Indian Contract Act 1872 MCQs with Answers

The Indian Contract Act, 1872 (Act No. 9 of 1872) establishes the basic legal framework for commercial agreements and obligations across 238 sections organized into 11 chapters. The statute codifies the rules governing contract formation, validity, performance, discharge, breach, and special commercial relations including indemnity, guarantee, bailment, and agency.

Formation begins in Chapters I and II. Section 2 defines the essential progression: proposal (Clause a), promise (Clause b), consideration (Clause d), agreement (Clause e), and enforceable contract (Clause h). Section 10 specifies that agreements are contracts if made by free consent of competent parties for lawful consideration and lawful objects. Section 11 establishes competency, affirming the rule from Mohori Bibee v. Dharmodas Ghose that minor agreements are void ab initio. Vitiating factors include coercion, undue influence, fraud under Section 17, and misrepresentation under Section 18, rendering consent voidable under Section 19.

Consideration rules are governed by Section 23 (unlawful objects and public policy) and Section 25 (agreements without consideration void, subject to registered love and affection, past voluntary services, and time-barred debts). Statutory restraints on personal liberty are explicitly voided: Section 27 invalidates restraints on trade (except sale of goodwill), Section 28 bars restraints on legal proceedings, and Section 30 voids agreements by way of wager.

Performance and discharge are addressed in subsequent chapters. Section 56 codifies the doctrine of frustration, discharging parties when performance becomes legally or physically impossible (Satyabrata Ghose v. Mugneeram). Quasi-contractual obligations under Section 70 require compensation for non-gratuitous acts. Upon breach, Section 73 codifies the common law rule from Hadley v. Baxendale, granting damages for proximate losses while excluding remote injury. Pre-estimated damages under Section 74 eliminate the English penalty distinction, entitling claimants to reasonable compensation not exceeding the stipulated penalty (Fateh Chand and Kailash Nath).

Special contracts span indemnity, guarantee, bailment, and agency in Chapters VIII through X. Agency questions frequently examine Section 202, which provides that an agency coupled with an interest cannot be terminated to the prejudice of the agent's interest, surviving even the principal's death or insanity.