formation of a contract is

a. offer, acceptance, consideration , agreement
b. offer, consideration, acceptance, agreement
c. agreement, consideration, offer, acceptance
d. offer, acceptance, agreement, consideration
8. A contract creates
a. right in personam b. rights in remuneration
c. only rights with no obligation d. only obligations and no rights
9. Which of the following feature is not essential for a contract?

a. it should be in writing only
b. free consent of parties comptent of contract
c. lawful consideration and with a lawful object
d. it should not be declared void expressly
10. When one person signifies to another his willingness to do or to abstain from doing anything with a
view to obtaining the assent of that other person to such act or abstinence, he is said to make a
a. proposal b. promose
c. contract d. none of these
11. A offers to sell B his car for Rs 200000. C standing nearby says, ‘I will take it of B does not take it. ‘B is
not interested in the car. What will be the position of C says to A, ‘here is the money, I take the car,
a. there is a contract between A and C b. There is no contract between A and C
c. A may or may not accept the offer d. Both b and c
12. An agreement is a voidable contract when it is

a. enforceable
b. enforceable by law at the option of the aggrieved party
c. enforceable by both the parties
d. not enforceable at all
13. Which one of the following statement is true?

a. offer and acceptance are revocable
b. offer and acceptance are irrevocable
c. an offer can be revoked but acceptance can not
d. an offer can not be revoked, but acceptance can be recoved
14. Which one of the following falls into the category of offer?
a. newspaper advertisement regarding sale
b. display of goods by a shopkeeper in his window with prices marked on them
c. an advertisement of reward to the public
15. Which of the following circumstances is undue influence not exercised?

a. where one person holds a real or apparent authority over the other
b. where he stands in a fiduciary relation with the other
c. where he makes a contract with a person whose mental capacity is temporary or permanently affected by
reason of ae, illness or mental distress
d. when something is said or done in a dishonest way to trick people
16. Where the parties to a contract are under the mistake as to matter of fact essential to the agreement,the
agreement is
a. voidable at the option of the party making the proposal
b. voidable at the option of the party accepting the proposal
c. considered valid
d. void
17. who among the following is not competent to contract?

a. person who has acquired the age of 18
b. person who has acquired the age of 16
c. person is of sound mind
d. person who is disqualified from contracting by any law
18. What is consent under the Indian contract act 1872?

a. ehen acceptance of proposal is made by the party to whom the proposal is made
b. when the acceptance is made by another person other than the person to whom the proposal is made
c. when they agree upon the same thing in the same sense
d. when both the parties agree upon a thing in the way, it is understood by them
19. Which of the following is not a necessary feature for free consent?
a. when the consent is not caused by coercion
b. when the consent is not caused by undue influence
c. when the consent is not caused by mistake
d. when the consent is not caused by misunderstanding
20. what is the meaning of novation?

a. rescinding of a contract
b, alteration of a contract
c. change in provision of a contract
d. substituting an old contract for a new one
21. A contract is discharged on account of change of circumstances where the performance becomes
a. virtually impossible b. extremely difficult or hazardous
c. temporarily impossibility d. both a and b
22. when after the formation of a valid contract, an event happens which makes the performance of
contract impossible, the contract becomes
a. voidable b. void
c. valid d. illegal
23. The discharge of contract means the

a. enforcement of obligations of parties b. coming to end of obligation of parties
c. starting of obligation d. payment of carriages and penalty
24. The legal provision relating to discharge of contract by impossibility of performance are contained in
a. section 55 (b) section 56 (c) section 58 (d) section 59
25. Which of the following impossibility is the ground for discharge of contract?
a. initial impossibility b. supervening impossibility
c. both a and b d. none of the above
26. A contract containing an undertaking to do an impossible act, is

a. void ab initio b. voidable
c. valid d. illegal
27. Which of the following is a made of discharge of contract?

a. by performance of contract b. by agreement
c. by impossibility of performance d. all of the above
28. In which of the following modes, the contract is discharge?

a. by operation of law b. by lapse of law
c. by breach of contract d. all of these
29. If a person who is incapable of entering into a contract is supplied with necessaries by another person,
then the latter shall
a. be reimbursed for such supplies by a relative of the incapable person and that relative must be capable of
contracting
b. be reimbursed for such suppliers from the property of such incapable person
c. be reimbursed for such supplies from the property of such incapable person
d. not entitled to be reimbursed at all
30. A owes Rs 10000 to B under a contract. It is agreed between A, B and C that B shall hence forth accept C
as his debtor instead of A for the same amount. Old debt of A is discharged and a new debt from C to B is
contracted. This is
a. alteration of contract b. rescission of contract
c. novation of contract d. charge in contract
31. In which of the following cases, the contract is not discharge on the ground of subsequent impossibility?
a. death of promisor b. charge of law
c. commercial hardships d. destruction of subject matter
32. A agreed to let a room to B for holding music shows on a certain dates. Before any show wars organized
the room has destroyed in an accidental fire. In this case, the contract becomes
a. void and is discharged b. voidable at As option
c. void but not discharge d. voidable at B s option
33. A owes B Rs 5000, C pays to B Rs 100 and B accepts them, in satisfaction of his claim on A. What is the
status of payment?
a. this payment is a partial discharge of the whole claim
b. this payment is a discharge of the whole claim
c. this payment is not a discharge of the whole claim
d. none of the above
34. A contract is void on the ground of initial impossibility.

a. only where it is unknown to the parties
b. only where it is known to the parties
c. whether it is known or unknown to the parties at the tome of agreement
d. whether it is known to the third parties

35. A agreed to sell his horse to B, but unknown to both the parties, the horse was dead at the time of
agreement, in this case, the contract is
a. void and the parties are discharge from performance
b. void but the parties are not discharge from performance
c. voidable at the option of either party
d. voidable at the option of A only
36. In which of the following cases, a contract is discharge on the ground of frustration or subsequent
impossibility?
a. outbreak of war b. change of law or government policy
c. both a and b d. none of the above
37. A agreed to supply certain goods to B which to be procured from Cs factory. Due to strike is Cs factory,
A could not supply the goods. The contract
a. becomes void on account of impossibility
b. becomes voidable on account of difficulty
c. is discharged on account of impossibility
d. is not discharged on account of impossibility
38. Genarally, the following damages are not recoverable?

a. ordinary damages b. special damages
c. remote damages d. Nominal damages
39. When there is breach of contract, the party which aggrieved by breach is entitled for
a. compensation against the breacher
b. nothing
c. registration of criminal case against the breacher
40. Consideration should not be but is should be natural

a. quasi b. complete
c. party d. legal
41. Quasi contract is a

a. contract b. legal obligation
c. agreement d. conlingent contract
42. The term quasi contract is used in Indian contract Act in

a. section 68 to 72 b. section 69
c. section 71 d. none of these
43. In case of breach of contract, which of the following remedy is available to the aggrieved party?
a. suit for recission b. suit for damages
c. suit for specific performance d. all of the above
44. In case of breach of contract of sale of some rare article or thing for which there is no substitute in the
market, the court may grant
a. quantum meruit b. rescission
c. injuction d. specific performance
45. When a contract is breached, the party who suffers such breach shall
a. be indemnified for the loss or damage caused to him
b. receive compensation for any loss or damage caused to him
c. be remunerated for the loss or damage caused to him
d. not have any right under the act

46. Which of the following is true in the context of quasi contract?
1. there is no real contract in existence
2. there is no offer and acceptance
3. there is no intention to create contract
Select the correct answer by using the codes given below
a. 1 b. 1 2 c. 1 3 d. all of the above
47. The basis of quasi contractual relation is the

a. existence of a valid contract between the parties
b. existence of a voidable contract between the parties
c. prevention of unjust enrichment at the expenses of others
d. provisions contained in section 10 of the contract act
48. The quasi contractual obligantions arise where a person

a. suppliers necessaries to an incompetent person
b. makes payment of money or delivery of goods or under coercion
c. both a and b
49. A person supplying necessaries to an incompetent person (such as a minor or lunatic) is entitled to
reimbursed from the property of such person on the basis of
a. valid contract b. quasi contract
c. vaidable contract d. contingent contract
50. In which of the following circumstances, the quasi contractual obligations arise?
a. liability of a finder of goods
b. compensation of none-gratiuitous acts
c. recovery of payments made by interested persons
d. all of the above
51. A person supplying ‘necessaries’ to an incompetent person is entitled to be reimbursed from the
a. incompetent person personaly b. parents of incompetent person
c. property of incompetent person d. funds with the state government
52. A supplies to B, a lunatic, the necessaries, suitable to his condition in life. In this case
a. B is personality liable to pay b. B property is liable
c. B parents are personally liable d. if B property is not sufficient to reimburse, than he is
personally liable
53. Mr As property was wrongfully advertised for sale for recovery of government revenue due from B. In
order to save his property, Mr A paid the government dues. In this case, Mr A is entitled to recover the
amount of dues paid by him from Mr B on the basis of
a. government contract b. valid contract
c. quasi contract d. none of these
54. Which of the following expression is used in the Indian Contract Act in the part dealing with quasi
contracts?
a. quasi contractual obligations
b. certain relations of quasi contractual obligations
c. certain relations resembling those created by contract
d. obligations in the absence of actual contact
55. When a party of the contract fails to perform a contract within the fixed time
a. such contract remains valid provided the promise is fulfilled whether at the time of performance or later
b. such a contact becomes void
c. such contract becomes voidable at the option of the promise if the intention of the parties was that time
should be of essence of the contract
d. such a contract becomes voidable at the option of the promises or promise and the intention of the
parties does not matter
56. A, a singer, enters into a contract with B. the manager of a theatre, to sing at his theatre two nights in
every week during the next two months and B engages to pay her Rs 1000 for each nights performance. On
the 6th night, A willfully absent herself from the theatre.
a. B is at libertu to put an end to the contract

b. B cannot put an end to the contract
c. either a and b
57. A seaon article marked price Rs 50 in Neha’s shop, Sonal offers Neha Rs 50 for the article. Neha refuses
to sell saying the article is not for sale. Advice Sonal.
a. Sonal cannot force Neha to sell the article at Rs 50
b. Sonal can force Neha to sell the article at Rs 50
c. Sonal can claim damages
d. Sonal can sue Neha in the court
58. Mr X a trademan, left certain goods at Mr Ys house by mistake, in this case Mr Y

a. is bound to return the goods under quasi contractual obligations
b. is not bound to return the goods as there is no agreement between the two
c. can use the goods as his own and can also claom compensation from Mr X
d. is under obligation to make a fresh contract with Mr X for the use of these goods
59. Mr X a builder, contracts to erect and finish a house by the 1st January, in order that Mr B may give
possession of it at that tome to Mr C, to whom Mr B has contracted to let it. Mr A is informed of the contract
between Mr B and Mr C. Mr A builds the house so badly that, before the 1 st January, it falls down and has to
be rebuild by Mr B, who in consequence, loses the rent which he have received from Mr C and is obliged to
make compensation to Mr C for the breach of his contract.
a. Mr A must make compensation to Mr B for the cost of rebuilding the house
b. Mr A must take compensation to Mr B for the rent lost
c. Mr A must make compensation to Mr for the compensation made to Mr C
d. all of the above
60. Mr A advertises in daily newspaper that he will give a prize of Rs 90000 to the first person to swim the
English channel and back during the month of August. F, who read the advertisement, sets off from Dower
on 1st August and reaches the coast of France on 2nd August. On that day, a further advertisement appears in
the same newspaper stating that the offer of the prize has been withdrawn. On 3rd august, F completes the
return swim to England can F recover the prize.
a. yes, as the second advertisement is ineffective as for as F is concerned
b. no, as the offer was revocated
c. F can only claim for damages
61. Which of these contracts has three parties consisting of creditor, principle debtor and surety?
a. contract of indemnity b. contract of surety
c. contract of pledge d. contract of guarantee
62. Any guarantee which the creditor has obtained by means of keeping silence as to material
circumstances is
a. valid b. considered to be his approval
c. invalid d. considered to be his denial
63. Where a person pledge goods in which he has only a limited interest, the pledge is
a. invalid to the extent of that interest b. entire contract is invalid
c. valid to the extent of that interest d. entire contract is valid
64. What is the minimum consideration required to create an agency?

a. minimum of Rs 100000 b. minimum of 1000
c. no consideration at all is required d. minimum of 10000
65. What are the essentials for a person to employ an agent?

a. the person should not be of sound mind
b. the person should be a major according to the law to which the agent is subject
c. the person should be a major according to the law to which he is subject and should also be of sound
mind
d. the person should have executed a contract of indemnity before employing an agent
66. A contracts to pay B a sum of money when B marries C. C dies without being married to B.
a. the contract still can be forced b. the contract becomes void
c. either a or b d. none of the above
67. The extent of the liability under an indemnity depends on

a. the nature and terms of the contract
b. the case which must be governed by his own facts and circumstances
c. both a and b
68. contract is made by spoken words

a. implied b. express c. void d. special
69. A guarantee with extend to a series of transaction is called

a. special guarantee b. continuing guarantee
c. special guarantee d. none of the above
70. A sub-bailee is a person to whom the actual possession of goods is transferred by someone
a. who is not himself not an owner of goods
b. who has a present right to possession of them as bailee of the owner
c. both a and b
71. What is a continuing guarantee?

a. a guarantee which continues even after the contract comes to an end
b. a guarantee which shall be applicable to any other person who becomes a party to the contract
c. a guarantee which extends to a series of transaction
d. a guarantee which continues till the contract does not come to an end
72. what happens to a continuing guarantee in case of surety’s death?

a. indemnification from the property of the surety with regard to future transactions
b. revocation of the continuing guarantee with regard to future transactions
c. the continuing guarantee shall continue in the name of the suretys heirs
d. the continuing guarantee shall be continued by any other person
73. a transfers possession or custody of the farmland to his son ‘P’. P shall pay rent or a lease fee in return P
only receives custody and control of the property, but A still iwns it. A is thus responsible for paying the
property taxes and is liable for what happens on the land. This kind of contrat or arrangement is called
a. guarantee b. bailment c. pledge d. set off
74. An agents authority can be created

a. only by expressly writing the terms thereof
b. only by implication
c. only by expressly writing the terms thereof and registering the same with sub-registrar
d. either expressly or impliedly
75. a sub-agent is a person employed by and acting under the control of

a. the principal
b. the original agent in the business of agency
c. both a and b
d. neither a nor b
76. Which of the following statement is correct with regard to the termination of agency in which the agent
himself has an interest in the subject matter?
a. such an agency can be terminated by the principal at his will
b. such an agent can be terminated on the death or insanity of the principal
c. such an agency cannot be terminated at all
d. such an agency can be terminated only upon an express contract to the said effect
77. A contracts to indemnify B against the consequences of any proceedings which C may take against B in
respect of a certain sum of Rs 500
a. this is contract of indemnity
b. this is not a valid contract of indemnity
c. this is contract of stipulation
78. A employs B to beat C and agree to indemnify him against all consequences of the act. B thereupon
beats C and to pay damages to C for so doing.
a. A is liable to indemnify B for those damages
b. A is partially liable to indemnify B for those damages
c. A is not liable to indemnify B for those damages
79. A engages B as clerk to collect money for him. B fails to account for some of his receipts and A in
consequence calls upon him to furnish security for his duly accounting. A does not acquaint C with Bs
previous conduct. B afterwards makes default.
a. the guarantee is not invalid b. the guarantee is partly invalid
c. the guarantee is invalid d. none of the above
80. The extent of an agents authority, whether express or implied, depends upon
a. the nature of act or business for which he has been appointed
b. things which are incidental to the business or are usually done in carrying it out
c. the usual customs and usages of the trade
d. all of the above
81. subject to a contract between the partners, the firm shall indemnify a partner is respect to payments
made and liabilities incurred by him.
a. in the ordinary and proper conduct of the business
b. in doing such act, in an emergency, for the purpose of protecting the firm from loss, as would be done by
a person of ordinary prudence, in his won case, under similar circumstances.
c. both a and b
82. termination of an agency with public authority or a public body may attract judicial intervention in writ
petition
a. if the termination be unreasonable b. if the termination be arbitrary
c. if the termination be unconscionable d. all of the above
83. A directs B, his solicitot, to sell his estate by auction and so employ an auctioneer for the purpose. B
names C, an auctioneer to conduct the sale.
a. C is a sub agenct, and A’s sub agent for the conduct to the sale
b. C is not sub agent, but Bs agent for the conduct for the sale
c. C is not a sub agent, but As agent for the conduct of the sale
84. A contracts with B to grow a crop of indigo on A’s land and to deliver it to B at a
fixed rate and C guarantee A’s performance of this contract. B diverts a stream of water
which necessary for irrigation of A’s land and thereby presents him from raising the
indigo.
a. A is liable on his guarantee b. A is partly liable on his guarantee
c. A is no longer liable on his guarantee d. None of the above
85. Statement I Every contract is an agreement but every

agreement is not a contract Ststement II All agreements are
contracts, if they are made by the free consent of partiesCodes
a. statement I is correct but statement II is incorrect
b. statement II is correct but statement I is incorrect
c. both statements are correct
d. both statements are incorrect
ANSWERS →
1=C 2=B 3=B 4=A 5=C 6=C 7=A 8=A 9=A 10=A
11=D 12=B 13=A 14=C 15=D 16=D 17=B 18=C 19=D 20=D
21=D 22=B 23=B 24=B 25=C 26=A 27=D 28=D 29=B 30=C
31=C 32=A 33=B 34=C 35=A 36=C 37=B 38=C 39=A 40=A
41=B 42=D 43=D 44=D 45=B 46=D 47=C 48=C 49=B 50=D
51=C 52=B 53=C 54=C 55=C 56=A 57=A 58=A 59=D 60=A
61=D 62=C 63=C 64=C 65=C 66=B 67=C 68=B 69=C 70=C
71=C 72=B 73=B 74=D 75=B 76=D 77=A 78=C 79=C 80=D
81=C 82=D 83=C 84=C 85=C

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Multiple Choice Questions

1) Law of contract is—

3) An agreement is a voidable contract when it is –

4) An agreement not enforceable by law is said to be

6) The transactions collateral to an illegal agreement are

8) Flaw in capacity to contract may arise from –

9) Which of following result in an offer

10) A specific offer can be accepted by

1 | Page Prepared by Uma kant(SRF, Research Scholar “LU”, MBA, MCom)

12) Acceptance may be revoked by the acceptor

13) An advertisement to sell a thing by auction is

15) An offer is made to Mani in crowd It –

17) There is a counter-offer when

19) Consideration must move at the desire of –

22) Consideration must be something which the promisor –

23) Compromise of dispute claims –

25) A person who is not party to a contract

26) Consideration in a contract –

27) An agreement made without consideration is

28) A promise to subscribe to a charity .The promise is a

29) An agreement with or by minor is –

30) On attaining the age of majority a minor‘s agreement –

31) A minor , by misrepresenting his age , borrows some money –

33) A person is usually of sound mind , but occasionally of sound mind –

34) A contract by an idiot is –

36) The contractual capacity of a company is regulated by –

38) Flaw in a capacity to contract may arise from –

39) Where consent is caused by fraud or misrepresentation , the contract is –

45) A mere attempt at deceipt by a party to a contract –

46) When consent to an agreement is obtained by undue influence, the agreement is a –

47) which of the following relationships raise presumption of undue influence?

48) If there is error in cause ,the contract I

4 | Page Prepared by Uma kant(SRF, Research Scholar “LU”, MBA, MCom)

51) If there is a fraudulent misrepresentation as to the contents of a document , the contract is –

52) If there is a fraudulent misrepresentation as to the character of a document , the contract is –

54) A promise made without the intention of performing it amounts to –

56) The collateral transactions to an illegal agreement are

57) An agreement made with an alien enemy is

59) Regulation as to the opening and closing of business in a market are

62) A contract of life insurance is

63)an agreement the meaning of which is not certain ,is

64)Which of the following are wagering agreements,-

65) An agreement to do an impossible act is,

66)A wagering agreement is .

67) A contract of insurance is a –

68)Which of the following are contingent contracts?

69)A contingent contract is –

70)A contract to pay B Rs. 10,000 if B s house is burnt – This is a

73)Each party is a promisor and a Promisee in case of –

75)Sale of goods for cash is an example of –

76)When a party to a contract transfers his contractual rights to another , it is known as ,-

79) Assignment by operation of law takes place –

82) If a contract contains an undertaking to perform an impossibility , the contract is

83)An agreement to do an act impossible in itself –

84)If a new contract is substituted in place of an existing contract , it is called –

92) The court may grant rescission where the contract is

93) The foundation of modern law of dameges was laid down in , -

94) Specific performance may be ordered by the court when –

96) The case of Hadley v. Baxendale (1854) deals with

97) Anticipatory breach of a contract takes place –

99) Ordinary damages are damages which---