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CS Executive Paper 6 (ECIPL) study materials
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CS Executive Paper 6 (ECIPL) practice questions

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Question 1Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

Under the Indian Contract Act, 1872, a proposal is said to be accepted when the acceptance is expressed in some usual and reasonable manner. If the proposer prescribes a particular mode of acceptance and the offeree accepts in a different mode, what is the legal position?

  1. The proposer may insist that the acceptance be made in the prescribed manner, and if he does not do so within a reasonable time, he is deemed to have accepted the non-conforming acceptance Correct answer.
  2. The acceptance is automatically valid and the proposer has no right to object to the deviation
  3. The acceptance amounts to a fresh proposal by the offeree which the original proposer must accept in writing
  4. The acceptance is void ab initio and no contract can ever arise between the parties

Explanation

Section 7 of the Indian Contract Act, 1872 provides that acceptance must be absolute and unqualified and expressed in the prescribed or usual manner. Where the proposer prescribes a mode and the acceptor deviates, the proposer may insist on the prescribed mode, but if he keeps silent beyond a reasonable time he is deemed to have accepted the deviated acceptance.

Question 2Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

Which of the following is essential for a valid contract under Section 10 of the Indian Contract Act, 1872?

  1. The agreement must be in writing and registered
  2. The contract must be attested by two witnesses
  3. The consideration must always be adequate and in money
  4. There must be free consent of competent parties, lawful consideration and a lawful object Correct answer.

Explanation

Section 10 requires that agreements be made by free consent of parties competent to contract, for a lawful consideration and with a lawful object, and not expressly declared void. Writing, registration and attestation are required only for specific classes of contracts under other statutes.

Question 3Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

A minor, aged 17, borrows Rs. 50,000 from a moneylender and executes a promissory note. On attaining majority, he refuses to repay. Which statement correctly states the legal position?

  1. The agreement is void ab initio and the minor incurs no personal liability, though the moneylender may recover the amount from the minor's estate if the minor has property Correct answer.
  2. The moneylender can enforce the promissory note because the minor received the benefit
  3. The minor is liable only after ratification by a fresh written promise made within six months of attaining majority
  4. The minor is personally liable because borrowing money is a necessary for his benefit

Explanation

Under Mohori Bibee v. Dharmodas Ghose, an agreement with a minor is void ab initio, and the minor cannot be made personally liable even for necessaries; only the minor's estate is liable under Section 68. There is no question of ratification on attaining majority because the original agreement was void.

Question 4Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

Under the Indian Contract Act, 1872, which of the following is a valid form of consideration?

  1. Consideration that is unlawful in part but separable from the lawful part
  2. Consideration that is illusory and dependent entirely on the promisor's whim
  3. Consideration that is opposed to public policy
  4. Past voluntary services rendered at the desire of the promisor Correct answer.

Explanation

Section 2(d) recognises consideration given at the desire of the promisor, and Section 25(2) expressly validates a promise to compensate a person who has already voluntarily done something for the promisor. Past consideration is therefore valid in this limited statutory form.

Question 5Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

A agrees to sell his house to B, and both parties believe in good faith that the house is worth Rs. 80 lakh. In fact, the house is worth Rs. 40 lakh. B later seeks to avoid the contract on the ground of mistake. What is the position?

  1. The contract is voidable at B's option because the mistake caused loss to him
  2. B can avoid the contract only if he proves fraud on A's part
  3. The contract is valid because a mistake as to value, unaccompanied by mistake as to the subject matter or a fact essential to the agreement, does not render it void Correct answer.
  4. The contract is void because there is a bilateral mistake as to value

Explanation

Section 20 makes an agreement void where both parties are under a mistake as to a matter of fact essential to the agreement. A mere error of judgment about market value, without any mistake about the identity or existence of the subject matter, is not a mistake essential to the agreement.

Question 6Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

A threatens to file a false criminal complaint against B unless B sells his land to A at half its market price. B executes the sale deed. What is the status of the contract?

  1. The contract is voidable at B's option because his consent was caused by coercion Correct answer.
  2. The contract is unenforceable only if B first proves actual loss in a civil suit
  3. The contract is void ab initio because threats of criminal prosecution always render an agreement void
  4. The contract is valid because A did not commit any physical violence

Explanation

Section 15 defines coercion to include threatening to institute a criminal prosecution against a person to induce him to enter into an agreement. Under Section 19, consent caused by coercion makes the agreement voidable at the option of the party whose consent was so caused.

Question 7Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

Which of the following relationships is expressly presumed under Section 16 of the Indian Contract Act, 1872 to be in a position to dominate the will of another?

  1. Creditor and debtor
  2. Husband and wife
  3. Landlord and tenant
  4. Doctor and patient Correct answer.

Explanation

Section 16(2) lists relationships where one party is in a position to dominate the will of another, including real or apparent authority, fiduciary relations, and mental or bodily distress. The doctor-patient relationship is a classic fiduciary relationship where undue influence may be presumed.

Question 8Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

A, intending to deceive B, falsely represents that he has authority to sell a plot of land. B pays Rs. 10 lakh in reliance. What remedy is available to B under the Indian Contract Act, 1872?

  1. B can only rescind the contract and cannot claim damages
  2. B can rescind the contract and also claim damages for the loss suffered Correct answer.
  3. B can claim damages only if he proves that A had no authority
  4. B can neither rescind nor claim damages because the contract is void

Explanation

Section 19 provides that where consent is caused by fraud, the agreement is voidable at the option of the party deceived, and he may also claim damages under Section 75 read with the general law of tort. The deceived party is entitled to restitution and to compensation for the loss caused by the fraudulent misrepresentation.

Question 9Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

Under the Indian Contract Act, 1872, which of the following agreements is expressly declared to be void?

  1. An agreement in restraint of marriage of any person other than a minor Correct answer.
  2. An agreement to sell a business along with its goodwill
  3. An agreement to refer a dispute to arbitration
  4. An agreement of guarantee for a debt

Explanation

Section 26 expressly declares void every agreement in restraint of the marriage of any person, other than a minor. Agreements of guarantee, sale of goodwill and arbitration agreements are valid and are recognised under Sections 126, 27 and the Arbitration and Conciliation Act, 1996 respectively.

Question 10Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

An agreement in restraint of trade is void under Section 27 of the Indian Contract Act, 1872. Which of the following is an exception recognised by the statute itself?

  1. An agreement among competitors to divide the market between them
  2. An agreement between two traders not to sell goods below a fixed price
  3. An agreement by an employee not to compete with the employer for two years after resignation
  4. An agreement by a seller of goodwill not to carry on a similar business within reasonable limits Correct answer.

Explanation

Section 27 contains an exception for the sale of the goodwill of a business: the seller may agree not to carry on a similar business within specified local limits, so long as the limits are reasonable. The other options are restraints of trade that fall foul of Section 27.

Question 11Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

A wagering agreement is void under Section 30 of the Indian Contract Act, 1872. Which of the following is a consequence of this rule?

  1. The winner can recover the amount won from the loser in a court of law
  2. The stake money deposited with a stakeholder can be recovered from the stakeholder after the event
  3. No suit can be brought to recover anything alleged to be won on a wager, though the loser may recover money deposited with a stakeholder if the stakeholder has not paid it over Correct answer.
  4. Collateral transactions relating to a wager are also void in every case

Explanation

Section 30 bars suits to recover winnings on a wager, but the loser may recover his deposit from a stakeholder before the stakeholder has paid it over to the winner. Collateral transactions are generally enforceable, and the mere fact that they relate to a wager does not render them void.

Question 12Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

A contract is discharged by supervening impossibility under Section 56 of the Indian Contract Act, 1872. Which of the following is an instance of such impossibility?

  1. Refusal of the promisor to perform because the contract has become unprofitable
  2. Destruction of the subject matter of the contract without the fault of the promisor Correct answer.
  3. Difficulty in performing the contract due to an increase in the cost of raw material
  4. Delay in performance caused by the promisor's own negligence

Explanation

Section 56 applies where performance becomes impossible or unlawful after the contract is made, such as by destruction of the subject matter or the death or incapacity of the promisor in personal contracts. Commercial hardship, unprofitability or self-induced delay does not attract the doctrine.

Question 13Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

Under Section 73 of the Indian Contract Act, 1872, when a contract is broken, the injured party is entitled to compensation for which of the following?

  1. Damages for remote and indirect losses regardless of whether they were foreseeable
  2. Punitive damages exceeding the actual loss suffered
  3. Any loss which naturally arose in the usual course of things from the breach, or which the parties knew at the time of contracting to be likely to result from the breach Correct answer.
  4. Only nominal damages of one rupee

Explanation

Section 73 codifies the rule in Hadley v. Baxendale: the injured party may recover compensation for loss arising naturally in the usual course of things, or for loss which the parties knew at the time of contracting to be likely to result from the breach. Remote and unforeseeable losses are excluded.

Question 14Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

A contracts to deliver 100 bags of sugar to B on 1 March. On 1 March, A fails to deliver, and B purchases sugar in the open market at a higher price. B also suffers loss because his sub-buyer cancels a contract. Which of the following is correct regarding B's claim?

  1. B can recover the difference between the contract price and the market price, and also the loss on the sub-contract if A knew of the sub-contract at the time of contracting Correct answer.
  2. B can recover the entire loss on the sub-contract even if A had no knowledge of it
  3. B cannot recover anything because he did not mitigate his loss
  4. B can recover only the difference between the contract price and the market price, and nothing more in any circumstances

Explanation

Section 73 allows recovery of the natural loss arising from the breach, which includes the difference between the contract price and the market price. Special loss on a sub-contract is recoverable only if the parties knew at the time of contracting that such loss was likely to result from the breach.

Question 15Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

A owes B Rs. 1 lakh. A, B and C enter into an agreement under which C agrees to pay B Rs. 1 lakh and B agrees to accept C as the debtor in place of A. What is this arrangement called under the Indian Contract Act, 1872?

  1. Remission
  2. Novation Correct answer.
  3. Rescission
  4. Alteration

Explanation

Section 62 recognises novation, rescission and alteration as modes of discharging a contract. Novation occurs when a new contract is substituted for an existing one, either between the same parties or with a third party substituted for one of them, as in this tripartite arrangement.

Question 16Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

Under the Indian Contract Act, 1872, a contract of guarantee is a contract to perform the promise or discharge the liability of a third person in case of his default. Which of the following statements about a contract of guarantee is correct?

  1. The surety's liability is secondary and co-extensive with that of the principal debtor, unless the contract provides otherwise Correct answer.
  2. The surety is discharged automatically if the creditor grants time to the principal debtor without the surety's consent
  3. A guarantee can be given only for a past debt and not for a future debt
  4. The surety's liability is primary and independent of the principal debtor's default

Explanation

Section 128 provides that the liability of the surety is co-extensive with that of the principal debtor unless the contract provides otherwise. The surety's liability is secondary in nature and arises on the default of the principal debtor.

Question 17Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

A, a surety for B's loan from C, pays the debt on B's default. What rights does A acquire against B and C?

  1. A can claim reimbursement from C only and cannot proceed against B
  2. A acquires no rights because he paid voluntarily
  3. A can claim reimbursement from B and, on payment, steps into the shoes of the creditor against B Correct answer.
  4. A can claim reimbursement from B only if B consents to the payment

Explanation

Section 145 gives the surety a right of reimbursement against the principal debtor, and Section 140 gives him the right of subrogation, under which he steps into the creditor's shoes and acquires the creditor's rights against the principal debtor. Both rights arise on payment of the debt.

Question 18Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

Under the Indian Contract Act, 1872, an agency may be created in which of the following ways?

  1. Only by operation of law and never by the act of the parties
  2. Only by a registered power of attorney
  3. Only by express written agreement
  4. By express agreement, by implication, or by ratification by the principal of acts done without authority Correct answer.

Explanation

Section 186 provides that the authority of an agent may be express or implied. Section 196 recognises agency by ratification where the principal subsequently adopts an act done on his behalf without authority. Agency may also arise by operation of law, for example in partnership.

Question 19Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

An agent, without the knowledge of his principal, purchases the principal's property himself. What is the legal consequence under the Indian Contract Act, 1872?

  1. The transaction is voidable only if the principal proves actual loss
  2. The principal may repudiate the transaction and the agent must account for any benefit gained Correct answer.
  3. The agent becomes the lawful owner and the principal cannot challenge the sale
  4. The transaction is valid because the agent paid a fair price

Explanation

Section 215 provides that if an agent deals on his own account in the business of the agency without obtaining the principal's consent and after full disclosure, the principal may repudiate the transaction. Section 216 requires the agent to account for and pay over to the principal all benefits derived from such transactions.

Question 20Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

Under the Specific Relief Act, 1963, specific performance of a contract may be enforced in respect of which of the following?

  1. A contract to marry
  2. A contract whose performance depends on the personal qualifications of a party
  3. A contract for the sale of an immovable property Correct answer.
  4. A contract for the performance of a personal service

Explanation

Section 10 of the Specific Relief Act, 1963, as amended in 2018, provides that specific performance may be granted for any contract except those expressly excluded. Section 14 excludes contracts of personal service, contracts to marry and contracts dependent on personal qualifications, leaving contracts for the sale of immovable property within the enforceable class.

Question 21Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

Under the Specific Relief Act, 1963, which of the following is a ground on which a court may refuse specific performance of a contract?

  1. The contract is not in writing
  2. The defendant is a company and not a natural person
  3. The contract is of such a nature that the court cannot enforce its material terms Correct answer.
  4. The plaintiff has failed to prove the exact amount of damages suffered

Explanation

Section 14 of the Specific Relief Act, 1963 lists contracts that cannot be specifically enforced, including contracts whose material terms the court cannot enforce. The court must be able to supervise and enforce the terms before granting specific performance.

Question 22Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

Under the Specific Relief Act, 1963, a contract for the sale of immovable property may be specifically enforced against a subsequent purchaser who takes with notice of the original contract. This rule is based on which principle?

  1. The doctrine of lis pendens
  2. The doctrine of part performance Correct answer.
  3. The rule of caveat emptor
  4. The rule of privity of contract

Explanation

Section 27 of the Specific Relief Act, 1963 provides that specific performance may be enforced against a subsequent transferee who takes with notice of the original contract. This is a statutory application of the equitable doctrine of part performance, which prevents a purchaser from defeating a prior contract with notice.

Question 23Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

Under the Specific Relief Act, 1963, a suit for a declaratory decree may be filed by a person who is entitled to any legal character or to any right as to any property. Which of the following is a condition for such a suit?

  1. The plaintiff must prove actual pecuniary loss
  2. The plaintiff must first exhaust all other remedies available to him
  3. The suit must be filed within three months of the denial
  4. The plaintiff must have been denied the legal character or right by the defendant Correct answer.

Explanation

Section 34 of the Specific Relief Act, 1963 permits a suit for a declaration where the plaintiff is entitled to a legal character or right as to property and the defendant has denied or is interested in denying that character or right. The denial or interest in denial is the essential condition.

Question 24Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

Under the Specific Relief Act, 1963, an injunction may be granted to prevent the breach of an obligation existing in favour of the applicant. Which of the following is a type of injunction recognised by the Act?

  1. A declaratory injunction creating a new right
  2. A self-help injunction authorising the plaintiff to use force
  3. A mandatory injunction directing the defendant to perform an act Correct answer.
  4. A punitive injunction imposing a fine on the defendant

Explanation

Sections 36 to 42 of the Specific Relief Act, 1963 deal with injunctions, including preventive and mandatory injunctions. A mandatory injunction requires the defendant to do a positive act to restore the position that existed before the breach.

Question 25Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

Under the Specific Relief Act, 1963, which of the following contracts is specifically enforceable at the instance of the purchaser?

  1. A contract for the sale of a plot of land where the seller has a defective title but the defect is capable of being remedied Correct answer.
  2. A contract for the sale of a plot of land where the seller has no title at all and cannot obtain it
  3. A contract for the sale of a plot of land that is void for uncertainty
  4. A contract for the sale of a plot of land that is illegal under a statute

Explanation

Section 17 of the Specific Relief Act, 1963 deals with contracts for the sale of property with defective title. Where the defect is capable of being remedied, the court may grant specific performance, subject to conditions; where the seller has no title and cannot obtain it, specific performance is refused.

Question 26Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

Under the Indian Contract Act, 1872, which of the following is an essential element of a valid contract as laid down in Section 10?

  1. Free consent of the parties Correct answer.
  2. Registration of the agreement before a Sub-Registrar
  3. Attestation by two witnesses
  4. Payment of stamp duty at the time of formation

Explanation

Section 10 provides that agreements become contracts when made by the free consent of parties competent to contract, for a lawful consideration and lawful object, and not expressly declared void. Registration, attestation and stamping are formalities that affect enforceability or admissibility but are not ingredients of a contract under Section 10.

Question 27Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

A agrees to sell his car to B for Rs. 5 lakh. Unknown to both parties, the car had already been destroyed by fire before the agreement was made. What is the status of the agreement under the Indian Contract Act, 1872?

  1. It is voidable at B's option because the consideration failed
  2. It is unenforceable until B proves A's negligence
  3. It is void because the subject matter was destroyed before the agreement Correct answer.
  4. It is valid, and A must compensate B for non-delivery

Explanation

Where the subject matter of an agreement has already perished before the contract is made, without the knowledge of the promisor, the agreement is void under Section 20 read with the doctrine of mistake as to the existence of the subject matter. Both parties here were ignorant of the destruction, so the agreement is void from the outset rather than voidable.

Question 28Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

A, a minor, borrows Rs. 50,000 from B and executes a promissory note. On attaining majority, A refuses to repay. Which statement correctly states the position under the Indian Contract Act, 1872?

  1. B can recover the principal with interest under Section 65 for failure of consideration
  2. A is liable because the promissory note ratifies the earlier void agreement
  3. B cannot recover the amount as damages, since the agreement was void ab initio Correct answer.
  4. B can recover the amount because the loan was for A's necessities

Explanation

An agreement with a person who is not competent to contract is void under Sections 10 and 11, and a minor's agreement is void ab initio, so no damages can be recovered on it. A fresh promise after majority requires a fresh consideration to be binding, and the doctrine of restitution under Section 65 applies only to void agreements discovered later, not to agreements void from the beginning.

Question 29Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

Under the Specific Relief Act, 1963, which of the following is true of a contract that is not specifically enforceable?

  1. The plaintiff is left to the remedy of compensation in money for its breach Correct answer.
  2. The court must always order rectification of the instrument instead
  3. The court may still grant specific performance if the plaintiff waives damages
  4. The contract automatically becomes void on the court's refusal

Explanation

Specific performance is an equitable discretionary remedy available only in the cases enumerated in the Act; where it is refused, the party is not left without a remedy and may claim compensation in money for the breach. Refusal of the equitable relief does not affect the legal validity of the contract.

Question 30Law of Contract and Specific Relief (Indian Contract Act, 1872 and Specific Relief Act, 1963)

A contracts to sing at B's theatre for two nights, and B agrees to pay Rs. 1 lakh. Before the first performance, A is diagnosed with a permanent throat condition that prevents singing. Which statement best describes the legal position under the Indian Contract Act, 1872?

  1. The contract becomes void under Section 56, as performance is impossible by an event beyond A's control Correct answer.
  2. B may compel A to arrange a substitute singer acceptable to B
  3. The contract remains valid and B must pay, as A's illness is only temporary
  4. A is liable in damages because personal incapacity is no excuse

Explanation

Section 56 provides that a contract to do an act which, after the contract is made, becomes impossible by reason of an event which the promisor could not prevent, becomes void when the act becomes impossible. A permanent incapacity to perform a contract of a personal nature falls within this doctrine, so the contract is discharged without liability for damages.

Question 31Law of Sale of Goods and Negotiable Instruments (Sale of Goods Act, 1930; Negotiable Instruments Act, 1881)

Under the Sale of Goods Act, 1930, in a contract of sale of goods, the property in the goods is transferred when the parties intend it to be transferred. In the absence of a contrary intention, when does property pass in an unconditional contract for the sale of specific goods in a deliverable state?

  1. On actual delivery of the goods
  2. On payment of the full price
  3. On the buyer taking physical possession
  4. At the time the contract is made Correct answer.

Explanation

Section 20 provides that where there is an unconditional contract for the sale of specific goods in a deliverable state, property passes at the time the contract is made, irrespective of postponement of payment or delivery. The section embodies the maxim that the property passes when the parties intend, and this is the statutory default.

Question 32Law of Sale of Goods and Negotiable Instruments (Sale of Goods Act, 1930; Negotiable Instruments Act, 1881)

A sells to B 100 bags of rice 'ex warehouse', and the contract provides that B must remove the goods within 15 days. The goods are specific and in a deliverable state. When does property pass to B?

  1. Only when B actually removes the goods from the warehouse
  2. When the warehouseman attests the transfer in his books
  3. When the contract is made, subject to Section 20 Correct answer.
  4. When B pays the price and obtains a delivery order

Explanation

Where specific goods are in a deliverable state and the contract is unconditional, Section 20 fixes the passing of property at the making of the contract even if the buyer is to remove the goods later. The time allowed for removal does not postpone the transfer of property.

Question 33Law of Sale of Goods and Negotiable Instruments (Sale of Goods Act, 1930; Negotiable Instruments Act, 1881)

In a sale of unascertained goods by description, when does the property in the goods pass to the buyer?

  1. When the buyer pays the price in full
  2. When goods of that description in a deliverable state are unconditionally appropriated to the contract Correct answer.
  3. When the contract of sale is executed by both parties
  4. When the seller issues an invoice describing the goods

Explanation

Section 23 provides that in a contract for the sale of unascertained or future goods by description, property passes when goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the buyer's assent or by the buyer with the seller's assent. Appropriation is the key act.

Question 34Law of Sale of Goods and Negotiable Instruments (Sale of Goods Act, 1930; Negotiable Instruments Act, 1881)

Which of the following is a condition precedent to the passing of property in unascertained goods under Section 18 of the Sale of Goods Act, 1930?

  1. Payment of the price by the buyer
  2. Delivery of the goods to the buyer
  3. Execution of a stamped agreement
  4. Ascertainment of the goods Correct answer.

Explanation

Section 18 lays down that no property in unascertained goods is transferred to the buyer unless and until the goods are ascertained. Ascertainment identifies the goods to which the contract relates; appropriation under Section 23 follows thereafter.

Question 35Law of Sale of Goods and Negotiable Instruments (Sale of Goods Act, 1930; Negotiable Instruments Act, 1881)

A contracts to sell to B a specified horse. Unknown to both parties, the horse had died before the contract was made. What is the effect of the contract?

  1. The contract is void Correct answer.
  2. The contract is voidable at B's option
  3. The contract is unenforceable but the seller is liable in damages
  4. The contract is valid and B must pay the price

Explanation

Section 7 provides that where there is an agreement to sell specific goods and the goods, without any fault of the seller or buyer, perish before the risk passes to the buyer, the agreement is thereby avoided. The contract becomes void.

Question 36Law of Sale of Goods and Negotiable Instruments (Sale of Goods Act, 1930; Negotiable Instruments Act, 1881)

A agrees to sell to B 50 tonnes of wheat to be grown on A's field. Before the crop is harvested, a fire destroys the standing crop without fault of either party. What is the position?

  1. The contract remains valid and specific performance can be granted
  2. The buyer must still pay the price
  3. The seller must compensate the buyer for the loss
  4. The agreement is void under Section 8 Correct answer.

Explanation

Section 8 deals with goods which perish before sale but after agreement to sell. Where the goods are future goods and perish without fault, the agreement is avoided and the contract becomes void.

Question 37Law of Sale of Goods and Negotiable Instruments (Sale of Goods Act, 1930; Negotiable Instruments Act, 1881)

Unless otherwise agreed, when does the risk of loss in respect of goods sold pass to the buyer?

  1. When the goods are appropriated to the contract
  2. When the price is paid
  3. When the goods are delivered to the buyer
  4. When the property in the goods passes Correct answer.

Explanation

Section 26 provides the general rule that risk prima facie passes with property, whether or not delivery has been made. The parties may agree otherwise, and delay in delivery by either party attracts special rules.

Question 38Law of Sale of Goods and Negotiable Instruments (Sale of Goods Act, 1930; Negotiable Instruments Act, 1881)

A sells specific goods to B and property passes, but the goods remain in A's warehouse for the buyer's convenience. The warehouse is destroyed by an earthquake. Who bears the loss?

  1. A, because the goods were still in his possession
  2. Both parties equally
  3. Neither party; the loss is borne by the insurer alone
  4. B, because risk passed with property Correct answer.

Explanation

Under Section 26, risk prima facie passes with property. Since property had passed to B, the loss falls on B even though the goods remained with the seller, unless the contract provided otherwise.

Question 39Law of Sale of Goods and Negotiable Instruments (Sale of Goods Act, 1930; Negotiable Instruments Act, 1881)

A agrees to sell to B 100 bales of cotton out of a larger stock. Before appropriation, A wrongfully refuses to deliver. What is B's remedy?

  1. B may claim the entire stock as his property
  2. B may sue for specific performance as of right
  3. B may sue for damages for non-delivery Correct answer.
  4. B has no remedy because property has not passed

Explanation

Where property has not passed and the seller wrongfully neglects or refuses to deliver, the buyer may sue for damages for non-delivery under Section 57. Specific performance is a discretionary and limited remedy for ascertained goods.

Question 40Law of Sale of Goods and Negotiable Instruments (Sale of Goods Act, 1930; Negotiable Instruments Act, 1881)

A agrees to sell to B a specific antique vase and wrongfully sells and delivers it to C, who buys in good faith without notice of B's contract. What is B's remedy against A?

  1. B may obtain specific performance against C
  2. B may treat the sale to C as void
  3. B may recover the vase from C
  4. B may sue A for damages for breach of contract Correct answer.

Explanation

Where the seller has parted with the goods to a bona fide purchaser without notice, the original buyer's remedy is against the seller for breach of contract, ordinarily damages. The innocent third party's title is protected.

Question 41Law of Sale of Goods and Negotiable Instruments (Sale of Goods Act, 1930; Negotiable Instruments Act, 1881)

In a contract of sale, which of the following is an implied condition on the part of the seller under Section 14 of the Sale of Goods Act, 1930?

  1. That the goods are of merchantable quality in every case
  2. That the seller has a right to sell the goods Correct answer.
  3. That the buyer will pay the price
  4. That the goods are free from all encumbrances

Explanation

Section 14 implies a condition that the seller has a right to sell the goods, and a warranty that the buyer shall have quiet possession and freedom from encumbrances. The right to sell is a condition.

Question 42Law of Sale of Goods and Negotiable Instruments (Sale of Goods Act, 1930; Negotiable Instruments Act, 1881)

A buys a car from B and uses it for several months. It later transpires that B had no title to the car and A is compelled to return it to the true owner. What can A recover from B?

  1. Only the depreciation in value
  2. Nothing, because the sale was completed
  3. Only nominal damages because A used the car
  4. The full price as damages for breach of the condition as to title Correct answer.

Explanation

Breach of the implied condition that the seller has a right to sell entitles the buyer to repudiate and recover the price as damages, notwithstanding that he had use of the goods. The condition goes to the root of the contract.

Question 43Law of Sale of Goods and Negotiable Instruments (Sale of Goods Act, 1930; Negotiable Instruments Act, 1881)

In a sale of goods by description, there is an implied condition that the goods shall correspond with the description. This condition applies even where the buyer has examined the goods.

  1. True, only if the seller is a manufacturer
  2. True, because the condition as to description is independent of examination Correct answer.
  3. False, because examination excludes the condition
  4. False, unless the goods are unascertained

Explanation

Section 15 implies a condition that goods sold by description must correspond with the description. The proviso about examination in Section 16 relates to merchantable quality and fitness, not to the description condition.

Question 44Law of Sale of Goods and Negotiable Instruments (Sale of Goods Act, 1930; Negotiable Instruments Act, 1881)

A tells B, a dealer, that he wants a car suitable for touring in hilly terrain. B supplies a car unfit for such use. Which implied condition is attracted?

  1. Fitness for a particular purpose under Section 16(1) Correct answer.
  2. Quiet possession under Section 14
  3. Correspondence with description only
  4. Merchantable quality only

Explanation

Where the buyer makes known to the seller the particular purpose for which the goods are required, so as to show reliance on the seller's skill or judgment, and the goods are of a description which it is in the course of the seller's business to supply, there is an implied condition of fitness for that purpose under Section 16(1).

Question 45Law of Sale of Goods and Negotiable Instruments (Sale of Goods Act, 1930; Negotiable Instruments Act, 1881)

In a sale by sample, which of the following is an implied condition under Section 17 of the Sale of Goods Act, 1930?

  1. That the seller shall deliver the sample to the buyer
  2. That the sample shall be preserved for one year
  3. That the bulk shall correspond with the sample in quality Correct answer.
  4. That the buyer shall have the right to examine the bulk

Explanation

Section 17 implies in a sale by sample that the bulk shall correspond with the sample in quality, that the buyer shall have a reasonable opportunity of comparing bulk with sample, and that the goods shall be free from any defect rendering them unmerchantable which would not be apparent on reasonable examination of the sample.

Question 46Law of Sale of Goods and Negotiable Instruments (Sale of Goods Act, 1930; Negotiable Instruments Act, 1881)

A sells to B 10 bags of sugar by sample. The sample was free from weevils, but the bulk contains weevils not apparent on reasonable examination of the sample. What is B's remedy?

  1. B may reject the goods for breach of the implied condition Correct answer.
  2. B has no remedy because the defect was latent
  3. B must accept the goods because the sample was shown
  4. B may only claim a price reduction

Explanation

Section 17 implies a condition that the goods shall be free from defects rendering them unmerchantable which would not be apparent on reasonable examination of the sample. Breach of this condition entitles the buyer to reject the goods.

Question 47Law of Sale of Goods and Negotiable Instruments (Sale of Goods Act, 1930; Negotiable Instruments Act, 1881)

A, a seller, delivers goods to B on 'sale or return'. B retains them beyond the stipulated time without intimating his decision. What is the legal effect?

  1. B is deemed to have adopted the sale Correct answer.
  2. The goods remain the seller's property indefinitely
  3. B must return the goods at his own cost
  4. The contract lapses automatically

Explanation

In a sale or return transaction, the property passes to the buyer when he signifies approval or does any act adopting the transaction, or if he retains the goods beyond the stipulated time without notice of rejection. Retention beyond time amounts to adoption.

Question 48Law of Sale of Goods and Negotiable Instruments (Sale of Goods Act, 1930; Negotiable Instruments Act, 1881)

Which of the following correctly describes the rule relating to delivery of goods in instalments under the Sale of Goods Act, 1930?

  1. Delivery by instalments is void unless registered
  2. The buyer is not bound to accept delivery by instalments unless so agreed Correct answer.
  3. The seller may always deliver in instalments at his option
  4. Instalment delivery is permitted only for perishable goods

Explanation

Section 31 provides that unless otherwise agreed, the buyer is not bound to accept delivery by instalments. Where instalment deliveries are agreed and the seller makes defective deliveries in one or more instalments, the question whether the whole contract is repudiated depends on the terms and circumstances.

Question 49Law of Sale of Goods and Negotiable Instruments (Sale of Goods Act, 1930; Negotiable Instruments Act, 1881)

A sells goods to B and agrees to deliver them at B's warehouse. B refuses to accept delivery when tendered. What is A's right?

  1. A must resell the goods and bear all loss
  2. A must retain the goods and cannot claim the price
  3. A loses all rights against B
  4. A may treat the goods as at B's risk and claim the price Correct answer.

Explanation

Where the buyer wrongfully neglects or refuses to accept the goods and pay for them, the seller may sue for the price if property has passed, or for damages for non-acceptance. The goods are at the buyer's risk after refusal to accept.

Question 50Law of Sale of Goods and Negotiable Instruments (Sale of Goods Act, 1930; Negotiable Instruments Act, 1881)

An unpaid seller who is in possession of the goods has a right of lien. Which of the following is true about this lien?

  1. It is available only for specific goods
  2. It can be exercised only where the goods are in the seller's possession and the buyer has not paid Correct answer.
  3. It requires a court order before exercise
  4. It arises only if the buyer is insolvent

Explanation

Section 47 gives the unpaid seller a lien on the goods while he is in possession of them, where the buyer has not paid or tendered the price. The lien is a possessory right and does not require insolvency or a court order.