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Law of Contract MCQs for CLAT PG, Page 4

CLAT PG Law of Contract questions 76-100 of 100, with answer keys and explanations covering offer, acceptance, consideration, capacity, free consent, discharge, breach, remedies, indemnity, guarantee, bailment, and agency.

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Revise core LLB subjects through CLAT PG MCQs, passage-led questions, answer keys, explanations, statutes, and exam-oriented legal principles.

  • Agency by Estoppel and Holding Out5
  • Anticipatory Breach and its Consequences5
  • Consideration - Section 2(d) ICA and Privity5
  • Contingent Contracts vs Wagering Agreements5
  • Contracts with Government: Article 299 and Ultra Vires Doctrine5
  • Damages - Section 73 and Hadley v. Baxendale5
  • Discharge by Merger, Accord and Satisfaction5
  • Doctrine of Frustration and Restitution - Section 56 and 655
  • Doctrine of Part Performance and Section 53A Transfer of Property Act5
  • Frustration - Section 56 ICA5
  • Liquidated Damages - Section 74 ICA5
  • Minor's Agreement - Mohori Bibee5
  • Nemo Dat and Exceptions under Sale of Goods Act5
  • Offer and Acceptance - Carlill v. Carbolic Smoke Ball Co.5
  • Performance by Agent vs Personal Performance5
  • Restraint of Trade - Section 27 ICA5
  • Sale of Goods: Passing of Property and Risk5
  • Section 73 ICA and Remoteness of Damage5
  • Undue Influence - Section 16 ICA5
  • Wagering Agreement - Section 30 ICA5
Passage or principleIst Term LB102 / Mohori Bibee v. Dhurmodas Ghose (1903) PC

The legal position of minors in contract law is governed by Section 11 of the Indian Contract Act 1872, which provides that only a person who is of the age of majority, of sound mind, and not disqualified by law from contracting is competent to contract. In the landmark Privy Council case of Mohori Bibee v. Dhurmodas Ghose (1903), the defendant Dhurmodas Ghose, while a minor, mortgaged his property to Brahmo Dutt, a moneylender, for a sum of Rs. 20,000. The money was advanced through Brahmo Dutt's attorney Mohori Bibee, who had notice of the defendant's minority. When Dhurmodas sought to set aside the mortgage, the question before the Privy Council was whether a contract entered into with a minor was void or merely voidable. The Privy Council held that a contract with a minor is void ab initio - absolutely void from its very inception. The Court based this conclusion on a reading of Sections 10 and 11: Section 10 requires competent parties and Section 11 defines competence to exclude minors; therefore, a contract with a minor lacks a fundamental requirement and is not a contract at all. A void contract cannot be ratified after attaining majority, nor can any benefit received under it be recovered by the party who dealt with the minor, since allowing such recovery would indirectly enforce the void agreement. The rule operates as an absolute protection for minors, recognising their vulnerability and lack of judgment in commercial transactions.

Question 76EasyMinor's Agreement - Mohori Bibee

In Mohori Bibee v. Dhurmodas Ghose, the central legal question was:

  1. A

    Whether a moneylender can charge interest from a minor

  2. B

    Whether a contract with a minor is void or merely voidable

  3. C

    Whether a mortgage requires registration

  4. D

    Whether a guardian can contract on behalf of a minor

View answer and explanation

Correct answer: B. Whether a contract with a minor is void or merely voidable

The passage states: 'the question before the Privy Council was whether a contract entered into with a minor was void or merely voidable.'

Source note: Ist Term LB102 / Mohori Bibee v. Dhurmodas Ghose (1903) PC

Question 77EasyMinor's Agreement - Mohori Bibee

The Privy Council held that a contract with a minor is:

  1. A

    Voidable at the minor's option

  2. B

    Valid if for the minor's benefit

  3. C

    Void ab initio - absolutely void from its very inception

  4. D

    Enforceable if the consideration is adequate

View answer and explanation

Correct answer: C. Void ab initio - absolutely void from its very inception

The passage states: 'The Privy Council held that a contract with a minor is void ab initio - absolutely void from its very inception.'

Source note: Ist Term LB102 / Mohori Bibee v. Dhurmodas Ghose (1903) PC

Question 78MediumMinor's Agreement - Mohori Bibee

The Privy Council based its conclusion on the combined reading of Sections 10 and 11 ICA, holding that:

  1. A

    Section 10 does not require parties to be competent

  2. B

    Section 10 requires competent parties and Section 11 excludes minors from competence - therefore a contract with a minor lacks a fundamental requirement

  3. C

    Minors can contract if they have attained 16 years of age

  4. D

    The attorney's knowledge of minority was the deciding factor

View answer and explanation

Correct answer: B. Section 10 requires competent parties and Section 11 excludes minors from competence - therefore a contract with a minor lacks a fundamental requirement

The passage states: 'Section 10 requires competent parties and Section 11 defines competence to exclude minors; therefore, a contract with a minor lacks a fundamental requirement and is not a contract at all.'

Source note: Ist Term LB102 / Mohori Bibee v. Dhurmodas Ghose (1903) PC

Question 79MediumMinor's Agreement - Mohori Bibee

According to the passage, recovery of benefits received under a minor's contract is:

  1. A

    Permitted if the minor is unjustly enriched

  2. B

    Not possible - allowing recovery would indirectly enforce the void agreement

  3. C

    Permitted under Section 65 ICA

  4. D

    Possible only if the minor acted fraudulently

View answer and explanation

Correct answer: B. Not possible - allowing recovery would indirectly enforce the void agreement

The passage states: 'nor can any benefit received under it be recovered by the party who dealt with the minor, since allowing such recovery would indirectly enforce the void agreement.'

Source note: Ist Term LB102 / Mohori Bibee v. Dhurmodas Ghose (1903) PC

Question 80HardMinor's Agreement - Mohori Bibee

The Privy Council's ruling in Mohori Bibee is best described as operating to:

  1. A

    Allow courts to grant relief to minors in exceptional cases

  2. B

    Serve as an absolute protection for minors recognising their vulnerability - a minor's contract is void and cannot be enforced directly or indirectly

  3. C

    Enable moneylenders to protect themselves against dealings with minors

  4. D

    Create a special category of voidable contracts for minors

View answer and explanation

Correct answer: B. Serve as an absolute protection for minors recognising their vulnerability - a minor's contract is void and cannot be enforced directly or indirectly

The passage states: 'The rule operates as an absolute protection for minors, recognising their vulnerability and lack of judgment in commercial transactions.'

Source note: Ist Term LB102 / Mohori Bibee v. Dhurmodas Ghose (1903) PC

Passage or principleIst Term LB102 / Carlill v. Carbolic Smoke Ball Co. (1893) CA

The formation of a valid contract requires, among other things, a definite offer and an unambiguous acceptance of that offer. In Carlill v. Carbolic Smoke Ball Co. (1893), the defendant company published an advertisement stating that it would pay £100 to any person who contracted influenza after using its smoke ball product in the prescribed manner. The advertisement stated that £1,000 had been deposited with a bank as evidence of sincerity. The plaintiff, Mrs. Carlill, used the smoke ball as directed and nonetheless contracted influenza. When she claimed the £100, the company refused, arguing that the advertisement was merely a 'puff' and not a legal offer, and that no contract had been formed since there was no communication of acceptance. The Court of Appeal rejected these arguments. The Court held that the advertisement was not a mere puff but a definite offer to the public at large - a general offer. Such a general offer can be accepted by any member of the public who performs the condition stipulated. Furthermore, the Court held that communication of acceptance is not necessary in the case of such unilateral contracts - the performance of the act stipulated in the offer constitutes both acceptance and consideration simultaneously. The deposit of £1,000 with the bank demonstrated that the company intended to be legally bound, thereby negativing any claim that it was merely an advertising puff.

Question 81EasyOffer and Acceptance - Carlill v. Carbolic Smoke Ball Co.

In Carlill v. Carbolic Smoke Ball Co., the defendant company argued that the advertisement was:

  1. A

    A binding general offer to the public

  2. B

    A mere puff not amounting to a legal offer, and that no acceptance was communicated

  3. C

    A voidable contract

  4. D

    An invitation to treat requiring further negotiation

View answer and explanation

Correct answer: B. A mere puff not amounting to a legal offer, and that no acceptance was communicated

The passage states: 'the company refused, arguing that the advertisement was merely a puff and not a legal offer, and that no contract had been formed since there was no communication of acceptance.'

Source note: Ist Term LB102 / Carlill v. Carbolic Smoke Ball Co. (1893) CA

Question 82EasyOffer and Acceptance - Carlill v. Carbolic Smoke Ball Co.

The Court of Appeal held that a general offer can be accepted by:

  1. A

    Only a specific person named in the offer

  2. B

    Any member of the public who performs the condition stipulated in the offer

  3. C

    Only persons who communicate their acceptance in writing

  4. D

    Only persons known to the offeror

View answer and explanation

Correct answer: B. Any member of the public who performs the condition stipulated in the offer

The passage states: 'Such a general offer can be accepted by any member of the public who performs the condition stipulated.'

Source note: Ist Term LB102 / Carlill v. Carbolic Smoke Ball Co. (1893) CA

Question 83MediumOffer and Acceptance - Carlill v. Carbolic Smoke Ball Co.

According to the passage, in a unilateral contract such as the one in Carlill, communication of acceptance:

  1. A

    Is always required before performance

  2. B

    Is not necessary - performance of the stipulated act constitutes both acceptance and consideration simultaneously

  3. C

    Must be made in writing within a specified time

  4. D

    Must be communicated to the company's registered office

View answer and explanation

Correct answer: B. Is not necessary - performance of the stipulated act constitutes both acceptance and consideration simultaneously

The passage states: 'the Court held that communication of acceptance is not necessary in the case of such unilateral contracts - the performance of the act stipulated in the offer constitutes both acceptance and consideration simultaneously.'

Source note: Ist Term LB102 / Carlill v. Carbolic Smoke Ball Co. (1893) CA

Question 84MediumOffer and Acceptance - Carlill v. Carbolic Smoke Ball Co.

The significance of the £1,000 deposited by the company with the bank was that it:

  1. A

    Was the consideration for Mrs. Carlill's performance

  2. B

    Demonstrated the company intended to be legally bound, negativing the claim that the advertisement was a puff

  3. C

    Was the amount Mrs. Carlill was entitled to claim

  4. D

    Was deposited as security for litigation costs

View answer and explanation

Correct answer: B. Demonstrated the company intended to be legally bound, negativing the claim that the advertisement was a puff

The passage states: 'The deposit of £1,000 with the bank demonstrated that the company intended to be legally bound, thereby negativing any claim that it was merely an advertising puff.'

Source note: Ist Term LB102 / Carlill v. Carbolic Smoke Ball Co. (1893) CA

Question 85HardOffer and Acceptance - Carlill v. Carbolic Smoke Ball Co.

Which of the following best captures the ratio of Carlill v. Carbolic Smoke Ball Co. as described in the passage?

  1. A

    An advertisement can never be a legal offer

  2. B

    A general offer to the public is valid and can be accepted by performance of the stipulated condition without prior communication of acceptance

  3. C

    All advertisements require deposit of money to be binding

  4. D

    Unilateral contracts are never enforceable

View answer and explanation

Correct answer: B. A general offer to the public is valid and can be accepted by performance of the stipulated condition without prior communication of acceptance

The Court rejected the puff argument, held the advertisement was a general offer, and held that performance constitutes acceptance - making the contract enforceable.

Source note: Ist Term LB102 / Carlill v. Carbolic Smoke Ball Co. (1893) CA

Passage or principleIst Term LB102 / Niranjan Shankar Golikari v. Century Spinning (AIR 1967 SC)

Section 27 of the Indian Contract Act 1872 provides that every agreement by which any person is restrained from exercising a lawful profession, trade or business of any kind is, to that extent, void. This provision represents a fundamental difference from English law, under which the courts assess the reasonableness of a restraint to determine its enforceability. In Niranjan Shankar Golikari v. Century Spinning and Manufacturing Co. Ltd. (AIR 1967 SC 544), the Supreme Court of India examined the scope of Section 27 in the context of an employment contract. The employee had entered into a service agreement that included a negative covenant restricting him from engaging in similar employment with any competitor for the duration of the agreement. The employer sought an injunction to restrain the employee from working for a competitor during the term of his employment. The Supreme Court upheld the injunction and held that Section 27 does not invalidate all restrictions on employment - it applies primarily to post-service restraints. A restriction on employment during the period of service, if reasonable and necessary to protect legitimate business interests such as trade secrets and confidential information, is valid as an incident of the employment contract itself. The rationale is that a servant employed in a capacity requiring trust and discretion can be restrained from simultaneously serving a competing master. The Court drew a distinction between a service agreement (restrictions during employment - valid) and a covenant in restraint of trade (restrictions after termination of employment - void under Section 27).

Question 86EasyRestraint of Trade - Section 27 ICA

Section 27 ICA provides that agreements restraining a person from exercising a lawful profession or trade are:

  1. A

    Valid if reasonable

  2. B

    To that extent void - unlike English law which applies a reasonableness test

  3. C

    Void only for post-employment restrictions

  4. D

    Voidable at the option of the restrained party

View answer and explanation

Correct answer: B. To that extent void - unlike English law which applies a reasonableness test

The passage states: 'Section 27...provides that every agreement by which any person is restrained from exercising a lawful profession...is, to that extent, void' and distinguishes this from English law's reasonableness test.

Source note: Ist Term LB102 / Niranjan Shankar Golikari v. Century Spinning (AIR 1967 SC)

Question 87MediumRestraint of Trade - Section 27 ICA

In Niranjan Shankar Golikari, the Supreme Court held that Section 27 ICA applies primarily to:

  1. A

    All restrictions on employment

  2. B

    Post-service restraints - restrictions after termination of employment are void under Section 27

  3. C

    Restrictions in government employment

  4. D

    Only restraints involving trade secrets

View answer and explanation

Correct answer: B. Post-service restraints - restrictions after termination of employment are void under Section 27

The passage states: 'Section 27 does not invalidate all restrictions on employment - it applies primarily to post-service restraints.'

Source note: Ist Term LB102 / Niranjan Shankar Golikari v. Century Spinning (AIR 1967 SC)

Question 88MediumRestraint of Trade - Section 27 ICA

The restriction during the period of service in Niranjan Shankar Golikari was held valid because it was:

  1. A

    An absolute restraint approved by the High Court

  2. B

    Reasonable and necessary to protect legitimate business interests such as trade secrets - a valid incident of the employment contract itself

  3. C

    A restraint approved by the government

  4. D

    Limited in geographical scope

View answer and explanation

Correct answer: B. Reasonable and necessary to protect legitimate business interests such as trade secrets - a valid incident of the employment contract itself

The passage states: 'A restriction on employment during the period of service, if reasonable and necessary to protect legitimate business interests such as trade secrets and confidential information, is valid as an incident of the employment contract itself.'

Source note: Ist Term LB102 / Niranjan Shankar Golikari v. Century Spinning (AIR 1967 SC)

Question 89HardRestraint of Trade - Section 27 ICA

The rationale for allowing restrictions during employment, as described in the passage, is:

  1. A

    The employer has paid for exclusive services

  2. B

    A servant employed in a capacity requiring trust and discretion can be restrained from simultaneously serving a competing master - protecting confidential business information

  3. C

    The restriction was for a limited period

  4. D

    The employee voluntarily agreed to the restriction

View answer and explanation

Correct answer: B. A servant employed in a capacity requiring trust and discretion can be restrained from simultaneously serving a competing master - protecting confidential business information

The passage states: 'The rationale is that a servant employed in a capacity requiring trust and discretion can be restrained from simultaneously serving a competing master.'

Source note: Ist Term LB102 / Niranjan Shankar Golikari v. Century Spinning (AIR 1967 SC)

Question 90HardRestraint of Trade - Section 27 ICA

The distinction the Supreme Court drew in Niranjan Shankar Golikari is between:

  1. A

    Valid and invalid employment contracts generally

  2. B

    A service agreement (restrictions during employment - valid) and a covenant in restraint of trade (restrictions after termination - void under Section 27)

  3. C

    Skilled and unskilled workers' contracts

  4. D

    Industrial and agricultural employment

View answer and explanation

Correct answer: B. A service agreement (restrictions during employment - valid) and a covenant in restraint of trade (restrictions after termination - void under Section 27)

The passage states: 'The Court drew a distinction between a service agreement (restrictions during employment - valid) and a covenant in restraint of trade (restrictions after termination of employment - void under Section 27).'

Source note: Ist Term LB102 / Niranjan Shankar Golikari v. Century Spinning (AIR 1967 SC)

Passage or principleIst Term LB102 / Raghunath Prasad v. Sarju Prasad (1923) PC

Section 16 of the Indian Contract Act 1872 defines undue influence as a situation where a person is in a position to dominate the will of another and uses that position to obtain an unfair advantage. The section creates a presumption of undue influence where one party holds real or apparent authority over the other, stands in a fiduciary relationship to the other, or where the other's mental capacity is temporarily or permanently affected by reason of age, illness or distress. In Raghunath Prasad Sahu v. Sarju Prasad Sahu (1923), the Privy Council addressed a transaction between a son and his father, a zamindar. The son, in urgent need of money, borrowed a sum at an exorbitant rate of interest. The father had custody of the son's title deeds and was the only person able or willing to lend. The son sought to have the mortgage set aside on the ground of undue influence. The Privy Council held that the presumption under Section 16(2)(b) applied because the son's economic distress gave the father a position to dominate the will of the son - the son had no alternative but to agree to the oppressive terms. The Court also noted that Section 16(3) creates a presumption when the transaction appears unconscionable - where a person in a position of domination enters a transaction that appears unconscionable, the burden shifts to the dominant party to prove the absence of undue influence. The effect of establishing undue influence is that the contract becomes voidable at the option of the dominated party under Section 19A, and upon rescission, the party must restore benefits received.

Question 91EasyUndue Influence - Section 16 ICA

Section 16 ICA defines undue influence as arising when one party is in a position to dominate the will of another and:

  1. A

    Merely has a superior education or intelligence

  2. B

    Uses that position to obtain an unfair advantage

  3. C

    Has more financial resources

  4. D

    Is of older age than the other party

View answer and explanation

Correct answer: B. Uses that position to obtain an unfair advantage

The passage states Section 16 concerns a party who 'is in a position to dominate the will of another and uses that position to obtain an unfair advantage.'

Source note: Ist Term LB102 / Raghunath Prasad v. Sarju Prasad (1923) PC

Question 92MediumUndue Influence - Section 16 ICA

In Raghunath Prasad v. Sarju Prasad, the Privy Council held that the presumption of undue influence under Section 16(2)(b) applied because:

  1. A

    The interest rate exceeded the rate permitted by law

  2. B

    The son's economic distress gave the father a position to dominate the son's will - the son had no alternative but to agree to oppressive terms

  3. C

    The mortgage was unregistered

  4. D

    The father had previously been convicted of fraud

View answer and explanation

Correct answer: B. The son's economic distress gave the father a position to dominate the son's will - the son had no alternative but to agree to oppressive terms

The passage states: 'the Privy Council held that the presumption...applied because the son's economic distress gave the father a position to dominate the will of the son - the son had no alternative but to agree to the oppressive terms.'

Source note: Ist Term LB102 / Raghunath Prasad v. Sarju Prasad (1923) PC

Question 93MediumUndue Influence - Section 16 ICA

Under Section 16(3) ICA, when a transaction appears unconscionable, the burden of proof shifts to:

  1. A

    The party claiming to have been under undue influence

  2. B

    The dominant party to prove the absence of undue influence

  3. C

    The court to investigate independently

  4. D

    The Reserve Bank of India to verify the interest rate

View answer and explanation

Correct answer: B. The dominant party to prove the absence of undue influence

The passage states: 'Section 16(3) creates a presumption when the transaction appears unconscionable - the burden shifts to the dominant party to prove the absence of undue influence.'

Source note: Ist Term LB102 / Raghunath Prasad v. Sarju Prasad (1923) PC

Question 94EasyUndue Influence - Section 16 ICA

The effect of establishing undue influence under Section 19A ICA is that the contract becomes:

  1. A

    Void ab initio

  2. B

    Voidable at the option of the dominated party - and upon rescission, that party must restore benefits received

  3. C

    Illegal and criminal

  4. D

    Unenforceable by operation of law without court order

View answer and explanation

Correct answer: B. Voidable at the option of the dominated party - and upon rescission, that party must restore benefits received

The passage states: 'the contract becomes voidable at the option of the dominated party under Section 19A, and upon rescission, the party must restore benefits received.'

Source note: Ist Term LB102 / Raghunath Prasad v. Sarju Prasad (1923) PC

Question 95HardUndue Influence - Section 16 ICA

Which of the following circumstances in Raghunath Prasad most directly establishes the father's position to dominate the son?

  1. A

    The father was the son's parent

  2. B

    The father had custody of the son's title deeds and was the only person able or willing to lend - giving him exclusive control over the son's access to credit

  3. C

    The son was a student without income

  4. D

    The mortgage covered all of the son's property

View answer and explanation

Correct answer: B. The father had custody of the son's title deeds and was the only person able or willing to lend - giving him exclusive control over the son's access to credit

The passage states: 'The father had custody of the son's title deeds and was the only person able or willing to lend' - creating the exclusive domination over the son's choices.

Source note: Ist Term LB102 / Raghunath Prasad v. Sarju Prasad (1923) PC

Passage or principleIst Term LB102 / Gherulal Parakh v. Mahadeodas Maiya (AIR 1959 SC)

Section 30 of the Indian Contract Act 1872 provides that agreements by way of wager are void and that no suit shall be brought for recovering anything alleged to be won on any wager or for entrusting anything to any person to abide the result of a game or other uncertain event on which any wager is made. A wagering agreement characteristically involves two parties taking opposite views on an uncertain event, each standing to win or lose solely on the outcome, with no interest in the event other than the stake. In Gherulal Parakh v. Mahadeodas Maiya (AIR 1959 SC 781), the parties had entered into agreements to carry out transactions in future goods on a speculative basis, sharing profits and losses - transactions which were in the nature of wagering contracts. The main question was whether a partnership connected with wagering transactions was unenforceable and how Section 30 interacts with Section 23. The Supreme Court held that while wagering agreements are void under Section 30, they are not per se illegal under Section 23. The Court emphasised that Section 23 concerns unlawful objects and public policy, and that the distinction between void and illegal agreements matters because collateral transactions are not automatically tainted merely because the principal wager is void. The case is therefore significant for explaining why a void wager does not, by itself, make every connected agreement unlawful.

Question 96EasyWagering Agreement - Section 30 ICA

Under Section 30 ICA, a wagering agreement is:

  1. A

    Illegal and criminal

  2. B

    Void - no suit can be brought to recover anything alleged to be won on a wager

  3. C

    Voidable at the option of the loser

  4. D

    Valid if registered with the government

View answer and explanation

Correct answer: B. Void - no suit can be brought to recover anything alleged to be won on a wager

The passage states: 'Section 30 of the ICA provides that agreements by way of wager are void and that no suit shall be brought for recovering anything alleged to be won on any wager.'

Source note: Ist Term LB102 / Gherulal Parakh v. Mahadeodas Maiya (AIR 1959 SC)

Question 97EasyWagering Agreement - Section 30 ICA

A characteristic feature of a wagering agreement as described in the passage is:

  1. A

    The parties must be businessmen

  2. B

    Each party standing to win or lose solely on the outcome of an uncertain event with no interest other than the stake

  3. C

    The contract must be in writing

  4. D

    The contract must involve money, not goods

View answer and explanation

Correct answer: B. Each party standing to win or lose solely on the outcome of an uncertain event with no interest other than the stake

The passage describes wagering as 'each standing to win or lose solely on the outcome, with no interest in the event other than the stake.'

Source note: Ist Term LB102 / Gherulal Parakh v. Mahadeodas Maiya (AIR 1959 SC)

Question 98MediumWagering Agreement - Section 30 ICA

The Supreme Court in Gherulal Parakh held that wagering agreements under Section 30 are void but:

  1. A

    Also illegal under Section 23 making them criminal

  2. B

    Not per se illegal under Section 23 - void and illegal are distinct categories in Indian contract law

  3. C

    Always enforceable between the original parties

  4. D

    Illegal only in Maharashtra and Bombay

View answer and explanation

Correct answer: B. Not per se illegal under Section 23 - void and illegal are distinct categories in Indian contract law

The passage states: 'The Supreme Court held that while wagering agreements are void under Section 30, they are not per se illegal under Section 23.'

Source note: Ist Term LB102 / Gherulal Parakh v. Mahadeodas Maiya (AIR 1959 SC)

Question 99HardWagering Agreement - Section 30 ICA

What is the safer doctrinal takeaway from Gherulal Parakh on collateral agreements connected with wagers?

  1. A

    Every collateral agreement connected with a wager is automatically illegal

  2. B

    A void wager does not by itself make a collateral agreement unlawful; illegality must arise from some separate Section 23 vice

  3. C

    All partnerships connected with speculative trading are criminal

  4. D

    A wager becomes valid once parties share profits and losses through partnership

View answer and explanation

Correct answer: B. A void wager does not by itself make a collateral agreement unlawful; illegality must arise from some separate Section 23 vice

Gherulal Parakh is best read as distinguishing a void wager from an illegal one. The safer doctrinal takeaway is that a collateral agreement is not automatically tainted merely because the underlying wager is void; some independent ground of unlawfulness under Section 23 must be shown.

Source note: Ist Term LB102 / Gherulal Parakh v. Mahadeodas Maiya (AIR 1959 SC)

Question 100HardWagering Agreement - Section 30 ICA

According to the passage, the distinction between void and illegal in Indian contract law is significant because it determines:

  1. A

    The criminal liability of the parties

  2. B

    The enforceability of collateral agreements - a merely void wager does not automatically taint them, though a separately unlawful object under Section 23 still would

  3. C

    The court's jurisdiction to hear the matter

  4. D

    Whether the parties must return benefits received

View answer and explanation

Correct answer: B. The enforceability of collateral agreements - a merely void wager does not automatically taint them, though a separately unlawful object under Section 23 still would

The passage states: 'The distinction between void and illegal in Indian contract law has significant practical consequences for the enforceability of collateral agreements.'

Source note: Ist Term LB102 / Gherulal Parakh v. Mahadeodas Maiya (AIR 1959 SC)

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