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The Indian Contract Act, 1872: Capacity of Parties and Consideration

3.1 CAPACITY OF PARTIES

As per Section 10, all agreements are contracts, if they are made by the parties competent to contract. The competency of parties is one of the essential elements of the valid contract. The capacity of parties to the contract means the legal ability of the parties to enter into a contract.

3.1.1 Who Are Competent to a Contract?

Section 11 specifies the persons who are competent to contract. It suggests that every person who is of the age of majority, sound mind and disqualified from entering into a contract is competent to contract.

In simple form we can understand that the following persons can enter into the contract:

1. Person who has attained age of majority.
2. Person who is of sound mind.
3. Person who is not disqualified by law.

Conversely, it can be said that minors, persons of unsound mind and persons disqualified by law are not competent to enter into a contract.

3.2 MINOR

According to the Majority Act 1875, a person who has not completed the age of 18 years is a minor. When guardian is appointed by the court, the person becomes a major when he attains the age of 21 years.

3.3 EFFECT OF MINOR’S AGREEMENT

Effects of minor’s agreement are briefly discussed under the following heads:

3.3.1 Agreement Is Void ab initio

The agreement by a minor is void ab initio. It is nullity in the eye of law. An agreement with a minor can never be enforced by the other party. The law protects the minors as they are not capable to understand the terms of contracts, and the rights and liabilities under the contract. Landmark judgment of Mohribibi explains the effect of minor’s agreement as under.

Example

Mohiribibi versus Dharmodas

D minor borrowed money from M by executing mortgage of his house in favour of M. Later on his failure to pay money. It was held that minor’s agreement is void and money cannot be recovered. M was ordered to release his house from mortgage. Court has explained that minor cannot be promisor but he can be promisee.

3.3.2 Minor Can Be a Promisee or Beneficiary

An agreement for the benefit of a minor is enforceable by the minor. It means if a major borrows money from a minor and later refuses to pay it, the minor can sue him and recover the same.

3.3.3 No Ratification

Ratification by the minor is not valid. The ratification means the acceptance of a transaction already done. However, on attaining majority, he can enter into a fresh contract having the same terms and conditions.

Again, it is worth noting that where a minor had not completed a transaction during his minority and continues to complete the same on majority, he will be liable for the whole transaction. Therefore, the services are rendered at the desire of the minor during his minority (to the minor) and are continued to be rendered at his request after his majority. If he makes a promise to pay for the whole, the promise is enforceable.

Example

A, a minor, borrowed ₹ 2000 from B. A executed a promissory note (P/N) in favour of B. This is void P/N. On attaining majority, A replaces a fresh P/N for the old one. Still this is void because ratification of void agreement is also void.

3.3.4 No Specific Performance

No specific performance order can be granted against a minor. A specific performance order is the order granted by the court against the defaulting party to contract to perform, the promise as per the terms and conditions of the contract. As a minor cannot be a promisor, a minor cannot be forced to perform a promise.

3.3.5 Restitution Order

A restitution order can be granted against a minor. The restitution order means restoring the things to its proper owner. The restitution order is granted subject to the following conditions:

1. The power of court to order restitution is discretionary.
2. It is generally allowed by the court when a minor had misrepresentation to the other party about his age.
3. The court considers all facts and circumstances.
4. If money paid to the minor is in same form, the minor may be ordered to pay it back.
5. If money is used to purchase property, property purchased by the minor shall be used in paying off money.

3.3.6 Contract by Parent or Guardian

Under certain circumstances, the guardian can enter into a contract on behalf of the minor. For the contract entered by the guardian on behalf of the minor is valid if:

1. It is the benefit of the minor.
2. The guardian is authorized to enter the contract.

Example

The guardian is not authorized to enter into the contract for the purchase of immovable property.

For the contract entered by the guardian on behalf of minor neither the guardian nor the minor is personally liable. But the assets or property of the minor is liable. It means money can be recovered by the other party from the asset or estate of the minor.

3.4 DIFFERENT POSITION OF A MINOR

A minor cannot be a promisor but a minor can be a promisee or a beneficiary. Based upon this understanding, we can discuss the following different position of the minor.

3.4.1 Minor Agent

A minor cannot appoint an agent because only a person competent to contract can appoint the agent. However, the minor can be appointed as an agent.

3.4.2 Guarantee for and by a Minor

The contract of guarantee in favour of the minor is valid. However, the minor cannot be a surety in the contract of guarantee. This is because the surety is ultimately liable under the contract of guarantee, whereas the minor can never be held personally liable.

3.4.3 Minor and Insolvency

The minor can never enter into a contract and cannot create personal liability. Therefore, he cannot be declared insolvent.

3.4.4 Minor as a Joint Promisor

The minor can be a joint promisor with a major but the minor cannot be held liable under the contract as well as to his co-promisor. But the major promisor is liable.

3.4.5 Minor Shareholder

The minor cannot apply for the allotment of shares in a company as he is not competent to contract. However, the minor can apply to the transfer of fully paid shares in the company through his guardian.

3.4.6 Minor and Negotiable Instruments Act

The minor can draw, make, negotiate or endorse any negotiable instrument (i.e. cheque, P/N and B/E) but will not be personally liable under any such instruments. However, any negotiable instrument executed or endorsed in favour of the minor can be enforced by him.

3.4.7 Service Contract

The minor cannot be a promisee and therefore the contract of personal service by the minor is void.

3.4.8 Minor as Trade Union Member

Any person who has attained the age of 15 years may be a member for the registered trade union, provided the rules of the trade union allows so. Such a member will enjoy all the rights of a member.

3.4.9 Liability for Tort

The minor is liable for a tort, i.e. civil wrong committed by him.

Example

A 14-year-old boy drives a car carelessly and injures B. He is liable for the accident, i.e. tort.

3.5 MINOR’S LIABILITY FOR NECESSITIES

In any contract for supplying necessities to the minor or his dependent neither the minor nor his guardian is liable. But the property of the minor is liable. The things supplied must be necessities of life. It may be noted that necessities of life are those things without which an individual cannot reasonably exist. The minor is not already in possession of such necessities, otherwise it is not considered as necessities.

Food, clothes, bed, shelter, shoes, medicines and similar other things required for the maintenance of his life or for the life of his dependents, expenses for instruction in grades or arts; expenses for moral, religous or intellectual education, funeral expenses of his deceased family members, marriage expenses of a dependent female member in the family; expenses incurred in the protection of his property or personal liberty, Diwali pooja expenses, etc. have been held by the courts to be necessaries of life. However, the things like earrings for a male, spectacles for a blind person or a wild animal cannot be considered as necessaries.

3.5.1 Things Must Be Suitable to the Conditions in Life of the Minor

The things supplied must be suitable to the conditions in life to the minor. They must be according to the status in life of the minor. While deciding the things of necessity, one should not forget that ‘what is necessity for a duchess is luxury for a farmer’s wife’. Necessary is different from person to person.

Example

A minor was supplied a pair of pearl and diamond buttons. Held it could not be considered as necessaries in this case.

3.5.2 The Minor Must Be in Need of Such Things

The minor must be in need of the things supplied. If the minor is already having a sufficient supply of the things supplied and does not need them any more, further supply of them will not be considered to be necessary.

Example

A, a minor, purchased 11 fancy waist coats and other clothes. While he was already having sufficient clothes to wear. Held the 11 waist coats and other clothes purchased were not necessaries and the price was irrecoverable.

3.6 PERSON OF UNSOUND MIND

At the time of entering into a contract, a person must be of sound mind. The law presumes that every person is of sound mind unless otherwise it is proved before the court. An agreement by a person of unsound mind is void. Following are the categories of persons considered as persons of unsound mind.

3.6.1 An Idiot

An idiot is a person who is congenital (by birth) unsound mind. His incapacity is permanent, and therefore he can never understand the contract, and makes a rational judgment as to its effects upon his interest. Consequently, the agreement of the idiot is absolutely void ab initio. He is not personally liable even for the payment of necessaries of life supplied to him.

3.6.2 Delirious Persons

A person delirious from fever is also not capable of understanding the nature and implications of an agreement. Therefore, he cannot enter into the contract so long as delirium lasts.

3.6.3 Hypnotized Persons

Hypnotism produces temporary incapacity till a person is under the effect of artificial induced sleep.

3.6.4 Mental Decay

There may be a mental decay or senile mind due to old age or poor health. When such person is not capable of understanding the contract and its effect upon his interest, he cannot enter into contract.

A lunatic is not permanently of unsound mind. He can enter into a contract during lucid intervals, i.e. during a period when he is of sound mind.

3.6.5 Drunken Person

An agreement by the drunken person, or by a person in a state of drunkenness, who is not capable to understand the terms and conditions of a contract is void. An agreement made by an intoxicated person is void.

3.7 PERSON DISQUALIFIED BY LAW

Following categories of persons are disqualified by law to enter into a contract or a specific type of contract.

3.7.1 Body Corporate or Company or Corporation

The contractual capacity of a company is determined by the object clause of its memorandum of association. Any act done in excess of power given is ultra-vires, and hence void. A company cannot enter into any contract which is beyond its memorandum or which is personal in nature as it is an artificial person.

3.7.2 Alien Enemy

An alien means a person who belongs to a foreign state. An alien can be an enemy or a friend. When he is a citizen of any country which was against India in war, he is known as alien enemy. If any contract is entered into with the alien enemy and the war breaks out with that country, the contract is suspended until the war is over. During the war, the contract can be entered into with the alien enemy with the permission of the central government.

3.7.3 Convict

A convict cannot enter into a contract while he is undergoing imprisonment. But he can enter into a contract with the permission of central government while undergoing imprisonment. However a convict can enter into a contract when is released from jail or he has been granted bail.

3.7.4 Insolvent

When any person is declared as an insolvent his property vests in the receiver and therefore, he cannot enter into a contract relating to his property. Again he becomes capable to enter into a contract when he is discharged by the court.

The foreign sovereigns, diplomatic staff and representative of foreign staff can enter into valid contract.

Note:

A person can enter into a contract with Foreign Sovereigns, their Diplomatic Staff and Representatives of Foreign States, who have a special privilege in the sense that they cannot be sued upon by others without a special permission of the central government.

3.8 WHAT IS CONSIDERATION?

In latin, consideration is known as ‘quid pro quo’. It means something in return. It is the benefit received by a party to the contract in return of the promise made by him.

Example

A, a coolie, lifts B’s luggage and B pays him remuneration. Lifting luggage is causing detriment to the coolie but a benefit to the passenger, i.e. promisor.

Consideration may be doing of some act or not doing an act. It means right, benefit, interest avoidance of loss or profit received by one party.

A contract is valid if supported by a consideration. A consideration is moving from both the parties. No consideration, no contract. A promise without consideration is not an agreement and hence it is not a contract. Ex nudo pacto, non oritur action—out of a naked pact, no cause of action arises. Pact means promise.

3.8.1 Consideration is Defined Under Section 2(d)

When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called the consideration for the promise.

3.9 TYPE OF CONSIDERATION

We can understand the different types of consideration as under.

3.9.1 Past Consideration

It is also known as executed consideration. One party to contract has received the benefit before formation of contract.

Example

A requests B to find out his lost cow. B found out and delivered the cow to A. Thereafter, A promised to pay B ₹ 500 as a reward. Here, the efforts of B at the request of A constitute a valid past consideration for the promise by A to pay ₹ 500 to B. The consideration by B was given before the promise to pay is made by A.

3.9.2 Present Consideration

It is received at the time of formation of the contract. It is in process of execution.

Example

A buys a TV set from B’s shop and pays the price immediately. The act of both the parties constitutes a present or executed consideration.

3.9.3 Future Consideration

It will be received by a party after the formation of the contract. It is also called as executory consideration.

Example

A agrees to sell a TV set to B for ₹ 10,000 on first of the next month and B agrees to pay the price 10 days after the date of delivery. In this contract, consideration for both the parties is future or executory.

3.10 ESSENTIALS OF VALID CONSIDERATION

We can summarize the following essentials of the valid consideration.

3.10.1 Consideration Means Doing or Not Doing Something

The consideration is some act or abstinence. Some act means doing something while abstinence means not to do something. Thus, a consideration can be positive or negative. To do something is known as positive consideration while not to do something is known as negative consideration.

3.10.2 Consideration Must Move at the Desire of Promisor

The consideration must move at the desire of the promisor. However, it is not necessary that it must be for the benefit of the promisor. It can be for the benefit of a third person also.

Example

A is employed by an institute to teach ‘Mercantile Law’ but A teaches ‘Economics’. A is not entitled to claim the remuneration because he has done nothing at the desire of the promisor.

3.10.3 Consideration May Move from Promisee or Other Person

The consideration may move from a promisee or any other person. If the consideration is moved from the promisee or any other person, it is valid.

3.10.4 Consideration May Be Inadequate

The consideration may be inadequate. The act only says that there should be a consideration and consideration means something in return. It means if a person sells a book worth ₹ 2000 in ₹ 200, it is a valid consideration and a valid contract. However, the consideration should be certain. It means mutually agreed upon by both the parties.

3.10.5 Consideration May Be Past, Present or Future

The consideration may be past, present or future. A past consideration is valid in India while it is not regarded as valid in many other countries.

3.10.6 Act Promisor Bound to Do Is Not Consideration

If the promisor is legally bound or required to perform something as a part of his duty, and he agrees to do so, it is not a valid consideration. The consideration must be something different from a promisor’s existing obligation.

Example

A promises to pay to B, a lawyer, an additional sum of money if the suit was decided in his (A’s) favour. Held there was no consideration for this promise and hence void. The lawyer once accepted to defend the case was under contractual duty to render the best of his services.

3.10.7 Consideration Must Be Lawful

The consideration must be lawful. Lawful means as per the provisions of an act. An unlawful act or benefit received in an unlawful manner is not regarded as the consideration.

3.10.8 Consideration Should Be Possible to Perform

The consideration must be real and not illusory. It means the consideration should not be impossible to perform. An act does not recognize impossible performance. It may be physically impossible or can be legal impossible.

Example

A promises to discover treasure by magic if B pays him ₹ 1000. Consideration from A is void because it is impossible to perform the promise.

3.11 STRANGER TO CONTRACT AND STRANGER TO CONSIDERATION

As a general rule, there should be ‘a privity of contract’ to enable the party to contract to sue against the other party to contract or for enforcement of contract against the other party. As a part of a general rule, a stranger to contract cannot sue. The stranger to contract and stranger to consideration are explained in brief after this example.

Example

If the contract is between A and B, D will be known as stranger to contract. D cannot sue either A or B as D is not party to contract. Here A can sue B or B can sue A.

3.11.1 Stranger to Consideration

The consideration can be supplied by any person, and it need not to be supplied by the promisee only. If it is supplied by any other person other than promisor, then the person who is supplying is known as stranger to the consideration.

3.11.2 Stranger to Contract

The stranger to contract means the person who is not party to contract. The stranger to contract is also known as third party. The stranger to contract cannot bring suit except in recognized cases.

3.12 EXCEPTION TO THE RULE OF STRANGER TO CONTRACT

The stranger to contract has the right to sue in the following cases.

3.12.1 Beneficiary

In case of trust, the beneficiary may enforce the contract. The beneficiary of a trust or other interest in specific immovable property can enforce it even if he is not a party named in the trust deed.

3.12.2 Family Settlement or Marriage Settlement

In case of family settlement, marriage settlement or any other agreement for such purpose, any person can sue even though he is not a party to the contract. But family settlement or marriage settlement should be reduced to writing.

Example

A partition deed between the male members of a family made a provision for the expenses of marriage of a female member. Accordingly, the expenses of the marriage were to be contributed by her father and brothers but they refused. Held she was entitled to the amount even though she was not a party to the contract.

3.12.3 Assignment of Contract

In case of an assignment of contract, when the benefit under a contract has been assigned, the assignee can enforce the contract. The assignment of the contract can take place by the act of parties. The contract requiring personal skill cannot be assigned.

3.12.4 Agency

When a contract entered into through an agent. Here the stranger can sue even party to contract when the agent has acted within his authority and in the name of principal.

3.13 EXCEPTION TO RULE ‘NO CONSIDERATION NO CONTRACT’—SECTION 25

The essentials of a valid contract suggest that the contract is valid if it is supported by a consideration. The contract or agreement without a consideration is void. Latin maxim says that ‘Ex Nudo pacto non oritur action’, i.e. an agreement without a consideration is void. In layman language, we can say that no consideration, no contract. However following agreements and contracts entered into without consideration are valid.

3.13.1 Agreement on Account of Natural Love and Affection

If an agreement is made on account of natural love and affection, it is valid even if it is without the consideration if following conditions satisfied:

1. Agreement should be in writing.
2. Agreement should be registered as per the law.
3. Parties to agreement must fall within blood relation. Mere nearness of relation does not necessarily imply natural love and affection.

3.13.2 Voluntary Past Services

A promise made without a consideration is valid if it is the promise to compensate a person who has already voluntarily done something for the promise. But voluntary past services rendered should be lawful. In order that the promise to pay for the past voluntary services is binding, the following essential factors must exist:

1. The services should have been rendered voluntarily.
2. The services must have been rendered for the promisor.
3. The promisor must be in existence at the time when services were rendered.
4. The Promisor must have intended to compensate to the promisee.

Example

A finds B’s purse and gives it to him. B promises to give A ₹ 50. This is a contract to compensate some voluntary service.

3.13.3 Bailment

No consideration requires for gratuitous bailment of goods. A bailment is a special contract.

3.13.4 Agreement to Pay Time Barred Debt

An agreement or promise to pay time barred debt is valid if:

1. It is made in writing signed by the debtor.
2. It relates to the debt which could not be enforced by the creditor because limitation period is over.

3.13.5 Gift

Rule of no consideration no contract is not applicable to completed gift. A gift is completed when it is accepted by donee. However, an agreement to make a gift is not enforceable. Same way a promise to make a gift is not enforceable.

3.13.6 Contract of Agency

No consideration requires for contract of agency.

3.13.7 Promise to Charities

A mere promise to contribute to charity is not enforceable by law because it is without a consideration.

However, if a person promises to contribute to charity and on this faith, the promisee undertakes a liability to the extent not exceeding the promised subscription, the contract shall be valid and enforceable.

Example

A person promised ₹ 500 to a fund started to rebuild a mosque. The secretary of the Mosque Committee filed a suit to recover the amount. Held, the subscriber was liable as neither the promisor gained nor the promisee (the secretary) suffered from the promise.

LIST OF LANDMARK JUDGEMENTS

1. Mohari Bibee vs Dharmodas Ghose (1903)

   The minor is imcompetent to a contract and an agreement with him is void.

2. Suraj Narain vs Sukhu Aahir (1928)

   The minor cannot ratify the contract after attaining majority.

3. Roberts vs Gray (1913)

   The minor’s estate is liable not only for the necessary goods but also for the necessary services rendered to him.

4. Inder Singh vs Parmeshwardhari Singh (1957)

   The agreement by a person of unsound mind is absolutely void.

5. Leslie vs Sheill (1914)

   If minor enters into the agreement by misrepresenting his age, he cannot be sued for fraud.

6. Raghava Chariar vs Srinivasa (1916)

   The minor can be a beneficiary or a promisee.

7. Currie vs Misa (1875)

   The consideration defined as ‘some right, interest, profit or benefit accruing to one party for some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other’.

8. Fazaluddin Mandal vs Panchannan Das (1957)

   A single consideration may support more than one promise and may move from the promisee or any other person.

9. Bhoori vs Thakur Gulab Singh (1958)

   The forbearance to sue an old contract or a fresh contract is a good consideration for dispensing with performance of a prior contract.

10. Raj Rani vs Prem Adib (1949)

    The stranger to consideration cannot be a minor. As a minor cannot enter into a contract. The minor cannot be a promisor, he can be a promisee.

11. Dunlop Tyre Co. vs Selfridges Ltd (1915)

    In general third party cannot sue for the carrying out of promises made by the parties to the contract.

12. Shadwell vs Shadwell (1960)

    The consideration must be something more than the promisee is already bound to do for the promisor.

13. Chappell vs Nestle (1960)

    The consideration need not be adequate but must have some value, however, slight.

TEST YOUR KNOWLEDGE

1. Who is competent to enter into a contract?

   (Ref. Para-3.1)

2. Discuss briefly the position of a minor with regard to the contracts entered into by him.

   (Ref. Para-3.2,3.3)

3. Write a short note on the capacity of parties to enter into a contract.

   (Ref. Para-3.1,3.2,3.6,3.7)

4. A minor cannot recover the price of goods sold on credit to a major. Evaluate the correctness of the statement.

   (Ref. Para-3.2)

5. Ratification by a minor’s agreement is not allowed after attaining the majority by him.

   (Ref. Para-3.3)

6. A minor can be a promisee. Comment.

   (Ref. Para-3.3)

7. What are necessaries for minor as per the contract act? Give few examples of necessaries.

   (Ref. Para-3.5)

8. A minor is personally liable for the necessaries supplied to him. Comment.

   (Ref. Para-3.5)

9. Who are treated as persons of unsound mind?

   (Ref. Para-3.6)

10. Who are treated as persons disqualified by law?

    (Ref. Para-3.7)

11. Insolvent person can enter into a contract. Comment.

    (Ref. Para-3.7)

12. Define consideration.

    (Ref. Para-3.8)

13. What are the essential elements of a valid consideration?

    (Ref. Para-3.10)

14. Write a short note on the adequacy of a consideration.

    (Ref. Para-3.10)

15. What do you understand by a stranger to consideration?

    (Ref. Para-3.11)

16. A stranger to contract cannot sue. Comment.

    (Ref. Para-3.11)

17. Explain—A stranger can perform a contract.

    (Ref. Para-3.11)

18. In what circumstances can a stranger to contract bring suit?

    (Ref. Para-3.12)

19. Explain the rule ‘no consideration, no contract’. Are there any exceptions to this rule?

    (Ref. Para-3.13)

20. A promise to pay a time barred debt is not enforceable. Comment.

    (Ref. Para-3.13)

MULTIPLE-CHOICE QUESTIONS

1. Capacity to contract means
   1. the parties are financially sound to make contracts.
   2. the parties are physically able to enter into contracts.
   3. the parties are legally competent to enter into contracts.
   4. all of the above.
2. Competence to contract means
   1. age of the parties.
   2. soundness of the mind of the parties.
   3. both (i) and (ii).
   4. intelligence of the parties.
3. A convict when undergoing an imprisonment
   1. is capable of entering into a contract.
   2. is incapable of entering into a contract.
   3. is capable of entering into a contract, if it is permitted by the court.
   4. is capable of passing on a consideration.
4. A corporation cannot enter into contracts that are
   1. ultra vires its Memorandum of Association.
   2. strictly of a personal nature as it is only an artificial person.
   3. either (i) or (ii).
   4. neither (i) nor (ii).
5. On attaining the age of majority, a minor’s agreement
   1. is void.
   2. cannot be ratified.
   3. becomes void.
   4. can be ratified.
6. A guardian shall ............... for breach of contact by the minor.
   1. be held liable
   2. not be held liable
   3. be imprisoned
   4. not be questioned
7. A minor can be
   1. a partner in a firm.
   2. an agent.
   3. an employer.
   4. all of the above.
8. A contract to take a loan by a boy 17 years of age from a money lender of 34 years is
   1. valid contract.
   2. void contract.
   3. quasi contract.
   4. void agreement.
9. A minor, by misrepresenting his age, borrows some money. He
   1. can be sued for fraud.
   2. cannot be sued for fraud.
   3. is liable to return the money.
   4. is liable to return the money on attaining majority.
10. A minor enters into a contract for the purchase of certain necessaries. In such a case
    1. he is liable to return the necessaries.
    2. he is liable to pay.
    3. his estate is liable to pay.
    4. his guardian is liable to pay.
11. Which of these has not been held as a ‘necessary’?
    1. Food
    2. Clothing
    3. Shelter
    4. Mobile phone
12. Which of these is a not a ‘necessary’ for a minor?
    1. Provision of education.
    2. Provision of medical and legal advice.
    3. Provision of a house on rent for the purpose of living and continuing his studies.
    4. Provision of alcoholic drinks.
13. Which of the following are the persons of unsound mind?
    1. An idiot
    2. A lunatic
    3. A drunken person
    4. All of the above
14. Which of the following persons are not competent to the contract being the persons disqualified by law?
    1. Alien enemies
    2. Insolvents
    3. Convicts
    4. All of the above
15. Which of the following persons do not fall in the category of persons of unsound mind
    1. idiots.
    2. lunatics.
    3. aliens.
    4. drunken persons.
16. In a case where a lunatic enters into a contract for the purpose of ‘necessaries,’ then
    1. a lunatic is personally liable to pay.
    2. a lunatic’s guardian is liable to pay.
    3. a lunatic’s estate is liable to pay.
    4. the guardian’s estate is liable to pay.
17. A contracts with an alien enemy before the declaration of war, which are against the national interest, are
    1. terminated.
    2. not affected at all.
    3. suspended and revived after war.
    4. none of the above.
18. A consideration means
    1. quid pro lo.
    2. quid pro quo.
    3. qui pro quo.
    4. quid pro quod.
19. A consideration in a contract
    1. may be any thing.
    2. nothing in return.
    3. something in return.
    4. may be illusory.
20. An essential feature of a consideration is that
    1. it must be cash.
    2. it must be given by the promisee alone.
    3. it must be at the request of the promisor.
    4. it must be in kind.
21. A consideration may be
    1. past.
    2. present.
    3. future.
    4. either (i) or (ii) or (iii).
22. A consideration must be something which the promisor
    1. is already bound to do.
    2. is not already bound to do.
    3. may voluntarily do.
    4. must not do.
23. An executory consideration can be
    1. positive.
    2. negative.
    3. neither (i) nor (ii).
    4. either (i) or (ii).
24. An executed consideration
    1. can be positive or negative.
    2. the liability is outstanding on one side only.
    3. is an act against, future promise.
    4. all of the above.
25. A consideration may be
    1. executory.
    2. executed.
    3. either (i) or (ii).
    4. both (i) and (ii).
26. A for natural love and affection, promises to give his son B ₹ 1000. A puts his promise to B into writing and registers it. This is a
    1. contract.
    2. agreement.
    3. promise.
    4. offer.
27. A husband, by a registered agreement promised to pay his wife ₹ 5000 per month. There was no consideration moving from the wife to the husband. The agreement is …..........
    1. void.
    2. illegal.
    3. valid.
    4. unenforceable.
28. A consideration must move at the desire of
    1. a promisor.
    2. a promisee.
    3. a stranger.
    4. either (ii) or (iii).
29. A consideration may move from
    1. a promisor.
    2. a promisee.
    3. either (i) or (ii).
    4. both (i) and (ii).
30. Under the Indian Contract Act, a third person
    1. beneficiary under the contract can sue.
    2. from whom the consideration has proceeded can sue.
    3. cannot sue even if the consideration has proceeded from him.
    4. cannot sue at all for want of privity of contract.
31. A stranger to contract means
    1. first party to contract.
    2. second party to contract.
    3. third party to contract.
    4. either (i) or (ii).
32. The term privity of contract means
    1. stranger to contract.
    2. contract is private.
    3. first party to contract.
    4. second party to contract.
33. A promises to pay ₹ 1000 to B if he brings a star from sky to earth and B agrees to bring the star to earth. In this case, contract is
    1. valid.
    2. void as consideration is illusory.
    3. illegal.
    4. contingent.
34. A promises, for no consideration, to give to B ₹ 1000.
    1. This is a void agreement.
    2. This is a valid agreement.
    3. This is a voidable agreement.
    4. None of the above.

ANSWER KEYS

1. iii
2. iii
3. iv
4. iii
5. ii
6. ii
7. ii
8. ii
9. ii
10. iii
11. iv
12. iv
13. iv
14. iv
15. iii
16. iii
17. i
18. ii
19. iii
20. iii
21. iv
22. ii
23. iv
24. iv
25. iii
26. i
27. iii
28. i
29. ii
30. i
31. iii
32. i
33. ii
34. i