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Contract Act-II MCQs Set-1
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There are 2 Sets of MCQs available for The Indian Contract Act-I, you are advised to explore all the sets :
1. Section 124 of the Indian Contract Act, 1872 deals with:
a. Contract of guarantee
b. Contract of bailment
c. Contract of indemnity
d. Contract of agency
2. As per Section 124, a contract of indemnity is a contract:
a. To perform the promise of a third party
b. To compensate for loss caused by conduct of promisor or another person
c. To sell goods at a future date
d. To share profits
3. In Section 124, the person who promises to make good the loss is called:
a. Indemnified
b. Indemnifier
c. Surety
d. Debtor
4. According to Section 124, the loss may arise due to:
a. Only act of God
b. Only promisor’s conduct
c. Only third-party conduct
d. Conduct of promisor or any other person
5. Which of the following is NOT correct under Section 124?
a. It involves two parties
b. It protects against loss
c. It includes promise to pay debt of third person
d. It covers loss caused by conduct of others
6. A contract between an insurance company and vehicle owner to save the later from consequences of a vehicular accident is a contract of
a. guarantee
b. surety
c. bailment
d. indemnity
7. Contract of Insurance is contract of:
a. Guarantee
b. Indemnity
c. Bailment
d. Quasi-contract
8. A contract of Insurance, the performance of which depends upon a future event falls under the category?
a. Contingent contract
b. Contract of indemnity
c. Contract of guarantee
d. Quasi-contract
9. Indemnity applies even if:
a. No loss occurs
b. Third person’s rights are affected
c. Agent acts unlawfully
d. Contract is void
10. Section 125 of the Indian Contract Act, 1872 deals with:
a. Duties of indemnifier
b. Rights of indemnity-holder when sued
c. Contract of guarantee
d. Breach of contract
11. The indemnity-holder is entitled to recover from the promisor:
a. Only damages
b. Only costs
c. Only compromise amount
d. Damages, costs, and sums paid under compromise
12. An indemnity-holder can recover legal costs if:
a. He always wins the case
b. He acts against the promisor’s orders
c. He acts prudently and does not contravene promisor’s orders
d. He ignores the promisor completely
13. Amount paid under a compromise can be recovered if:
a. It is against the promisor’s orders
b. It is made without any reason
c. It is prudent and not against promisor’s instructions or is authorized
d. It is always recoverable
14. Which of the following is NOT recoverable under Section 125?
a. Damages in a suit
b. Costs of suit (if conditions satisfied)
c. Loss due to personal negligence
d. Amount paid in compromise (if conditions satisfied)
15. Section 126 of the Indian Contract Act, 1872 deals with:
a. Contract of indemnity
b. Contract of guarantee
c. Contract of bailment
d. Contract of agency
16. A contract of guarantee is a contract to:
a. Compensate for loss
b. Perform the promise or discharge liability of a third person in case of default
c. Transfer ownership
d. Share profits
17. The person who gives the guarantee is called:
a. Creditor
b. Principal debtor
c. Surety
d. Agent
18. The person in respect of whose default the guarantee is given is called:
a. Surety
b. Creditor
c. Principal debtor
d. Promisee
19. A contract of guarantee may be:
a. Only written
b. Only oral
c. Either oral or written
d. Registered only
20. Mark the correct answer in respect of Contract of Guarantee.
a. It may be in writing
b. It may be oral
c. Both (a) and (b)
d. Neither (a) nor (b)
21. In a contract of guarantee under Indian Contract Act, 1872, the person for whom the guarantee is given is called
a. Surety
b. Principal Debtor
c. Creditor
d. None of the above
22. ‘A’ says to ‘B’ that he will give a sum of rupees 5000 if B marries his daughter. This is:
a. Vested Right
b. Primary Right
c. Contingent Right
d. None of these
23. A guarantee which the creditor has obtained by means of keeping silence as to a material circumstance is:
a. Valid
b. Invalid
c. Voidable
d. None of these
24. Bank Guarantee is an independent contract between:
a. Creditor and Debtor
b. Buyer and Seller
c. Bank and Beneficiary
d. None of the above
25. A sells and delivers goods to B, C afterwards without consideration, agrees to pay for them in default of B:
a. The agreement is valid
b. Agreement is void
c. Agreement is voidable
d. C has no right to agree
26. Section 127 of the Indian Contract Act, 1872 deals with:
a. Contract of indemnity
b. Consideration for guarantee
c. Contract of bailment
d. Breach of contract
27. As per Section 127, consideration for a guarantee may be:
a. Only money paid to surety
b. Benefit given to the creditor
c. Anything done or promise made for the benefit of the principal debtor
d. Only written agreement
28. The consideration for giving a guarantee must benefit:
a. Surety
b. Creditor
c. Principal debtor
d. Agent
29. Which of the following is correct regarding consideration for guarantee?
a. It must move to the surety
b. It may move to the principal debtor
c. It is not required
d. It must be in writing
30. Consideration in a contract of guarantee can be:
a. Only past consideration
b. Only present consideration
c. Only future consideration
d. Anything done or any promise made for benefit of principal debtor
31. A is surety for B for a loan of Rs One lac which B defaulted. A is liable for:
a. Rs. One lac
b. not liable
c. liable to recover it from B and then pay
d. none of the above
32. A becomes surety to C for B’s conduct as a manager of C’s bank. Afterwards B and C contract, without A’s permission that B shall become, liable for one- fourth of the losses on overdraft. B allows a customer to withdraw and the bank losses a sum of money. To make good this loss A is:
a. Wholly liable
b. Not liable
c. Liable to the extent of one-fourth
d. Liable to the extent of three-fourth
33. Section 128 of the Indian Contract Act, 1872 deals with:
a. Rights of indemnity holder
b. Consideration for guarantee
c. Surety’s liability
d. Breach of contract
34. As per Section 128, the liability of the surety is:
a. Less than the principal debtor
b. Greater than the principal debtor
c. Co-extensive with the principal debtor
d. Independent of the principal debtor
35. “Co-extensive liability” means:
a. Liability is limited
b. Liability is equal in extent to that of the principal debtor
c. Liability is optional
d. Liability is conditional only
36. The liability of the surety may differ from the principal debtor if:
a. Law requires it
b. Court orders it
c. It is provided otherwise in the contract
d. Creditor decides it
37. Which statement is correct under Section 128?
a. Surety is liable only after debtor pays
b. Surety’s liability is always limited
c. Surety’s liability is equal to that of principal debtor unless contract states otherwise
d. Surety has no liability
38. Section 129 of the Indian Contract Act, 1872 deals with:
a. Contract of indemnity
b. Continuing guarantee
c. Surety’s liability
d. Breach of contract
39. A continuing guarantee is a guarantee which:
a. Applies to a single transaction only
b. Extends to a series of transactions
c. Is always written
d. Is always oral
40. What is the term used to describe a guarantee which is intended to cover a number of transaction over a period of time?
a. Ordinary guarantee
b. Specific guarantee
c. Continuing guarantee
d. Subsequent guarantee
41. Which of the following best describes a continuing guarantee?
a. One-time promise
b. Limited contract
c. Ongoing guarantee for multiple transactions
d. Conditional contract only
42. A guarantee given for repeated dealings between parties is called:
a. Specific guarantee
b. Conditional guarantee
c. Continuing guarantee
d. Void guarantee
43. Which statement is correct regarding continuing guarantee?
a. It applies only once
b. It applies to future series of transactions
c. It is invalid in law
d. It cannot be revoked
44. Section 130 of the Indian Contract Act, 1872 deals with:
a. Continuing guarantee
b. Revocation of continuing guarantee
c. Surety’s liability
d. Contract of indemnity
45. A continuing guarantee may be revoked:
a. Only by the creditor
b. Only by the court
c. By the surety at any time
d. Only after all transactions are completed
46. Revocation of a continuing guarantee is effective for:
a. Past transactions only
b. Future transactions only
c. Both past and future transactions
d. No transactions
47. Revocation of a continuing guarantee is done by:
a. Filing a case
b. Giving notice to the creditor
c. Informing the principal debtor only
d. Writing a contract again
48. A continuing guarantee under Section 130 is:
a. Irrevocable absolutely
b. Revocable as regards future transaction
c. Revocable absolutely
d. Either (a) or (b)
49. Which statement is correct regarding revocation of continuing guarantee?
a. It cancels liability for past transactions
b. It cancels all liabilities
c. It affects only future transactions after notice
d. It is not allowed by law
50. Section 131 of the Indian Contract Act, 1872 deals with:
a. Revocation of guarantee by notice
b. Revocation of continuing guarantee by death of surety
c. Surety’s liability
d. Contract of indemnity
51. The death of the surety results in:
a. Automatic discharge of all liabilities
b. Revocation of continuing guarantee for future transactions
c. Revocation for past transactions
d. No effect on guarantee
52. Revocation due to death of surety applies to:
a. Past transactions only
b. Future transactions only
c. Both past and future transactions
d. None
53. The rule of revocation by death applies:
a. Always
b. Only if court orders
c. Unless there is a contract to the contrary
d. Only if creditor agrees
54. Which statement is correct regarding Section 131?
a. Death cancels all liabilities of surety
b. Death revokes guarantee for future transactions unless otherwise agreed
c. Death has no effect
d. Guarantee becomes void automatically
55. When a surety to a bond dies before, the bond is forfeited. The liability in respect of bond:
a. Shall not be discharged
b. Shall be discharged
c. Court has discretion to remit any portion
d. There is no provision
56. ‘M’ lends Rs. 1,00,000 to ‘A’. ‘p’ is the surety. The contract provides that the liability of ‘P’ shall be limited to Rs. 50,000. The contract is
a. void
b. voidable
c. irregular
d. valid
57. Section 133 of the Indian Contract Act, 1872 deals with:
a. Revocation of guarantee
b. Discharge of surety by variance in terms of contract
c. Continuing guarantee
d. Contract of indemnity
58. A variance to the contract without surety’s consent discharges him as to subsequent transactions between principal debtor and the creditor.
a. False
b. True
c. Court has discretion to decide
d. None of the above
59. A surety is discharged if:
a. The creditor files a suit
b. There is a variance in contract without surety’s consent
c. The debtor defaults
d. The contract is written
60. “Variance” means:
a. Cancellation of contract
b. Change in terms of contract
c. Breach of contract
d. Formation of contract
61. Assertion (A): The liability of the surety is coextensive with that of the principal debtor unless it is otherwise provided by the contract.
Reason (R): Any variance, made without the surety’s consent, in the terms of the contract between the principal debtor and. the creditor, discharges the surety as to transactions subsequent to variance.
Code:
a. Both A and R are true and R is the correct explanation of A
b. Both A and R are true but R is not the correct explanation of A
c. A is true but R is false
d. A is false but R is true
62. A, B and C as sureties for D, enter into three several bonds, each in a different penalty, namely, A is the penalty of Rs. 10,000, B is that of Rs. 20,000 and C in that of Rs. 40,000 conditioned for D’s duly accounting to M. D makes default to the extent of Rs. 30,000. The liabilities of A, B and C are:
a. only A is liable to pay
b. only B is liable to pay
c. only C is liable to pay
d. A, B and C are each liable to pay
63. The discharge of surety applies to:
a. Past transactions only
b. Future transactions after the variance
c. All transactions
d. No transactions
64. Which statement is correct under Section 133?
a. Surety is always liable
b. Surety is discharged if terms are changed without his consent
c. Surety is liable even after changes
d. Consent of surety is not required
65. Section 134 of the Indian Contract Act, 1872 deals with:
a. Discharge of surety by variance
b. Discharge of surety by release of principal debtor
c. Continuing guarantee
d. Contract of indemnity
66. The surety is discharged when:
a. The creditor sues the debtor
b. The principal debtor is released by the creditor
c. The debtor makes payment
d. The contract is written
67. Surety is discharged if:
a. The creditor changes his address
b. The creditor performs his duty
c. The creditor does any act or omission that discharges the principal debtor
d. The debtor refuses to pay
68. In which of the following circumstances a surety stands discharged?
a. By release or discharge of the principal debtor
b. By variance in the terms of contract
c. (a) and (b) both
d. None of these
69. Liability of the surety is:
a. Conditional on default
b. Independent of default
c. Can be conditional or independent
d. None of the above
70. The discharge of surety under Section 134 is based on:
a. Agreement between surety and creditor
b. Agreement between creditor and principal debtor
c. Court order only
d. Law of tort
71. Which statement is correct under Section 134?
a. Surety remains liable even if debtor is released
b. Surety is discharged if principal debtor is released by creditor
c. Surety is always liable
d. Surety has no rights
72. Section 137 of the Indian Contract Act, 1872 deals with:
a. Discharge of surety by variance
b. Creditor’s forbearance to sue
c. Revocation of guarantee
d. Contract of indemnity
73. Mere forbearance by the creditor to sue the principal debtor:
a. Discharges the surety
b. Has no effect on the surety’s liability
c. Cancels the contract
d. Makes the contract void
74. The surety is not discharged when:
a. The debtor is released
b. Terms are changed
c. Creditor delays or refrains from suing the debtor
d. Contract is altered
75. The surety will be discharged due to forbearance if:
a. Law requires it
b. Court orders it
c. There is a contract to the contrary
d. Debtor refuses to pay
76. Which statement is correct under Section 137?
a. Delay in suing always discharges surety
b. Surety is discharged automatically
c. Mere delay or forbearance does not discharge surety unless agreed otherwise
d. Surety is never liable
77. Section 138 of the Indian Contract Act, 1872 deals with:
a. Discharge of surety
b. Release of one co-surety
c. Continuing guarantee
d. Contract of indemnity
78. When one co-surety is released by the creditor:
a. All co-sureties are discharged
b. Other co-sureties are also discharged
c. Other co-sureties remain liable
d. Contract becomes void
79. Release of one co-surety:
a. Discharges all sureties
b. Has no effect on other sureties
c. Cancels the guarantee
d. Ends all liabilities
80. A co-surety who is released by the creditor:
a. Is free from all responsibilities
b. Is still responsible to other co-sureties
c. Has no obligations
d. Becomes principal debtor
81. Which statement is correct under Section 138?
a. Releasing one surety discharges all
b. Other co-sureties remain liable and released surety remains liable to them
c. All liabilities end
d. Guarantee becomes void
82. Section 140 of the Indian Contract Act, 1872 deals with:
a. Rights of surety on payment
b. Discharge of surety
c. Contract of indemnity
d. Continuing guarantee
83. When the surety pays the guaranteed debt:
a. He loses all rights
b. He gets rights against the creditor
c. He is invested with all rights of the creditor against the principal debtor
d. He becomes creditor automatically
84. The rights of surety arise when:
a. Contract is made
b. Debt becomes due or default occurs and surety performs or pays
c. Creditor files a case
d. Debtor refuses to pay only
85. Section 141 of the Indian Contract Act, 1872 deals with:
a. Rights of surety on payment
b. Surety’s right to benefit of creditor’s securities
c. Discharge of surety
d. Continuing guarantee
86. A surety is entitled to:
a. Only known securities
b. No securities
c. Benefit of all securities held by creditor, whether known or not
d. Only future securities
87. If the creditor loses or parts with security without surety’s consent:
a. Surety remains fully liable
b. Surety is discharged to the extent of value of security
c. Contract becomes void
d. Creditor is discharged
88. Section 142 of the Indian Contract Act, 1872 deals with:
a. Misrepresentation in contract of guarantee
b. Discharge of surety
c. Continuing guarantee
d. Contract of indemnity
89. A guarantee is invalid when:
a. It is oral
b. It is written
c. It is obtained by misrepresentation of a material fact by the creditor
d. It is signed by surety
90. Misrepresentation must relate to:
a. Minor details
b. Any unrelated matter
c. A material part of the transaction
d. Personal opinion only
91. Section 143 of the Indian Contract Act, 1872 deals with:
a. Misrepresentation in guarantee
b. Concealment in guarantee
c. Discharge of surety
d. Continuing guarantee
92. A guarantee is invalid if:
a. It is oral
b. It is written
c. The creditor conceals material facts
d. The surety signs willingly
93. Concealment must relate to:
a. Minor facts
b. Personal opinions
c. Material circumstances
d. Future events only
94. Section 145 of the Indian Contract Act, 1872 deals with:
a. Rights of creditor
b. Implied promise to indemnify surety
c. Discharge of surety
d. Continuing guarantee
95. In a contract of guarantee, the principal debtor:
a. Has no obligation
b. Must indemnify the surety
c. Is discharged always
d. Pays only creditor
96. The surety can recover from the principal debtor:
a. All sums paid
b. Only wrongful payments
c. Only rightfully paid sums under the guarantee
d. No amount
97. Section 146 of the Indian Contract Act, 1872 deals with:
a. Discharge of surety
b. Liability of co-sureties to contribute
c. Contract of indemnity
d. Continuing guarantee
98. Where there are co-sureties for the same debt:
a. Only one surety is liable
b. All sureties pay different amounts
c. Co-sureties are liable to contribute equally
d. Sureties are not liable
99. Equal contribution among co-sureties applies:
a. Only when they know each other
b. Only when contracts are same
c. Whether jointly or severally and even without knowledge of each other
d. Only when court orders
100. Section 147 of the Indian Contract Act, 1872 deals with:
a. Equal liability of co-sureties
b. Liability of co-sureties bound in different sums
c. Discharge of surety
d. Contract of indemnity
101. Where co-sureties are bound in different sums:
a. They are not liable
b. Only one surety is liable
c. They are liable equally up to the limits of their obligations
d. They pay unequal amounts always
102. The liability of co-sureties in different sums is:
a. Unlimited
b. Equal without limit
c. Equal but restricted to their maximum agreed amount
d. Based on creditor’s choice
103. Section 148 of the Indian Contract Act, 1872 deals with:
a. Contract of guarantee
b. Bailment, bailor and bailee
c. Contract of indemnity
d. Agency
104. A bailment is:
a. Sale of goods
b. Delivery of goods for some purpose with condition of return or disposal
c. Transfer of ownership
d. Gift of goods
105. The delivery of goods by one person to another for some specific purpose is known as:
a. Bailment
b. Pledge
c. Hypothecation
d. Mortgage.
106. ‘Baliee’ is a person:
a. to whom the goods are delivered
b. who delivers the goods
c. who fails to deliver the goods
d. none of the above
107. ‘X’ hires a carriage of ‘Y. The carriage is unsafe, though ‘Y is not aware of it and ‘X’ is injured. For the injury to ‘X’, Y is:
a. Liable
b. Not liable
c. Liable to the extent of 50%
d. None of these
108. The person who delivers the goods is called:
a. Bailee
b. Bailor
c. Agent
d. Creditor
109. Section 149 of the Indian Contract Act, 1872 deals with:
a. Delivery to bailee
b. Duties of bailee
c. Contract of indemnity
d. Guarantee
110. Delivery to the bailee may be made by:
a. Written agreement only
b. Oral agreement only
c. Any act which puts goods in possession of bailee or his authorized person
d. Court order only
111. Delivery is valid when:
a. Goods are sold
b. Goods are destroyed
c. Possession is transferred to bailee or authorized person
d. Ownership is transferred
112. Section 150 of the Indian Contract Act, 1872 deals with:
a. Duties of bailee
b. Bailor’s duty to disclose faults
c. Contract of guarantee
d. Delivery of goods
113. The bailor must disclose:
a. All facts
b. Only minor defects
c. Faults known to him that materially affect use or involve risk
d. Price of goods
114. If goods are bailed for hire, the bailor is liable:
a. Only if he knows the faults
b. Only if bailee agrees
c. Whether he knows the faults or not
d. Never liable
115. Section 151 of the Indian Contract Act, 1872 deals with:
a. Duty of bailor
b. Care to be taken by bailee
c. Contract of guarantee
d. Delivery of goods
116. The bailee must take care of goods:
a. Like an expert
b. Like an ordinary prudent person takes care of his own goods
c. Without any care
d. Only when paid
117. Which of the following are the duties of a bailee?
1. Duty to take reasonable care of goods
2. Duty not to make unauthorized use of goods
3. Duty not to mix his own goods with the goods bailed
4. Duty to compensate when goods is damaged, despite of the care of the bailee
Code:
a. 2, 3 and 4
b. 1, 2 and 3
c. 3 and 4
d. 1 and 2
118. The standard of care depends on:
a. Price only
b. Owner’s instructions only
c. Bulk, quality and value of goods
d. Time only
119. Section 154 of the Indian Contract Act, 1872 deals with:
a. Duties of bailor
b. Unauthorized use by bailee
c. Finder’s rights
d. Contract of guarantee
120. If the bailee uses goods contrary to the terms of bailment:
a. No consequence
b. Bailment ends automatically
c. He is liable to compensate for damage
d. Bailor becomes liable
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