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Topics of Law Test 15

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Topics of Law Test 15
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  • Question 1
    1 / -0
    If the object or consideration of an agreement is unlawful, then it becomes a ____________________.
    Solution
    As per section 23 of the Contract Act, the consideration or object of an agreement is lawful, unless it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In this case, the agreement becomes void ab initio and illegal.
  • Question 2
    1 / -0
    X a Hindu already married having alive wife entered into an agreement to marry another girl. This agreement is _________________.
    Solution
    Any agreement object and consideration of which is forbidden by law or opposed to public policy is void as per section 23 of the Act. In this case, X has entered into an agreement to marry another girl although he is already married and his wife is alive but here the agreement is based on an act that is forbidden under law i.e. marrying more than once with living first wife is forbidden under Hindu Marriage Act, 1955 and hence, this agreement is unlawful and void.  
  • Question 3
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    Which of these statements is true?
    Solution
    • An agreement is rendered illegal if the object or consideration of the agreement is illegal i.e. forbidden by law or against morality and public policy and is also punishable. But void agreements need not be illegal as they are not enforceable by law but can be performed without any legal recourse. Also, an illegal agreement is illegal since the formation of the contract and is void ab initio, i.e. void from the beginning.
    • Agreement is a wider concept than a contract. A contract is a legally enforced agreement.  This means that all contracts are agreements but all agreements are not contracts such as social agreement which does not need any legal sanctions. Hence, an agreement need not always create legal obligation unless it is legally enforced.
    • An executory contract is a contract made by two parties in which the terms are set to be fulfilled at a later date. The contract stipulates that both sides still have duties to perform before it becomes fully executed. The contract is often in place between a debtor or borrower and another party.
  • Question 4
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    A contract entered with foreign sovereigns and Ambassadors cannot be enforced against them in court of law except _________.
    Solution
    The persons who disqualified from entering into a contract due to certain reasons may arise from their legal status, political status or corporate status:
    • Alien Enemy: An agreement with an Alien Enemy is held to be void.
    • Foreign Sovereign and Ambassadors: Foreign sovereigns and their representatives enjoy certain amount of privileges and immunities in every country. They cannot enter into a contract except through their agents residing in India. Moreover, the contract with them can be enforced in the court only with the permission of Central Government. 
    • Convicts: A convict while he is undergoing imprisonment, cannot enter into a contract.
    • Insolvents: An insolvent person is a person who is said to be unable to discharge or get off his liabilities and therefore, has applied for being adjudged insolvent or if such proceedings have been initiated by any one of his creditors.
    • Company or Statutory bodies: A contract entered into by a corporate body or statutory body will be valid only to the extent it is within its Memorandum of Association
  • Question 5
    1 / -0
    X owes Rs. 10,000 to Y. Y promises to accept Rs. 5000 in full satisfaction of the amount. The agreement is _________.
    Solution
    Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit as per section 63 of the Act. In this case, though the creditor i.e. Y has accepted to take the amount less than the originally owed amount, the agreement is valid as per section 63 of the Act.
  • Question 6
    1 / -0
    X promised Y that he will never marry during his life time. This agreement is ________.
    Solution
    Under section 27 of the act, any agreement pertaining to the restraint of marriage of a person other than a minor is void in nature and cannot be enforced. In this matter too, X has promised not to marry during his lifetime which is consideration and object of the agreement and hence is restraint of marriage and void.
  • Question 7
    1 / -0
    All the illegal agreements are _________________.
    Solution
    An illegal agreement, under the common law of contract, is one that the courts will not enforce because the purpose of the agreement is to achieve an illegal end. The illegal end must result from performance of the contract itself. These kind of agreement are void from the beginning stage only and hence is void ab initio i.e. void from the beginning. 
  • Question 8
    1 / -0
    Which of the following agreement is not an agreement opposed to public policy?
    Solution
    As per section 23 of the act, those contracts, considerations or objects of which are unlawful i.e. illegal or immoral or forbidden by law or opposed to public policy are void in nature. The Act does not anywhere define the expressions "public policy" or "opposed to public policy" or "contrary to public policy". However, the term "public policy" could plainly mean issues concerning the public or public benefit and the interest of public at large. Over the years the courts have developed the meaning of the term 'opposed to public policy'. It contain agreements such as:
    • Trading with Enemies: All trade with enemies is against public policy. Thus it is unlawful and is void. However, if a contract is made during peace times and later on war breaks out, one of the two things may result, Either the contract is suspended or it stands dissolved depending upon the intention of the parties to contract.
    • Stifling Prosecution: An agreement in which one party agrees to drop criminal proceedings pending in a court in consideration of some amount of money, is unlawful. Therefore, such an agreement cannot be enforced except where crime is compoundable.
    • Agreement to Commit a Crime: If in an agreement, the consideration is committing a crime, the agreement is opposed to public policy and is void. Similarly, an agreement to indemnify a person against consequences of his criminal act is unenforceable being opposed to public policy. 
    • Agreements in Restraint of Legal Proceedings: agreements which prohibits wholly or partly any party to the agreement to enforce his rights in respect of any contract is void to that extent. If an agreement curtails the period of limitation which is prescribed by the law of limitation is void. This is so because, its object is to defeat the provisions of law.
  • Question 9
    1 / -0
    An agreement between the buyer and seller of goodwill whereby the seller agrees not to carry on business within specified local limits so long as the buyer or his representatives carry on the business is valid provided __________________.
    Solution
    As per section 27 of the Contract Act, every agreement by which anyone is restrained from exercising a lawful profession or trade or business of any kind, is to that extent void. However there is exception to this rule in the same section which says : : One who sells goodwill of a business with a buyer to refrain from carrying on a similar business, within specified local limits so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein provided that such limits appear to the Court reasonable, regard being had to the nature of business. Hence, ans is (D)
  • Question 10
    1 / -0
    The terms of appointment of X contains a term that he will serve the company for at least 3 years failing which the personal bonds submitted by him will be executed. This agreement is ___________.
    Solution
    As per section 27 of Contract Act, Every agreement by which anyone is restrained from exercising a lawful profession or trade or business of any kind, is to that extent void. However, there are certain exceptions to this rule. For example, agreements of service often contain negative covenants preventing the employee from working elsewhere during the period covered by the agreement and there is no rule of public interest which prevents this clause and consider it as a valid restraint. 

    In the present case,  the appointment of X has a term that  he will serve the company for at least 3 years failing which the personal bonds submitted by him will be executed. This covenant is valid in nature. An agreement of this class does not fall within Section 27. 
    If it did, all contracts of personal service for a fixed period would be void. An agreement to serve exclusively for a week, a day, or even for an hour, necessarily prevents the person so agreeing to serve from exercising his calling during that period for anyone else than the person with whom he so agrees.  
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