Samacheer Kalvi Class 11 Commerce Solutions Chapter 29 Elements of Contract

I Choose the Correct Answer

 

Question 1. An agreement enforceable by law is a ........................
(a) Enforceable acceptance
(b) Accepted offer
(c) Approved promise
(d) Contract
Answer: (d) Contract
In simple words: A contract is a formal agreement that can be legally enforced. This means if one party breaks the agreement, the other party can take legal action.

🎯 Exam Tip: Remember that not all agreements are contracts; only those that are legally enforceable qualify as contracts.

 

Question 2. Every promise and every set of promises, forming the consideration for each other, is an
(a) Agreement
(b) Contract
(c) Offer
(d) Acceptance
Answer: (a) Agreement
In simple words: When two people make promises to each other, and these promises form the basis for what each person gives or gets, that is called an agreement. It's the first step before a contract.

🎯 Exam Tip: Distinguish between an agreement (a broader concept) and a contract (an agreement that is legally binding).

 

Question 3. Void agreement signifies ......
(a) Agreement illegal in nature
(b) Agreement not enforceable by law
(c) Agreement violating legal procedure
(d) Agreement against public policy
Answer: (b) Agreement not enforceable by law
In simple words: A void agreement is something that was never legally valid from the start, or it became invalid later. This means you cannot go to court to make someone follow it.

🎯 Exam Tip: A void agreement differs from a voidable contract; a void agreement has no legal effect, while a voidable contract can be canceled by one party.

 

Question 4. Acceptance to be valid must ............................
(a) Be absolute
(b) Be unqualified
(c) Both be absolute & unqualified
(d) Be conditional
Answer: (c) Both be absolute & unqualified
In simple words: For an offer to be properly accepted, the person receiving the offer must agree to everything exactly as it was offered, without any changes or conditions. This makes the agreement clear and final.

🎯 Exam Tip: Any change or condition added to an acceptance turns it into a counter-offer, effectively rejecting the original offer.

 

Question 5. A contract with or by a minor is a ............................
(a) Valid contract
(b) Void contract
(c) Voidable contract
(d) Voidable at the option of either party
Answer: (d) Voidable at the option of either party
In simple words: If a minor makes a contract, that contract can be cancelled by the minor if they choose to do so. This protects young people who might not fully understand legal agreements.

🎯 Exam Tip: Contracts with minors are typically voidable to protect the minor, as they are presumed not to have full legal capacity.

II. Very Short Answer Questions

 

Question 1. What is law?
Answer: Law is a collection of rules that guide how people behave and interact within a polite society. It helps keep order and fairness. These rules are made by governments and are meant to be followed by everyone.
In simple words: Law is a set of rules for how people act in a society.

🎯 Exam Tip: Focus on the idea of law as a system of rules that ensures order and governs conduct in society.

 

Question 2. Why should one know the law?
Answer: Everyone should know the laws they are expected to follow because not knowing the law is not an excuse for breaking it. This principle ensures that all citizens are responsible for their actions. It helps people make informed decisions and avoid legal trouble.
In simple words: You must know the law because saying "I didn't know" is not a valid excuse if you break it.

🎯 Exam Tip: The key takeaway is 'ignorance of the law is no excuse' – this is a fundamental legal principle.

 

Question 3. Can a minor enter into a Contract?
Answer: According to the Indian Contract Act of 1872, any contract made by or with a minor is considered completely void from the very beginning. This means it has no legal standing and cannot be enforced by law. This rule protects minors from making agreements they might not fully understand.
In simple words: No, a minor cannot legally enter a contract because such a contract is automatically void by law.

🎯 Exam Tip: Highlight "void ab initio" (void from the beginning) when discussing contracts with minors, as it's a crucial legal term.

 

Question 4. Who can enter into a Contract?
Answer: The Indian Contract Act states that a person is capable of entering into a contract if they meet certain conditions. These conditions are:

• They must be of the age of majority as per the law they are subject to.
• They must be of sound mind, meaning they can understand the contract and its consequences.
• They must not be specifically disqualified from contracting by any law. This includes individuals like alien enemies, foreign leaders, representatives from other countries, people who are bankrupt, and convicted criminals.

Anyone who meets these three criteria can legally make a contract.
In simple words: To make a contract, a person must be an adult, have a sound mind, and not be forbidden by any law.

🎯 Exam Tip: List the three main legal capacities: age of majority, sound mind, and not disqualified by law.

 

Question 5. Define Contract
Answer: As per Section 2(h) of the Indian Contract Act, a contract is an agreement that can be enforced by law. This means it creates legal duties and rights for the people involved. It is an agreement that the courts will recognize and uphold.
In simple words: A contract is an agreement that the law can make you follow.

🎯 Exam Tip: Remember the core definition: "An agreement enforceable by law" is the key phrase for a contract.

III Short Answer Questions

 

Question 1. Define Offer:
Answer: According to Section 2(a) of the Indian Contract Act, an offer (or proposal) happens when one person tells another person that they are willing to do something or not do something. They do this to get the other person's agreement to that act or refusal. For an offer to be valid, it must clearly show the willingness to enter into a contract.
In simple words: An offer is when one person tells another they want to do or not do something, hoping the other person will agree.

🎯 Exam Tip: Emphasize that an offer must express a clear "willingness" and aim to gain the other party's "assent" or agreement.

 

Question 2. What do you mean by Agreement?
Answer: An agreement is made up of a promise or a group of promises where each promise acts as consideration for the other. A promise is created when an offer is accepted. So, an agreement is essentially an accepted offer. In simple terms, an agreement is formed when an 'offer' meets an 'acceptance'. It can be thought of as: Agreement = Offer / Proposal + Acceptance. Agreements form the foundation upon which contracts are built.
In simple words: An agreement is formed when someone makes an offer and another person accepts it, where both sides promise something.

🎯 Exam Tip: The formula "Agreement = Offer + Acceptance" is crucial and should always be included when defining an agreement.

 

Question 3. Define a Voidable Contract:
Answer: As per Section 2(i) of the Indian Contract Act of 1872, a voidable contract is an agreement that can be legally enforced, but only at the choice of one or more of the parties involved, not at the choice of the other parties. This means one party has the power to either confirm or cancel the contract. This often happens in situations where consent was not freely given, such as under pressure or false information.
In simple words: A voidable contract is one that can be canceled by one party but not by the other party.

🎯 Exam Tip: The key characteristic of a voidable contract is that enforceability is "at the option of one or more parties," giving them the choice to invalidate it.

 

Question 4. What do you mean by Revocation?
Answer: Revocation means taking back or withdrawing an offer before it has been accepted. It's like changing your mind and cancelling the offer you made. The offeror (the person who made the offer) can revoke it at any time before the offeree (the person who received the offer) accepts it. This ensures that a person is not bound by an offer indefinitely.
In simple words: Revocation means taking back an offer before anyone has accepted it.

🎯 Exam Tip: Remember that revocation must be communicated to the offeree before acceptance to be effective.

 

Question 5. Who is a promisor, promisee?
Answer: In a contract, there are usually two main parties:

• **Promisor:** This is the person who has made a promise and is now legally bound by it. They are the ones offering something.
• **Promisee:** This is the person to whom the promise has been made. They are the ones who will receive the benefit of the promise.

Every valid contract must have both a promisor and a promisee to be complete.
In simple words: The promisor makes a promise, and the promisee is the one who receives that promise.

🎯 Exam Tip: Clearly define each term separately, showing their distinct roles in a contractual agreement.

IV Long Answer Questions

 

Question 1. Explain the essentials of a Valid Contract:
Answer: For a contract to be legally valid and enforceable, it must have several important elements:
1. **Offer and Acceptance:** There must be at least two parties. One person must make a clear offer, and the other person must accept it completely and without conditions. This forms the basic agreement.
2. **Legal Relationship:** The parties must intend for their agreement to create legal ties, not just social or domestic ones. For example, a dinner invitation is not a contract, but a business deal is.
3. **Lawful Consideration (Quid Pro Quo):** According to Section 2(d) of the Contract Act, consideration means "something in return." Both parties must give something of value for the agreement. A contract without this exchange is usually not valid.
4. **Lawful Object (Section 23):** The purpose of the agreement must be legal and not against the law, morality, or public policy. Contracts for illegal activities are invalid.
5. **Free Consent (Sections 13 & 14):** Both parties must agree to the same thing in the same way (consensus ad idem). Their agreement must be free and genuine, meaning it wasn't forced by threat, undue influence, fraud, misrepresentation, or mistake. If consent is not free, the contract may be voidable.
6. **Capacity of Parties (Section 11):** The people entering the contract must have the legal ability to do so. This means they must be adults, of sound mind, and not legally disqualified.
7. **Certainty of Terms (Section 29):** The terms of the agreement must be clear and precise, not vague or ambiguous. Both parties need to understand exactly what they are agreeing to.
8. **Possibility of Performance (Section 56):** The things agreed upon in the contract must be possible to do. An agreement to do something impossible, like finding a hidden treasure, cannot be enforced.
9. **Not Declared Void:** The agreement should be one that can be enforced by law and not specifically declared illegal or void by any statute. Some agreements are specifically stated in law to be void.
10. **Necessary Legal Formalities:** While some contracts can be oral, others must follow specific legal forms, like being written and registered. These formalities must be completed for the contract to be valid.
In simple words: A valid contract needs clear offer and acceptance, an intent for legal ties, both sides giving something, a lawful purpose, free agreement, capable parties, clear terms, possible actions, and it must not be declared void by law. Sometimes, specific legal papers are also needed.

🎯 Exam Tip: Listing and briefly explaining each essential element is key to scoring full marks on this question. Use clear headings for each point.

 

Question 2. Difference between Contract and Agreement.
Answer: Here are the main differences between a contract and an agreement:

In simple words: A contract is an agreement that the law will make you follow, while an agreement is just a set of promises, which might or might not be legally binding. All contracts are agreements, but not all agreements are contracts.

🎯 Exam Tip: Presenting the differences in a clear table format is highly recommended for comparison questions, ensuring all corresponding points are covered.

 

Question 3. Explain the classification of Contract on the basis of the Validity.
Answer: Contracts can be grouped into different types based on how legally valid they are:
1. **Valid Contract:** This is an agreement that meets all the necessary conditions set by law for its creation. For example, if S offers to sell his car for Rs.2,00,000 to T, and T agrees to buy it, this forms a valid contract. All parties are bound by it.
2. **Void Contract (Section 2(j)):** This is a contract that stops being enforceable by law. It happens when a contract does not meet some key requirements for validity. Once declared void, it has no legal effect. For instance, if the subject of a contract becomes illegal after its formation, it becomes void.
3. **Voidable Contract (Section 2(i)):** This is an agreement that can be enforced by law, but only at the choice of one or more of the parties involved, not by the other parties. This means one party can choose to cancel it. This often occurs when consent was obtained through force or misrepresentation.
4. **Illegal Contract:** This is a contract that is forbidden by law. All illegal agreements are automatically void. However, not all void agreements are illegal. An example is a contract for a crime or something against public policy, which is illegal and cannot be enforced.
5. **Unenforceable Contract:** This type of contract cannot be enforced in court due to some technical problem. For example, if it's missing a required written form or is past the time limit for legal action. If these technical issues are fixed, the contract might become valid, but the court won't force performance if they are not corrected.
In simple words: Contracts are sorted by if they are legally correct. Valid contracts are good. Void contracts become invalid. Voidable contracts can be canceled by one side. Illegal contracts are forbidden by law. Unenforceable contracts have small technical errors that stop them from being used in court.

🎯 Exam Tip: Clearly define each type of contract and provide a simple, illustrative example for each to demonstrate understanding.

 

Question 4. Explain the classification of Contract on the basis of the Formation.
Answer: Contracts can be classified based on how they are created or formed:
1. **Express Contract:** This type of contract is made using spoken or written words. As per Section 9, if a proposal or acceptance is clearly stated in words, it's an express promise. For example, if P asks Q, "Will you buy my bicycle for Rs.1,000?" and Q replies, "Yes," that's an express contract. The terms are clearly communicated.
2. **Implied Contract:** This contract is not directly spoken or written but is understood from the actions or conduct of the parties. If a proposal or acceptance is shown through actions rather than words, it's an implied promise. For instance, when a person gets on a public bus, it's implied that they agree to pay the bus fare. The act of boarding implies a contract.
3. **Quasi Contract:** These are not actual contracts but are legal obligations created by law to prevent one person from unfairly benefiting at another's expense. There is no real agreement between the parties. It is an obligation that the law imposes on one party to another, without any actual agreement. For example, if you accidentally receive money meant for someone else, the law might make you return it.
4. **Tacit Contract:** A contract is called tacit when it has to be figured out or "inferred" from the behavior of the people involved. For example, when you take cash from an ATM, your actions imply an agreement with the bank. Another example is a sale made by the fall of the hammer at an auction, where the action signals acceptance. Tacit contracts are similar to implied contracts, focusing on actions that communicate agreement.
In simple words: Contracts are formed in different ways: Express contracts use spoken or written words. Implied contracts happen through people's actions. Quasi contracts are legal duties made by law, not by agreement. Tacit contracts are also understood from actions, like withdrawing cash from an ATM.

🎯 Exam Tip: For each type, provide a clear definition and a simple, relevant example to illustrate the method of formation.

 

Question 5. Explain the classification of Contract on the basis of the Performance.
Answer: Contracts can be categorized based on whether the obligations have been fulfilled or are yet to be performed:
1. **Executed Contract:** This is a contract where both parties have already completed their duties as stated in the agreement. For example, if X buys a car from Y by paying cash, and Y immediately delivers the car, both parties have performed their obligations, making it an executed contract. The transaction is complete.
2. **Executory Contract:** In this type of contract, both parties still need to fulfill their promises. For example, A agrees to buy B's bicycle and promises to pay on June 15th, while B agrees to deliver the bicycle on June 20th. Until both actions happen, the contract is executory.
3. **Unilateral Contract:** This is a one-sided contract where only one party has completed their promise or obligation, and the other party is yet to perform theirs. For example, X promises to pay Y Rs. 10,000 for some goods. X pays the money, but Y still needs to deliver the goods. Here, X has performed, but Y has not yet.
4. **Bilateral Contract:** This contract involves both parties committing to perform their respective promises. For example, R offers to sell his car to S for Rs. 10,00,000, and S accepts. There is a promise by R to sell the car and a promise by S to buy the car. Both promises exist, creating a two-sided obligation.
In simple words: Contracts are sorted by when they are completed. An executed contract means both sides have done their part. An executory contract means both sides still have things to do. A unilateral contract means one side has done their part, and the other has not yet. A bilateral contract means both sides have made promises to do something later.

🎯 Exam Tip: Focus on whether performance is complete (executed) or still pending (executory, unilateral, bilateral) for each definition and example.

11th Commerce Guide Elements of Contract Additional Important Questions and Answers

I. Choose the Correct Answer

 

Question 1. Contracts classified on the basis of performance are
a. executed contracts
b. executory contracts
c. partly executed or partly executory contracts
d. all of the options
Answer: (d) all of the options
In simple words: Depending on if the promises have been done or are still to be done, contracts can be called executed, executory, or even a mix of both.

🎯 Exam Tip: Remember that "performance" classification includes all stages from full completion to partial or pending actions.

 

Question 2. A contract in which, under the terms of a contract, nothing remains to be done by either party is known as
a. executed contract
b. executory contract
c. unilateral contract
d. none of the options
Answer: (a) executed contract
In simple words: When both people in a contract have finished everything they promised to do, it's called an executed contract. It's fully completed.

🎯 Exam Tip: The key indicator for an "executed contract" is that all obligations have been completely fulfilled by both sides.

 

Question 3. All illegal agreements are void, but all void agreements are not illegal.
a. True
b. Partly true
c. False
d. None of the options
Answer: (a) True
In simple words: Any agreement that breaks the law is automatically invalid. But just because an agreement is invalid doesn't mean it's against the law; it might just be missing a legal requirement.

🎯 Exam Tip: Understand the subtle but important distinction: illegality always leads to voidness, but voidness does not necessarily imply illegality (e.g., a contract with a minor is void but not illegal).

 

Question 4. A appoints B as his agent, by way of a power of attorney. This is an example of
a. express contract
b. implied contract
c. tacit contract
d. unlawful contract
Answer: (a) express contract
In simple words: When someone formally gives another person the power to act on their behalf using a legal document, it's a clear, written agreement. This kind of agreement is called an express contract because its terms are explicitly stated.

🎯 Exam Tip: A power of attorney is a written document, making it a clear example of an express contract due to its explicit terms.

 

Question 5. A contract creates
a. rights in person
b. rights in parties
c. no obligations
d. only obligations and no rights
Answer: (a) rights in person
In simple words: When people enter a contract, it gives them personal legal rights against each other. For example, if you pay for a service, you have a personal right to receive that service.

🎯 Exam Tip: Remember that contracts create specific personal rights (rights in personam) between the contracting parties, enforceable against each other.

 

Question 6. The Contract Act came into force
a. from 1 September 1972.
b. before 1 September 1882.
c. from 1 September 1872.
d. after 1 September 1872.
Answer: (c) from 1 September 1872.
In simple words: The law that governs contracts in India officially started on September 1, 1872. This date is important for understanding when contract rules began to apply.

🎯 Exam Tip: Memorize important dates related to key acts, as they are frequently tested.

II. Very Short Answer Questions

 

Question 1. What is meant by Tacit Contract?
Answer: A tacit contract is one that is not openly stated but is understood from the actions or behavior of the people involved. For example, when someone takes money from an automatic teller machine (ATM), or when a sale is confirmed by the fall of a hammer at an auction, these actions imply a contract. It's about unspoken agreements made evident through conduct. These are often used in routine transactions where terms don't need to be verbally agreed upon.
In simple words: A tacit contract is an agreement understood by people's actions, not by spoken or written words.

🎯 Exam Tip: Contrast tacit contracts with express contracts, emphasizing that tacit contracts rely on inference from conduct.

 

Question 2. What are all the two parts of the Indian Contract Act?
Answer: The Indian Contract Act is divided into two main parts:
1. **General Contract:** This section deals with the general principles that apply to all types of contracts. It covers basic concepts like offer, acceptance, consideration, and the capacity of parties to contract.
2. **Special Contract:** This section covers specific types of contracts, such as contracts of indemnity, guarantee, bailment, pledge, and agency. It lays down rules unique to these specialized agreements.
These two parts together form a comprehensive legal framework for contracts in India.
In simple words: The Indian Contract Act has two parts: one for general rules that apply to all contracts, and another for special rules that apply to certain kinds of contracts.

🎯 Exam Tip: Clearly state the two parts and give a brief idea of what each part covers.

 

Question 3. What do you mean by Acceptance?
Answer: According to Section 2(b) of the Indian Contract Act of 1872, acceptance occurs when the person who received a proposal agrees to it. When the person to whom the offer was made shows their consent to it, the proposal is then considered accepted. This act of agreement turns a proposal into a promise. Acceptance must be clear, complete, and communicated to the person who made the offer.
In simple words: Acceptance is when the person who got an offer agrees to it, turning the offer into a promise.

🎯 Exam Tip: Emphasize that acceptance transforms an "offer" into a "promise," which is a foundational step in forming an agreement.

III Short Answer Questions.

 

Question 1. Write a short note on Bilateral Contract.
Answer: A bilateral contract is a type of agreement where both parties make promises to each other and commit to fulfilling those promises. It involves a promise for a promise. For instance, if R offers to sell his Fiat car to S for Rs. 10,00,000, and S accepts R's offer, then there are two promises: R promises to sell the car, and S promises to buy it. This dual promise creates obligations for both parties. Most everyday contracts are bilateral.
In simple words: A bilateral contract is when both people in an agreement make promises to each other.

🎯 Exam Tip: The core concept of a bilateral contract is "promise for a promise," distinguishing it from unilateral contracts.

 

Question 2. What are all the types of agreements?
Answer: Agreements can generally be categorized into two types:
1. **Agreement not enforceable by law:** This refers to agreements where one or more essential elements of a valid contract are missing. Such agreements do not create legal obligations and cannot be taken to court. They might be social or domestic arrangements, or agreements that lack consideration.
2. **Agreement enforceable by law:** These are agreements that meet all the necessary requirements for a valid contract. They create legal rights and duties for the parties involved, meaning they can be enforced through legal action if needed. These are essentially contracts.
The enforceability by law is the main factor that distinguishes these two types.
In simple words: Agreements are either ones that the law can make you follow (these are contracts) or ones that the law cannot make you follow (these are not contracts).

🎯 Exam Tip: Clearly defining the two types based on their enforceability by law is the key to a complete answer.

 

Question 3. Explain the term Consideration:
Answer: As explained in Section 2(d) of the Indian Contract Act, consideration is what one party gives up or does in return for the promise of the other party. It means "something in return" (quid pro quo). This happens when, at the request of the person making the promise (the promisor), the other person (the promisee) or anyone else has done, stopped doing, or promises to do or stop doing something. This 'act' or 'promise' is called consideration for the promise. It is the price for which the promise of the other is bought.
In simple words: Consideration is something of value given by one person to another in exchange for a promise. It's what each person gets or gives in a contract.

🎯 Exam Tip: The term "quid pro quo" (something for something) is essential to remember and include when defining consideration.

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