10 Case-based MCQs based on famous cases of the Indian Contract Act, 1872

1. Offer and Acceptance

Case: Bhagwandas Goverdhandas Kedia vs. M/S Girdharilal Parshottamdas
Facts: An offer made on phone from Ahmedabad was accepted by the defendant over phone at Khamgaon, but goods were not supplied.

Q1: Where is the contract considered to be completed in the case of offer and acceptance via telephone under the Indian Contract Act, 1872?

A) Place where offer is made
B) Place where acceptance is received
C) Place of residence of the offeree
D) Place of residence of the offeror

Answer:

Option B) Place where acceptance is received

(Explanation:As per Section 4, a contract is complete at the place where the acceptance is communicated and received by the offeror)

2. Consideration

Case: Kedarnath Bhattacharji vs. Gorie Mahomed
Facts: The defendant subscribed Rs. 100 for construction of a Town Hall but later refused to pay.

Q2: Is a promise to subscribe to a fund binding if the promisee incurs liability on the faith of such promise?

A) No, absence of consideration
B) Yes, it is valid consideration
C) Only if in writing
D) If approved by a magistrate

Answer:

Option B) Yes, it is valid consideration

(Explanation: Section 2(d) states consideration is valid if the promisee has incurred liability on the faith of the promise, as in this case)

3. Past Consideration

Case: Durga Prasad vs. Baldeo
Facts: Plaintiff constructed a market; defendants promised commission later.

Q3: Is past consideration (an act already completed) valid under Indian law?

A) Yes, always
B) No, never
C) Only for natural love and affection
D) Yes, only if requested by promisor

Answer:

Option D) Yes, only if requested by promisor

(Explanation: Section 2(d) states past consideration must be at the request of the promisor; however, acts done voluntarily do not constitute valid consideration)

4. Capacity to Contract — Minor

Case: Mohori Bibee vs. Dharmodas Ghose

Facts: A minor misrepresented age and mortgaged property.

Q4: What is the status of a contract entered into by a minor?

A) Voidable at minor’s option
B) Valid if for minor’s benefit
C) Void ab initio
D) Enforceable by lender

Answer:

Option C) Void ab initio

(Explanation:Section 10 and 11; a minor is incompetent, so such contracts are void from the beginning)

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5. Unilateral Contract

Case: Carlill v. Carbolic Smoke Ball Company
Facts:The company advertised a reward if the product failed, Mrs. Carlill fulfilled the conditions.

Q5: Under Section 8, how can a unilateral offer be accepted?

A) Oral acceptance
B) Written acceptance
C) Performance of the act
D) Notice to the offeror

Answer:

C) Performance of the act
(Explanation:Acceptance through performance constitutes a valid contract under Section 8; notification is not necessary)

6. Privity of Contract and Consideration

Case: Chinnaya v. Ramayya
Facts: A daughter refused to pay an annuity promised to her aunt, based on a contract involving a third party.

Q6: According to Section 2(d), is consideration valid if it moves from a third party?

A) No, should move only from promisee
B) Yes, may move from promisee or any other person
C) Only if stated in the contract
D) Not allowed under Indian law

Answer:

Option B) Yes, may move from promisee or any other person
(Explanation: Section 2(d) allows consideration by promisee or any other person; privity of consideration is recognized unlike English law)

7. Supervening Impossibility / Frustration

Case: Ghose vs. Mugneeram Bangur & Co.
Facts: Land was requisitioned by government after contract but requirement was temporary.

Q7: When does a contract become void due to impossibility under Section 56?

A) If performance becomes more difficult
B) If performance becomes illegal or impossible after contract
C) If one party wants to cancel
D) If both parties agree

Answer:

Option B) If performance becomes illegal or impossible after contract
(Explanation: Section 56 provides that a contract becomes void if subsequent impossibility occurs that is not temporary)

8. Mistake

Case: Powell v Lee
Facts: Powell applied for the post of a headmaster, acceptance was communicated by an unauthorised person.

Q8:Which of the following principles was established in the case of Powell v Lee (1908)?
A) An offer can be accepted by anyone except the offeree.
B) Acceptance of an offer must be communicated by the offeree or an authorized agent.
C) A contract is valid even if acceptance is not communicated.
D) Silence always amounts to acceptance in contract law.

Answer:

Option B) Acceptance of an offer must be communicated by the offeree or an authorized agent.
(Explanation:In Powell v Lee (1908), the court held that there was no binding contract between the parties because the acceptance of Powell’s application for employment was communicated to him by a school board member who lacked official authority to do so. The Board’s decision to offer Powell the job was not officially communicated by an authorized person. Thus, the principle established is that for a contract to be binding, acceptance must be officially communicated to the offeror by the offeree or someone with proper authority. Communication by an unauthorized person does not create a valid contract)

9. Misrepresentation

Case: Derry v Peek
Facts: Company did not mention in its prospectus that it required approval of board of trade to carry on business.

Q9:Which of the following correctly summarizes the legal principle established in the case of Derry v Peek (1889)?
A) Any incorrect statement made by company directors in a prospectus, even if made honestly, amounts to fraudulent misrepresentation.
B) Fraudulent misrepresentation occurs only if a false statement is made knowingly, without belief in its truth, or recklessly without regard to its truth or falsity.
C) Negligent misrepresentation is treated the same as fraudulent misrepresentation for the purposes of legal liability.
D) Mere carelessness or oversight in making a statement can lead to liability for deceit, regardless of the director’s intent.

Answer:

Option B) Fraudulent misrepresentation occurs only if a false statement is made knowingly, without belief in its truth, or recklessly without regard to its truth or falsity.

(Explanation:Derry v Peek established that liability for fraudulent misrepresentation requires proof of intentional dishonesty or reckless disregard for the truth, not mere negligence or honest mistake)

10. Communication of offer

Case: Lalman Shukla v Gauri Dutt

Facts: Gauri Dutt sent his servant Lalman in search of missing nephew and later announced a reward, which Laman was not aware of

Q10:What was the primary legal issue in Lalman Shukla v Gauri Dutt?

A) Breach of contract
B) Whether a person can claim a reward without knowledge of the offer
C) Negligence of duty
D) Validity of the reward amount

Answer:

Option B) Whether a person can claim a reward without knowledge of the offer
(Explanation: A person cannot accept an offer without knowledge of it )

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