Multiple Choice Questions on

Companies Act with answers

1). Section 12 of Companies Act 1994, deals with

a. Alteration of Memorandum  b. Share capital    c. Number of Directors   d. Share
holders

Ans. a

2). Minimum number of members required to apply for incorporation certificate in

a public ltd company is

a. 3       b. 2      c. 7       d. 50

Ans. C

3). The application for registration of a company should be presented to the

registrar of the state in which the _______________ of the company is to be
situated

A) Manufacturing plant  b) first branch   c)business office     d) any of the above.

Ans. c

4). The application for registration of a company should be presented to the

_______________ of the state appointed under Companies Act 1956

a. Controller    b. registrar    c. Governor    d. registration officer

Ans. b

Page 1 of 56
5). Number of documents to be submitted, by a public ltd company, to the registrar
while applying for incorporation of the company is

a. 3     b. 2        c. 7      d. 50

Ans. C

6). The address of the registered office of the company must be notified to the
registrar within _________ days of registration, if it is not done at the time of
incorporation

a. 15      b. 30      c. 60      d. 45

Ans. b

7). Among the following which documents are not mandatory to be submitted to
the registrar along with incorporation application by a private company.

a). Address of Registered office & undertaking   b). Undertaking and statement of
capital
c). statement of capital & list of directors   d). list of directors and statement of
capital

Ans. A

8). A statement of nominal capital must be given at the time of incorporation by

the company when the share capital is less than

a. 50 Lakh    b. 1 crore      c. 10 Lakh     d. 25 Lakh

Ans. d

Page 2 of 56
9). If the proposed nominal capital is more than 25 lakh at the time of
incorporation then the company needs to submit ________________ along with
the application

a). statement of capital  b). certificate of incorporation c). certificate of capital       

d). certificate of incorporation

Ans. C

10). The certificate of capital will be issued by

a). Registrar of companies Act   b). Controller of companies Act. C). Registrar of
capital issues    d). controller of capital issues

Ans. d

11). The articles of association needs to be signed by

a. all proposed directors    b. registrar  c. subscribers of memorandum                   

d. none of the above

Ans. c

12). The company will be considered as separate person and different from its
members from the date (when the) _____________

a. start of business     b. Apply for registration c. receive incorporation certificate   

d. mentioned in certificate

Ans. d

Page 3 of 56
13). Number of clauses in Memorandum of Association is

a. 5                    b. 6                    c. 7                    d. 8

Ans. b

14). Which of the following is not a clause of memorandum of association

a. situation                    b. capital                    c. subscription                    d. directors

Ans. d

15). If a company is instructed to change its name which resembles the name of an
existing company then the company can change the name by

a. Passing a special resolution  b. obtaining permission from central government

c. Passing an ordinary resolution          d. Both a & b

Ans. C

16). Which of the following clause of Memorandum of Association cannot be

altered

a. Name      b. Object        c. situation      d. liability

Ans. D

17). When the registered office of a company is changed within a city then it has to
be intimated to the registrar within ________ days of such change

a. 60     b. 45      c. 30      d. 7

Ans. C

Page 4 of 56
18). “Men may come and men may go but the company exist”- this explains which
characteristics of the company as per companies Act 1956

a. Separate legal entity  b. Perpetual Succession   c. Capacity to sue  d. None of the
above

Ans. B

19). The liability of the members of the company can be limited by

a. Share    b. Guarantee      c. Both a & b    d. Neither a nor b

Ans. C

20). The shares of a _______________ company can be freely transferable

a. Private ltd   b. Public ltd    c. Partnership    d. all of the above

Ans. B

21). _________ are the company created by special act of the legislature

a. Registered company    b. Public Ltd Company    c. Private ltd company               
d. Statutory company

Ans. d

22). A private company means a company which has a minimum paid up capital of
Rs.————-

a. 1,00,000    b. 5,00,000        c. 50,00,000        d. none of the above

Ans. a

Page 5 of 56
23). A private company means a company which has a minimum paid up capital of
Rs.————-

a. 1,00,000      b. 5,00,000      c. 50,00,000      d. none of the above

Ans. B

24).___________ cannot give invitation to the public to subscribe for any shares in
or debentures of the company

a.Subsidiary company    b. Statutory Company     c. Private company  d. Registered

company

Ans. c

25). A Government Company means any company in which not less than 51% of
the paid-up share capital is held by

a. Central Government    b. State government    c. Both a & b   d. Neither a nor b

Ans. c

26). A copy of the ________________ must accompany each from of application

for shares offered to the public.

a. Memorandum of association  b. Prospectus c. Articles of association                   

d. None of the above

Ans. b

27). If the company can make arrangements for raising the capital privately so that
pubic appeal is unnecessary, the company is required to prepare a
_________________

Page 6 of 56
a. Prospectus             b. statement in lieu of Prospectus            c. certificate of
Prospectus                 d. none of the above

Ans. b

28). The Prospectus must be issued to the public within ______________ days of
its date

a. 30  b. 60    c. 90   d. 100

Ans. c

29)._______________ capital means the sum mentioned in the capital clause of

Memorandum of Association

a. Full capital  b. Maximum capital   c. share capital      d. Nominal Capital

Ans. d

30). Par value of shares means the __________ value of the shares

a. Actual   b. face     c. Market      d. dividend

Ans. b

31). The dividend payable to ___________ share holders is payable on fixed figure
or percent

a. Equity     b. non preference   c. Preference    d. all of the above

Ans. c

32)._____________ share capital has priority both in repayment of dividend as

well as capital.

Page 7 of 56
a. Equity    b. non preference      c. Preference     d. all of the above

Ans. c

33).__________ means the total amount of called up share capital which is actually
paid to the company by the members

a. nominal capital  b. reserve capital  c. called up capital   d. Paid-up capital

Ans. d

34). __________ means the total amount of called up capital on the shares issued
and subscribed by the shareholders on capital account.

a. Called-up capital  b. subscribed capital  c. nominal capital  d. Paid-up capital

Ans. a

35. For example Par value is Rs10 and it is issued at Rs15 then Rs5 is the
___________ amount

a. Profit  b. Market value  c. dividend  d. premium

Ans. d

36. Powers, rights, remuneration, qualification and duties of directors are discussed
clearly in

a). Memorandum of Association b). Articles of Association c). Prospectus d). none
of the above

Ans. b

Page 8 of 56
37). A company is known as the _______company of another company if it has
control over that other company.

a. subsidiary  b. holding   c. controlling   d. statutory

Ans. b

38). A person cannot hold directorship in more than ____ public companies

a. 3  b. 10     c. 20      d. 7

Ans. 20

39).Private company prohibits any invitation or acceptance of deposits from

persons other than its ___________

a. Members      b. directors        c. Partners    d. banks

Ans. a

40). The company needs to obtain prior permision from central government when
it changes the address of its registered office from

a. one city to another city   b. with in the same city c. one state to another                
d. one country to another country

Ans. c

Page 9 of 56
Expected MCQ on Negotiable Instruments Act with Answers:
1. A promissory note, bill of exchange or cheque payable either to order or to bearer is called –
Negotiable Instrument
2. How many total sections are there in the Negotiable Instruments Act? – 147
3. Which section of Negotiable Instruments Act deals with Promissory Note? – Section 4
4. In which section bill of exchange is dealt with in Negotiable Instruments Act? – Section 5
5. What does Section 6 deals within the Negotiable Instruments Act? – Cheque
6. Which section in the Negotiable Instruments Act deals with Negotiable Instruments? – Section
13
7. Drawee is defined in which section of the Negotiable Instruments Act? – Section 7
8. Which section of Negotiable Instruments Act deals with Dishonour by non-payment? – Section
92
9. Which section of Negotiable Instruments Act deals with Cheque crossed generally? – Section
123
10. Which section of Negotiable Instruments Act deals with Presumptions as to Negotiable
Instruments? – Section 118
11. Which section of Negotiable Instruments Act deals with Dishonouring of Cheque? – Section 138
12. What type of negotiable instrument is a currency note? – Money is Not a Negotiable
Instrument
13. An order in writing directing a person to pay a sum of money to a specified person is called
_____. – Bill of Exchange
14. A bill of exchange drawn on a specified banker, and not expressed to be payable otherwise than
on demand is called ____. – Cheque
15. How many types of cheques are there as per the Negotiable Instruments Act? – 4 (Open
cheque, Crossed cheque, Bearer cheque, Order cheque)

1) Which of the following section in the Negotiable Instruments Act deals with the Bill of
Exchange?

A. Section 5
B. Section 6
C. Section 4
D. Section 13
E. Section 8

2) Which of the followings are not the Negotiable Instruments as defined by the Statute…

A. Banker’s Note
B. Promissory Note
C. Bill of Exchange
D. Cheques
E. All of the Instruments are Negotiable Instruments

3) Which of the following is/are true about the Negotiable Instruments Act, the Promissory
Note is …

Page 10 of 56
(I) Definition of Promissory Note is given in section 8 of the Negotiable Instrument Act

(II) Containing an unconditional undertaking

(III) To pay a certain sum of money only to a specific person or the bearer

(IV) The seller is bound to accept the promissory note

(V) A document was written and signed by the payer/maker

A. (I), (II) and (III)

B. (II), (III) and (V)
C. (II), (III), and (IV)
D. (I), (III) and (IV)
E. All of the above

4) Dishonour of Negotiable Instrument by Non Payment is covered under section in

Negotiable Instrument Act 1882…

A. Section 90
B. Section 91
C. Section 92
D. Section 93
E. Section 94

5) The Negotiable Instruments (Amendment) Bill, 2017 inserted a provision allowing a

court trying an offence related to cheque bouncing, to direct the drawer (person who writes
the cheque) to pay interim compensation to the complainant. The interim compensation
will not exceed ___% of the cheque amount?

A. 15%
B. 25%
C. 30%
D. 33%
E. 20%

6) Which of the following is/are true about Bill of Exchange?

(I) A bill of exchange requires in its inception two parties.

(II) A bill of exchange or “draft” is a written order by the drawer to the drawee to pay money to
the payee.

(III) Bills of exchange are used primarily in international trade, and are written orders by one
person to his bank to pay the bearer a specific sum on a specific date.

Page 11 of 56
(IV) Definition of ‘ Bill of Exchange’ is mentioned in Section 6 of the Negotiable Instrument
Act.

A. (I) and (IV)

B. (I), (II) and (IV)
C. (II) and (III)
D. (III) and (IV)
E. All of the Above

(7) If the holder of a bill of exchange allows the drawee more than ___ hours, exclusive of
public holidays, to consider whether he will accept the same, all previous parties not
consenting to such allowance are thereby discharged from liability to such holder.

A. 24
B. 12
C. 36
D. 48
E. 60

(8) Section 6 of the Negotiable Instruments Act defines ___

A. Cheque
B. Bill of Exchange
C. Promissory Notes
D. Dishonour by non-payment
E. Dishonour by non-acceptance

(9) If a Minor draw, indorse, deliver and negotiate Negotiable Instruments, it binds __

A. All the parties except minor

B. All the parties including minor
C. Minor Only
D. Minor and Only Drawer
E. Minor and the Drawee

(10) Which of the following is/are false about Dishonour of Cheque ?

(I) Section 138 defines Dishonour of cheque for insufficiency, etc., of funds in the account.

(II) Such cheque has been presented to the bank within a period of twelve months from the date
on which it is drawn or within the period of its validity, whichever is earlier

(III) Imprisonment for such offence may be extended for period of five year

(IV) Section 138 apply unless – the drawer of such cheque fails to make the payment of the said
amount of money to the payee or, as the case may be, to the holder in due course of the cheque,
within fifteen days of the receipt of the said notice.

Page 12 of 56
 A. (I) and (IV)
B. (II) and (III)
C. (II),(III) and (IV)
D. Only (IV)
E. Only (III)

Check Below Answer with explanation for the above questions.

The negotiable instruments act 1881 multiple choice questions and answers pdf:

1). Answer :Section 5 of the Negotiable Instruments Act, 1881 defines bills of exchange.
According to this definition, a bill of exchange is an instrument in writing containing an
unconditional order.

2). Answer : Banker’s Note. Promissory Notes, Bill of Exchange and Cheques are Negotiable
Instruments.

3). Answer :(II), (III) and (V)

A promissory note refers to a written promise to its holder by an entity or an individual to pay a
certain sum of money by a pre-decided date. Definition is mentioned in the section 4 of
Negotiable Instrument Act. The seller isn’t bound to accept the promissory note.

4). Answer : Section 92 : Dishonour by non-payment.—A promissory note, bill of exchange or

cheque is said to be dishonoured by non-payment when the maker of the note, acceptor of the bill
or drawee of the cheque makes default in payment upon being duly required to pay the same.

5). Answer :The Bill inserts a provision allowing a court trying an offence related to cheque
bouncing, to direct the drawer (person who writes the cheque) to pay interim compensation to the
complainant.  This interim compensation may be paid under certain circumstances, including
where the drawer pleads not guilty of the accusation.  The interim compensation will not exceed
20% of the cheque amount, and will have to be paid by the drawer within 60 days of the trial
court’s order to pay such a compensation.

6). Answer :(II) and (III). A bill of exchange requires in its inception three parties—the drawer,
the drawee, and the payee. Definition of ‘ Bill of Exchange’ is mentioned in the Section 5 of
Negotiable Instrument Act.

7). Answer :If the holder of a bill of exchange allows the drawee more than 48 hours, exclusive
of public holidays, to consider whether he will accept the same, all previous parties not
consenting to such allowance are thereby discharged from liability to such holder.

8). Answer :Section 6 of Negotiable Instruments Act 1881: “Cheque” A “cheque” is a bill of
exchange drawn on a specified banker and not expressed to be payable otherwise than on
demand.

Page 13 of 56
9). Answer :A minor may draw, indorse, deliver and negotiate such instrument so as to
bind all parties except himself.

10). Answer : (II) and (III) Section 138 : Where any cheque drawn by a person on an account
maintained by him with a banker for payment of any amount of money to another person from
out of that account for the discharge, in whole or in part, of any debt or other liability, is returned
by the bank unpaid, either because of the amount of money standing to the credit of that account
is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that
account by an agreement made with that bank, such person shall be deemed to have committed
an offence and shall, without prejudice to any other provision of this Act, be punished with
imprisonment for 8 [a term which may be extended to two years’], or with fine which may
extend to twice the amount of the cheque, or with both:

Provided that nothing contained in this section shall apply unless—

(a) the cheque has been presented to the bank within a period of six months from the date on
which it is drawn or within the period of its validity, whichever is earlier;

(b) the payee or the holder in due course of the cheque, as the case may be, makes a demand for
the payment of the said amount of money by giving notice; in writing, to the drawer of the
cheque, 9 [within thirty days] of the receipt of information by him from the bank regarding the
return of the cheque as unpaid; and

(c) the drawer of such cheque fails to make the payment of the said amount of money to the
payee or, as the case may be, to the holder in due course of the cheque, within fifteen days of the
receipt of the said notice.

1. A negotiable instrument means a _______________ payable either to order or to

bearer.

A. Promissory note
B. Bill of exchange
C. Cheque
D. All of the above

2. Negotiable means transferable by delivery and instrument means a written

document by which a right is created in favour of some person. Thus, negotiable
instrument may mean a written document transferable by delivery.

A. The above statement is correct

B. The above statement is incorrect

3. The essential characteristics of a negotiable instrument include:

Page 14 of 56
 A. Payable to order or bearer
B. Easy transferability
C. Transferee can sue in his own name
D. Title of holder in due course
E. All of the above

4. The presumptions in respect of negotiable instruments include:

I. Every negotiable instrument was made, drawn, accepted, endorsed or

transferred for consideration.
II. Every negotiable instrument bearing a date was made or drawn on such
date.
III. Every bill of exchange was accepted within a reasonable time after its date
and before its maturity.
IV. Every transfer of a negotiable instrument was made before its maturity.
V. The endorsements appearing upon a negotiable instrument were made in
the order in which they appear.
VI. A lost negotiable instrument was duly stamped.

A. All of the above

B. (I) (III) and (V) only
C. (II) (III) and (IV) only
D. None

5. A holder of negotiable instrument is a holder in due course where it is proved that

the holder has obtained the instrument from its lawful owner, or from any person in
lawful custody thereof, by means of an offence, fraud or for unlawful consideration
and in such a case the holder has to prove that he is a holder in due course.

A. The above statement is correct

B. The above statement is incorrect

6. When a bill of exchange has been noted or protested for non-acceptance or for
better security and any person accepts it supra protest or honour of the drawer or
of any one of the endorsers, such person is called:

A. An acceptor for honour

B. Payment for honour
C. Both A&B
D. None

7. The conditions for a valid acceptance for honour include:

A. The bill must have been noted or protested for non-acceptance or for better
security.
B. The acceptance for honour must be made with the consent of the holder.

Page 15 of 56
 C. It must be written on the bill and it must indicate that it is an acceptance for
honour of a party who is already liable on the bill.
D. It must be signed by the acceptor for honour who must not already be liable on the
bill
E. All of the above

8. Where the acceptance does not specify to whose honour it is made it shall be deemed
to be made for the honour of:

A. The drawer
B. The drawee
C. Acceptor
D. None

9. The essential conditions for the payment for honour include:

A. Bill must have been dishonoured for non- payment

B. Bill must have been noted or protested for non-payment.
C. Person paying or his agent must declare before the notary public, the party for
whose honour he accepts
D. All of the above

10. Any person making payment for honour is entitled to all the rights, in respect of the
bill, of the holder at the time of such payment. He may recover from the party for
whose honour he pays all sums so paid with interest thereon and all expenses
properly incurred in making such payment.

A. The above statement is correct

B. The above statement is incorrect

11. A person is called holder of a negotiable instrument if:

A. He must be entitled to the possession of the instrument in his own name

B. He must be entitled to receive / recover the amount due on the instrument from
the parties liable under the instrument
C. Both A&B
D. None

12. When the note, bill or cheque is lost and not found or is destroyed, the person in
possession of it or the bearer at the time of loss or destruction shall deemed to
continue to be its holder.

A. True
B. False

13. A person becomes holder in due course when he fulfils:

Page 16 of 56
 A. The essentials of a holder
B. Holder for valuable consideration
C. A person should receive the instrument before its maturity
D. All of the above

14. Types of instrument include:

A. Order
B. Bearer
C. Demand
D. Time
E. All of the above

15. A promissory note, bill of exchange or cheque is payable to order if:

A. Which is expressed to be so payable

B. Which is expressed to be payable to a particular person
C. Does not contain words which prohibit transfer
D. All of the above

16. A promissory note of bill of exchange or cheque is payable to bearer if:

A. Expressed to be so payable
B. last endorsement must be an endorsement in blank
C. Both A&B
D. None

17. Instruments payable on demand means the instrument in which no time for
payment is mentioned. A cheque is always payable on demand. A promissory note
or bill of exchange is payable on demand where:

A. It is expressed to be so
B. It is expressed to be payable “at sight” or “presentment”; or “on demand”
C. No time for payment is specified
D. The bill or note accepted or endorsed after it is overdue, as regards to person
accepting or indorsing it.
E. All of the above

18. If a negotiable instrument is made payable a stated number of months after date or
after sight, or after a certain event, it matures _________days after the
corresponding date of the month after the stated number of months.

A. Three
B. Four
C. Seven
D. None

Page 17 of 56
19. If an instrument is payable by instalments, three days of grace are to be allowed on
each instalment.

A. True
B. False

20. Inland instrument – A promissory note, bill of exchange or cheque which is

A. Made or drawn in Pakistan and also made payable in Pakistan

B. Made or drawn in Pakistan upon any person resident in Pakistan, although it may
be payable in a foreign country
C. Both A&B
D. None

21. An incomplete or blank negotiable instrument is one which is _____________ but

where the name or amount is missing.

A. properly stamped
B. signed
C. Both A&B
D. None

22. Which of the following is correct in connection with inchoate instrument?

A. The liability of a person who signs and delivers an inchoate instrument arises only
when the blanks are filled in and the instrument is completed.
B. To make the signer liable on an inchoate instrument, it is necessary that the
instrument should be delivered to the transferee.
C. The instrument must be stamped and the stamp affixed must be sufficient to cover
the amount filled in the instrument.
D. All of the above

23. An instrument which may be interpreted as either promissory note or bill of

exchange is called an ambiguous instrument. Its holder must elect once for all
whether he wants to treat it as a promissory note or bill of exchange.

A. The above statement is correct

B. The above statement is incorrect

24. Example of an Ambiguous instrument is:

A. A bill of exchange where the drawer and the drawee are the same person
B. Where the drawee is a fictitious person
C. Bills drawn by an agent on his principal
D. All of the above

Page 18 of 56
25. Essentials of valid endorsement include:

A. It must be on instrument itself, if no space is left on the back of the endorsement

B. It must be signed by the endorser for the purpose of negotiation
C. No particular form of words is necessary for an endorsement
D. All of the above

26. Kinds of endorsements are:

A. Blank or general endorsement

B. Endorsement in full or special endorsement
C. Both A&B
D. None

27. Blank or general endorsement –

A. If the endorser signs his name only and does not specify the name of the
endorsee, the endorsement is said to be blank.
B. If the endorser, in addition to his signature, also adds a direction to pay the
amount mentioned in the instrument to or to the order of a specified person the
endorsement is said to be full.
C. Both A&B
D. None

28. Endorsement in full or special endorsement –

A. If the endorser signs his name only and does not specify the name of the endorsee,
the endorsement is said to be blank.
B. If the endorser, in addition to his signature, also adds a direction to pay the
amount mentioned in the instrument to or to the order of a specified person
the endorsement is said to be full.
C. Both A&B
D. None

29. Negotiation – “When a promissory note, bill of exchange or cheque is transferred

free from defects to any person, so as to constitute that person the holder of it, the
instrument is said to be negotiated.

A. The above definition is correct

B. The above definition is incorrect

30. Modes of negotiation include:

A. Negotiation by mere delivery

B. Negotiation by endorsement and delivery
C. Both A&B

Page 19 of 56
 D. None

31. Material alteration – An alteration is material which:

A. Alters the character or identity of the instrument or which shakes the very
foundation of the instrument
B. Changes the rights and liabilities of the parties
C. Alters the operation of the instrument.
D. All of the above

32. Examples of material alteration include:

A. Date, Sum payable, Time of payment,

B. Place of payment, Addition of place of payment
C. Rate of interest
D. All of the above

33. In which of the following cases the alteration of a negotiable instrument is not
material:

A. A material alteration made before the instrument is issued.

B. An alteration made for the purpose of correcting a mistake.
C. An alteration made to carry out the common intention of the original parties.
D. An alteration made with the consent of the parties.
E. All of the above

34. Which of the following alterations are permitted by the Negotiable Instrument Act
1881, and do not invalidate the instruments?

A. Filling blanks of inchoate instruments.

B. Conversion of a blank endorsement into an endorsement in full.
C. Crossing the cheques
D. All of the above

35. Payment in due course means –

A. The payment must be in accordance with the apparent tenure of the instrument.
B. The payment must be made in good faith and without negligence.
C. The payment must be made to a person in possession of the instrument
D. The payment must be made in money only
E. All of the above

36. The essential characteristics of a promissory note include:

A. A promissory note has to be in writing.

B. There must be a promise or a clear undertaking to pay.

Page 20 of 56
 C. The promise must not depend upon the happening of some uncertain event. i.e. a
contingency or the fulfilment of a condition.
D. A promise to pay a certain amount of foreign or to deliver a certain quantity of
goods is not a promissory note.
E. All of the above

37. Parties to a bill of exchange are:

A. Drawer, Drawee
B. Payee
C. Both A&B
D. None

38. Essential elements of a bill of exchange include:

A. A bill of exchange is required to be in writing.

B. A bill of exchange contains an order to pay instead of a promise to pay
C. If the instrument contains an order to pay something other than money or
something in addition to money, it will not be valid bill of exchange.
D. All of the above

39. Cheque – Cheque is a bill of exchange drawn on a specified banker and not
expressed to be payable otherwise than on demand.

A. The above definition is correct

B. The above definition is incorrect

40. Essential elements of a cheque include:

A. The order must be to pay money only

B. It must always be drawn upon a specified banker
C. It must always be payable on demand
D. All of the above

41. Method of crossing – A cheque is said to be crossed when it bears across its face two
parallel transverse lines which are usually drawn on the left-hand top corner of the
cheque.

A. True
B. False

42. Types of crossing include:

A. General crossing, Special crossing

B. Restrictive crossing
C. Not negotiable crossing

Page 21 of 56
 D. All of the above

43. Circumstances in which a banker must refuse to honour a cheque include:

I. Where the customer has stopped the payment of the cheque.

II. When a garnishee order or any other legal order of the court prohibits
payment of cheque.
III. When the banker receives notice of customers death.
IV. When the banker has reason to believe the holder title is defective.
V. When the banker receives a notice of loss of cheque from his customer.
VI. When the banker receives notice in respect of closure of account.

A. All of the above

B. (I) (III) and (V) only
C. (II) (V) and (VI) only
D. None

44. Discharge of the negotiable instrument include:

A. Payment in due course

B. Negotiation back
C. Discharge as a simple contract
D. All of the above

45. Discharge of party or parties include:

A. When the holder of a negotiable instrument or his agent cancels the name of a
party on the instrument
B. Where the holder of a negotiable instrument releases any party to the instrument
by any method other than cancellation
C. Where a cheque is not presented by the holder for payment within a reasonable
time of its issue
D. All of the above

46. Discharge of party or parties by Operation of law include:

A. By an order of insolvency court, discharging the insolvent.

B. By merger. When a judgement is obtained against the acceptor, maker or
endorser, the debt under the bill is merged into the judgement debt.
C. By lapse of time i.e. when the remedy becomes time barred.
D. All of the above

Page 22 of 56
 2. Partnership Act 1932 MCQ Multiple
Choice Question Answer Mobile View
1. Can a company become a partner in a firm?(a) Yes, as the company is regarded as person
in legal sense of the term.(b) No, as the partnership is an association of natural persons
only.
Ans: (a) Yes, as the company is regarded as person in legal sense of the term.
2. A partnership firm comes into existence by agreement between all the partners, and such
agreement should be(a)Express agreement only.(b)Implied agreement only.(c)Either
express or implied.(d)Registered.
Ans: (c) Either express or implied.
3. A partnership deed usually contain the particulars relating to(a)Name of firm and
partners.(b)Nature of business and duration of firm.(c)Capital contribution, profit/loss
sharing ration and other agreed terms.(d)All of these.
Ans: (d) All of these.
4. A partner is the agent of the firm for the business of the firm(a)True, as the mutual
agency relationship is the foundation of the law of partnership.(b)False, as in that case a
firm is reduced to the status of a mere agency.
Ans: (a) True, as the mutual agency relationship is the foundation of the law of
partnership.
5. Which of the following statement is incorrect?(a)A person who receives the profits is
always a partner.(b)A person who receives the profits is not necessarily a partner.(c)The
true test of partnership is the mutual agency i.e., agency relationship among partners.
(d)The partnership comes into existence only an agreement.
Ans: (a) A person who receives the profits is always a partner.
6. A, a contractor, appointed B to manage his entire work. It was agreed that B would
receive 50% of the profits as his remuneration and would bear all the losses, if any. Here,
B is(a)A’s partner(b)A’s agent(c)Sole proprietor(d)None of these

Partnership MCQs
1. To start a partnership business, what should be the minimum number of partners?

A) 2

B) 10

C) 4

D) 20

Answer: A

2. What type of agreement is used to form a partnership business?

Page 23 of 56
A) Written agreement

B) Oral agreement

C) Written or oral agreement

D) None of them

Answer: C

3. In partnership, partners liabilities are

A) Unlimited

B) Limited to the capital of the business

C) Limited

D) Both A and C

Answer: A

4. Is a partnership firm examined as an individual a legal entity?

A) No

B) Yes

C) Partially Yes

Answer: A

5. What is interest on drawings?

A) Credited to partner’s current a/c

B) Not shown in current account

C) Debited to partner’s current a/c

D) None of the above

Answer: C

6. What is the partnership written agreement known as?:

A) Partnership contract

B) Agreement

C) Partnership deed

D) Partnership Act

Answer: C

7. No partnership agreement, what will be the percentage of profit sharing ratio between them?

Page 24 of 56
A) Unequal

B) Equal

C) It will depend on the experience of a partner

D) It will depend on a partner’s capital

Answer: B

8. Which is not a feature of a partnership business?

A) Ease of formation

B) Limited liability

C) Limited life

D) Mutual agency

Answer: B

9. Which kind of partnership one partner has unlimited liability and other partner have limited
liability?

A) Partnership-at-will

B) Limited partnership

C) General partnership

D) Particular partnership

Answer: B

10. Which types of partnership have no agreement in terms of the duration of partnership?

A) Partnership-at-will

B) Limited partnership

C) General partnership

D) Particular partnership

Answer: A

1. Partnership – is the relation between persons who have agreed to share the
profits of a business carried on by all or any of them acting for all.
A. True
B. False

Page 25 of 56
2. Firm and partners – Persons who have entered into partnership with one
another are called individually “partners” and collectively “a firm” and the
name under which their business is carried on is called the “firm name”.
A. The above definition is correct
B. The above definition is incorrect
3. Act of firm – An act of firm means any act or omission by all the partners,
or by any partner or agent of the firm which gives rise to a right
enforceable by or against the firm
A. The above definition is incorrect
B. The above definition is correct
4. Essential elements of a partnership include:
I. Association of two or more persons
II. Agreement
III. Sharing of profit
IV. Business
V. Mutual agency
A. All of the above
B. (I) and (III) only
C. (I) (IV) and (V) only
D. None
5. All of the following are correct EXCEPT:
A. The partnership is an association between two or more persons and all
persons must be competent to contract.
B. There can be no partnership consisting of a single individual.
C. The partnership Act 1932 limits the number of partners to 50.
D. If the number gets reduced to one, for any reason, it ceases to be a
partnership.
6. The written agreement is known as:

Page 26 of 56
 A. Memorandum of Association
B. Articles of Association
C. Partnership deed
D. None
7. Partnership arises from:
A. Joint Family Business
B. Operation of law inheritance
C. Succession
D. None
8. Identify from the following what a partnership deed usually sets out:
A. Firm name, Place or principal place of business of the firm, Number of
partners
B. The date when each partner joined the firm, Purpose of the partnership
C. Rights and duties of the partners, Duration of partnership
D. All of the above
9. If the partnership agreement does not specify what the rights or duties of
the partners should be in particular circumstances, the rules set out in the
Partnership Act 1932 are assumed to apply.
A. True
B. False
10. All of the following are correct EXCEPT:
A. To constitute a partnership, the parties must have agreed to carry on a
business.
B. An agreement to carry on business at a future time does not result in
partnership unless that time arrives and the business is commenced.
C. If the purpose is to carry on some charitable work it will not be a
partnership.
D. None

Page 27 of 56
11. A partner may not share in the losses of the business, yet his liability
towards outsiders shall be unlimited.
A. False
B. True
12. Identify from the following the circumstances where a person receiving
profits is not necessarily a partner:
A. Lender of money to persons engaged or about to engage in any business
B. Servant or agent as remuneration
C. Widow or child of a deceased partner as annuity
D. A minor who is admitted to the benefits of an existing partnership
E. All of the above
13. All of the following are correct EXCEPT:
A. A partnership does not have a legal personality. It is not a legal person.
B. A third party entering into business transaction with a partnership do
have a contractual agreement with the “partnership”.
C. Partners in a partnership do not have limited liability, and are personally
liable for any liabilities of the partnership business that the partnership
cannot pay.
D. None
14. What things to consider in determining whether a group of persons is or is
not a firm
A. Association of two or more persons
B. Agreement and Carrying on business
C. Sharing of profits
D. Mutual agency
E. All of the above
15. Which of the following is Type of partnership?
A. Partnership-at-will

Page 28 of 56
 B. Particular partnership
C. Both A&B
D. None
16. Which of the following is true for “Partnership-at-will”?
A. No provision is made between the partners for the duration of their
partnership, or for the determination of their partnership.
B. Any partner is free to dissolve the partnership by giving a notice in writing
to all other partners of his intention to dissolve the firm.
C. If freedom to dissolve the firm at will is curtailed by agreement, only then
will it not constitute a partnership at will.
D. All of the above
17. Which of the following is true for “Particular partnership”?
A. A partnership created for any particular adventure or undertaking or for a
specific time period
B. If the partners decide to continue partnership even after the expiry of the
specific period or completion of specific venture then it becomes
partnership at will.
C. Both A&B
D. None
18. Types of partners are:
I. Actual or ostensible partner
II. Sleeping or dormant partner
III. Nominal partner
IV. Partner in profits only
V. Sub-partner
VI. Silent partner
VII. Partner by estoppel or holding out
A. All of the above

Page 29 of 56
 B. (I) (IV) and (VII) only
C. (III) (V) and (VII) only
D. None
19. Sleeping or dormant partner –
A. A sleeping partner is not known as such as a partner to third parties
dealing with the firm.
B. He may or may not take active part in the conduct of the business of the
firm.
C. He is equally liable along with other partners for all the debts of the firm,
even though his existence is kept a secret from the outsiders dealing with
the firm.
D. All of the above
20. Nominal partner – A partner who does not contribute any capital or share in
profits, but lends his name to the firm is called a nominal partner. He along
with other partners is liable to the outsiders for all the debts of the firm.
A. True
B. False
21. Which of the following is correct for a Partnership firm?
A. It is created by an agreement alone and registration is optional.
B. A partner cannot transfer his interest without getting consent from other
partners.
C. Minimum two competent to contract persons are required and a maximum
of 20 persons can carry partnership other than banking business.
D. All of the above
22. General (mandatory) duties of partner include:

A. To be just and faithful

B. Carry on business to the greatest common advantage

C. Render true accounts

Page 30 of 56
 D. Indemnify for loss caused by fraud

E. All of the above

23. What the “Duty to be liable jointly and severally” implies?

A. The third party may take legal action for non-payment of a debt or losses

incurred as a result of a breach of contract against all the partners jointly.

B. The third party may take legal action for non-payment of a debt or losses

incurred as a result of a breach of contract against any individual partner.

C. Option A or B

D. None

24. Every partner is bound to act within the scope of his actual or apparent authority.

Where he exceeds the authority conferred on him and the firm suffers a loss

_____________ shall have to compensate the firm for any such loss.

A. The firm

B. All partners jointly and severally

C. The defaulting partner

D. None

25. In case of emergency a partner can even exceed his authority in order to save the

firm from any loss

A. True

B. False

26. Qualified duties of partner include:

I. Duty to attend diligently to his duties

II. Duty to contribute to the losses

III. Duty to indemnify for willful neglect

IV. Duty to use firm’s property exclusively for the firm

V. Duty to account for personal profits derived

VI. Duty not to compete with the business of the firm

VII. Duty not to assign his interest

Page 31 of 56
 A. (I) (III) and (V) only

B. (III) (IV) and (VII) only

C. All of the above

D. None

27. A partner is not entitled to receive remuneration for taking part in the conduct of

the business.

A. True

B. False

28. Where a partner competes in business with the partnership, without the consent

of the other partners:

A. He can retain all the profits derived

B. He is liable to account to the partnership for all the profits

C. He disqualifies as a partner

D. None

29. Rights of partner include:

I. Right to take part in the conduct of the business
II. Right to be consulted
III. Right to have access to the books
IV. Right to share the profits
V. Right to interest on capital
VI. Right to indemnity
A. All of the above
B. (I) (III) and (VI) only
C. (I) (IV) and (V) only
D. None
30. In the absence of a contract to the contrary every partner has a right to
share profits ___________ earned by the firm.
A. In proportion to their capital

Page 32 of 56
 B. Equally
C. Both A&B
D. None
31. No partner is allowed to receive any interest on capital as a general rule
because a partner is not a creditor of the firm. Interest on capital is allowed
only when agreed among the partners.
A. The above statement is incorrect
B. The above statement is correct
32. Where a partner makes for the purpose of the business, any payment or
advance beyond the amount of capital he has agreed to subscribe, he is
entitled to interest on it at the rate of __________ or as agreed upon.
A. 6% semi-annually
B. 6% per annum
C. 6% quarterly
D. None
33. Every partner has a right to claim indemnity from the firm in respect of
payments made or liabilities incurred by him:
A. In the ordinary and proper conduct of the business.
B. In doing such act, in an emergency, for the purpose of protecting the firm
from loss
C. Both A&B
D. None
34. A partner has a right to retire:
A. With the consent of all the partners
B. In accordance with an express agreement between the parties
C. Where the partnership is at will, by giving notice in writing to all the other
partners of his intention to retire.
D. All of the above

Page 33 of 56
35. The legal representative of the deceased partner or the outgoing partner, is
entitled at his option to:
A. Such share of the profits as in proportionate to his share in the property of
the firm
B. Interest at the rate of 6% on the amount of his share in the property of the
firm.
C. Both A&B
D. None
36. Mutual Rights and Liabilities of partners include:
I. Duty to work without remuneration
II. Rights to share profits and losses equally
III. Right to interest on capital
IV. Rights to interest on subsequent advance
V. Right to indemnity
VI. Duty to indemnify for willful neglect
A. All of the above
B. (II) (III) and (V) only
C. (I) (II) and (VI) only
D. None
37. The property of the firm includes:
A. All property originally brought into the common stock of the firm
B. All rights or interest in the property originally so brought
C. All property acquired, by purchase or otherwise, by or for the firm and all
rights and interest in any property so acquired
D. Goodwill of the business of the firm
E. All of the above
38. Any property purchased with partnership money without other partners
consent will be deemed to be partnership property.

Page 34 of 56
 A. True
B. False
39. A partner is the agent of the firm for the purpose of the business of the
firm. He has the capacity to bind the firm by his act. The authority of a
partner may be:
A. Actual
B. Implied
C. Both A or B
D. None
40. Implied authority – The act of a partner done by him:
A. As an agent of the firm
B. In the course of business of the firm
C. In the name of the firm, or in any other manner expressing an intention to
bind the firm.
D. All of the above
41. Actual authority – The authority of each partner to take decisions for the
business, and enter into transactions with other parties, as specified in the
partnership agreement.
A. False
B. True
42. A partner within the scope of his implied authority may bind the firm by:
A. Buying and selling good, on behalf of the firm and giving valid receipts for
them
B. Receiving payments of the debts due to the firm and giving valid receipts
or discharge for them
C. Contracting debts and paying debts on behalf of the firm
D. Settling accounts with persons dealing with the firm
E. All of the above

Page 35 of 56
43. Which of the following acts are not included in the implied authority of a
partner:
I. Submit a dispute relating to the business of the firm to arbitration
II. Compromise or relinquish any claim or portion of a claim by the firm
III. Withdraw a suit or proceeding filed on behalf of the firm
IV. Admit any liability in a suit or proceeding against the firm
V. Acquire immovable property on behalf of the firm
VI. Transfer immovable property belonging to the firm
A. All of the above
B. (I) (III) and (V) only
C. (I) (V) and (IV) only
D. None
44. A partner’s capacity to bind the firm by his act may be restricted by:
A. Restrictions on the implied authority of a partner
B. Statutory restrictions
C. Restrictions by partnership deed
D. All of the above
45. Ratification – When a partner exceeds his authority, that is act outside his
actual authority, the other partners may approve such unauthorized act
with retrospective effect.
A. The above statement is correct
B. The above statement is incorrect
46. In case of fraud, _____________  is liable to the third party for loss caused
to the third party by fraud committed by a partner but as between partners
same must be borne by the ___________ committing the fraud and cannot
be shared among all the partners.
A. The partner, firm
B. The firm, partner

Page 36 of 56
 C. All partners, firm
D. None
47. Any admission or representation made by a partner is evidence against the
firm if:
A. Such admission or representation must relate to the affairs of the firm
B. Such admission or representation must be made in the ordinary course of
business
C. Both A&B
D. None
48. Any notice to a partner operates as a notice to the firm if:
A. Such notice must relate to the affairs of the firm
B. Such notice must be given to a working partner and not to a sleeping
partner
C. There must not be any fraud committed by the partner receiving the notice
D. All of the above
49. The principle of “Holding out” applies where a person:
A. Represents himself
B. Allows partners to represents him
C. Both A&B
D. None
50. In order to render a person liable as a partner on the ground of estoppel or
holding out:
A. He must have by words spoken or written or by his conduct represented
himself to be a partner
B. He must have knowingly permitted himself to be represented as a partner
to the other person
C. The third party must have acted on the faith of such representation and
gives credit to the firm

Page 37 of 56
 D. All of the above
51. Where a retiring partner does not give a public notice of his retirement and
the continuing partners still use his name as a partner, he will be
personally liable on the ground of holding out to third parties.
A. The above is correct
B. The above is incorrect
52. A partner may transfer his interest in the firm by:
A. Sale
B. Mortgage
C. Charge fully or partially
D. All of the above
53. Rights of transferee of a partner’s interest includes:
A. He is entitled to receive the share of the profits of the transferring partner
B. The share of the assets of the firm to which the transferring partner is
entitled
C. An account from the date of the dissolution for the purpose of ascertaining
the share
D. All of the above
54. Disabilities of transferee of a partner’s interest includes:
I. No status of a partner.
II. Disability to interfere in the conduct of the business during the
continuance of the firm
III. Disability to require accounts.
IV. Disability to inspect the books of the firm.
V. Disability to challenge the accounts of profits agreed to by the
partners.
VI. Disability to sue for dissolution of the firm.
A. All of the above

Page 38 of 56
 B. (I) (II) and (VI) only
C. (II) (V) and (VI) only
D. None
55. Since a minor is not capable of entering into a contract, a contract by or
with a minor is void abinitio i.e. from the beginning. Since partnership is
formed by a contract, a minor cannot enter into a partnership agreement
but with the consent of all the partners for the time being a minor may be
admitted to the benefits of partnership.
A. The above statement is correct
B. The above statement is incorrect
56. Rights of a minor before attaining majority include:
A. Right to share property and profits of the firm as agreed by the partners
B. Right to have access to accounts of the firm ONLY and not to the secret
books
C. Right not to be adjudged insolvent
D. All of the above
57. Liabilities and Disabilities of a minor before attaining majority include:
A. Personally not liable i.e. limited liability
B. His share is liable for the acts of the firm
C. No suit against partners for profit and property except after disconnecting
his relation with the firm
D. All of the above
58. On attaining majority, the minor partner has to decide within six months
whether he shall continue in the firm or leave it.
A. True
B. False
59. Which of the following is correct where a minor on attaining majority elects
not to become a partner?

Page 39 of 56
 A. The status of a minor up to the date of public notice
B. His share not liable for any act of the firm after the date of public notice
C. Right to sue partners for share of the property and profits
D. All of the above

MCQ on Law of Contract-1872

Questions

1. Which of the following is not an essential of a valid contract?

 Agreement

 Adequate consideration

 Lawful Object

 Not barred by law

2. A contract will still be a valid contract if it is

 Opposed to public policy

 In restraint of marriage

 In restraint of Trade

 Without adequate consideration

3. The codified law for the law of Contract in India is

 Indian Contract Act,1872

 Indian Contract Act,1973

 Indian Contract Act,1992

 Indian Contract Act, 1901

Page 40 of 56
4. A proposal upon acceptance becomes a

 Contract

 A promise

 An agreement

 Both (b) and (c

5. The acceptance of a proposal should be

 Expressly given

 Impliedly given

 Given by consent

 All of the above

6. The consent given will be considered to be valid consent if there is

 Coercion

 Undue influence

 Free consent

 Misrepresentation

7. The rights concerning a contract are decided by

 Parties to the contract.

 Indian Contract Act

 Both (a) and (b)

 None of the above

8. The remedy of compensation given in the case of breach of contract is

given under which section of The Indian Contract Act?

Page 41 of 56
 Section 73

 Section 115

 Section 79

 Section 69

9. Which of the following maxims is not related to the law of Contract?

 Consensus ad idem-
Meeting of the minds (also referred to as mutual agreement, mutual assent
or consensus ad idem) is a phrase in contract law used to describe the intentions of the
parties forming the contract. In particular, it refers to the situation where there is a
common understanding in the formation of the contract.

 Assentio mentum- Assentio mentium is a latin term that implies meeting of minds or

mutual assent expressed or implied by both the parties to the contract

 Ex nudo pacto non oritur action- EX NUDO PACTO NON ORITUR ACTIO Ex
nudo pacto non oritur action is a Latin phrase. It means 'no right of action arises
from a contract entered into without consideration. ... Consideration is one of the
most essential element for the formation of a contract. It means something in return.

 Actus Non Facit Reum Nisi Mens Sit Rea("the act is not culpable unless
the mind is guilty".)
 Answer- Actus Non Facit Reum Nisi Mens Sit Rea

10. A void contract is a contract which

 Is not enforceable by law

 Does not have reasonable terms

 Declared void by the Indian contract act

 Both (a) and (c)

Page 42 of 56
Answers:

1. (b)

2. (d)

3. (a)

4. (b)

5. (d)

6. (c)

7. (a)

8. (a)

9. (d)

10. (d)

Questions

1. A decides to sell the house to B. The value of the house is Rs 1 Crore.

Which of the following is the valid consideration for this contract?

 1 Crore

 50 Lakh

 10000

 All of the above

2. Amit helped Ankit to reach the office on time where he had an

important meeting to attend. Two days later, Ankit promised to pay Rs.
10000 to Amit in gratitude. This contract is

 Void because there is no consideration

Page 43 of 56
 Valid as Amit’s action of helping amount to past consideration

 Valid

 Voidable

3. Which of the following sections lays down the provision of lawful

consideration and the lawful object under the Indian Contract Act
1872?

 10

 27

 2(d)

 23

4. Which section of the Indian Contract Act 1872 lays down the essentials
of a valid contract?

 2(d)

 10

 12

 3

5. The consideration paid by any person other than promisee is valid in

 Indian law

 English law

 Both (a) and (b)

 None of these

6. Astha promised to give Aarush Rs. 10000. In return, Aarush promised

to kidnap Chetan’s daughter. This contract is

Page 44 of 56
 Valid

 Void

 Voidable

 None of these

7. The legal maxim Quid Pro Quo refers to

 Something in return for something

 Money in return

 Something is better than nothing

 Same status

8. Which of the following is not an exception to the consideration as an

essential condition?

 Natural love and affection

 Promise to pay a time-barred debt

 Both (a) and (b)

 None of these

9. As per section 2(d) of the Indian Contract Act, which of the following is
not a consideration?

 Promise to do or abstain from doing something

 Has done or abstained from doing something

 Does or abstains from doing something

 None of these

10. Which of the following is not a valid consideration under the Indian
Contract Act 1872?

Page 45 of 56
  Unlawful Consideration

 Past Consideration

 Future Consideration

 Present Consideration

Answers

1. (d)

2. (b)

3. (d)

4. (b)

5. (a)

6. (b)

7. (a)

8. (d)

9. (d)

10. (a)

Give correct answer :

A) Void agreements are always illegal.

B) Illegal agreements are always voidable .
C) Illegal agreements are always Void.
D) Voidable contract are always illegal.
Answer : C

2) A contact is :

Page 46 of 56
A) A set of promise forming consideration for each other.
B) An agreement acceptable to both the parties about common thing.
C ) An understanding between the parties about a common thing.
D) An agreement enforceable by law.

Answer : D

3) A  person has the capacity to contract :

A) He is a major and sound mind.

B)  If he can fully understand the nature of his contract .
C) If he is not disqualified from contracting by any law to which he is subject
.
D) If he fulfill all the above conditions.

Answer : D

4) A agrees to sell to B 1000 mounds of rice at a price to be fixed by

C:

A) Valid
B) Void for uncertainty

C) voidable at the option of B.

D)  Voidable at the option of C.

Answer : A

5) If an infant obtains property or goods by  misrepresenting his 

age, he may be compelled to return the same....
This is known as :

A) Redemption
B) Subrogation
C) Restitution
D) Contribution

Answer : C

Page 47 of 56
6).Which one of the following element is not necessary for a contract
?

A) Competent parties
B) Reasonable terms and conditions.
C) Free consent
D) Lawful concentration .
Answer : B

7) An agreement becomes a contract if :

A) It is by free consent of the parties.

B) Parties are competent.
C) It is enforceable by law.
D)  None of the above .
Answer : C

8) In a standardized contract :

A) The individual has no choice but to accept and sign on the dotted line.
B) The individual must be protected in contract.
C) The agreement is without consideration.
D) None of the above.

Answer : A

9) The correct sequence in the formation of a contract is :

A) Offer, acceptance, agreement, consideration.

B) Agreement, consideration, offer,acceptance.
C) Offer , Consideration, acceptance, agreement.
D) Offer,acceptance, consideration, agreement.

Answer :D 

10)Consider the following statements :

Page 48 of 56
A) Every promise is an agreement.
B) Every agreement is a contract.
C) A contractor which cease to be enforceable by law becomes void .
D) A minor who is supplied necessaries is personally liable to pay for them.

11)Which of the statements given above are correct?

A) A and C only.
B)  A and B only.
C)  A,   B and C .
D)  B,  C and D .

Answer :A

 12) Consider the following statements :

 

1. If an infant  obtains  property or goods by misrepresenting his age, he

can be compelled to restore it even though the infant has sold the Goods or
converted them.

2. There is no estoppel against  minor.

Which of the statement given above are correct?

A)  1 only .
B) 2 only .
C) Both 1 and 2.
D) Neither 1 nor 2.
Answer : B

13) A petient in a lunatic Asylum who is at intervals of sound mind :

A) May not contract.

B) May contract.
C) May contact during those intervals when he is of sound mind.
D) May contract only after he becomes completely of sound mind .

Page 49 of 56
Answer : C

14) A sells,  by auction to B a horse which A knows to be unsound. A

says nothing to B about the horse  unsoundness. A does :

A)  Fraud
B)  Misrepresentation
C) No fraud
D) Undue Influence

Answer : C

15) Where both parties are under mistake as to matter of fact, the
agreement will be :

A) Enforceable
B) Voidable
C) Not void
D) Void

Answer : C

What will be the effect of mistakes as to law in force in India on the 

agreement?

A) Not voidable
B)  Voidable
C) Void 
D) Not void

Answer. : A

16) An agreement made without free consent is:

A) Always void
B) Voidable
C) Unlawful
D) Either void or voidable.

Page 50 of 56
Answer. : B

17) Which of the following statement is not correct ?

 A)  Minor's agreement is void.

 B)  Wagering agreement is void
C)  Agreement caused by mutual mistake is void.
D) Contract without consideration is void.

Answer. : C

18) A Guru. ( spiritual advisor) induced the Chela ( his devotee) to

gift him a whole of his property to secure benefit of his soul in the
next World.
The gift shall be...

A) Void
B) Voidable
C) Valid
D) Immoral

Answer. :B

19) A contract caused by one of the parties to it being under a

mistake as to matter of fact is :

A)  Void

B)  Valid
C) Voidable at the option of either party.
D) Voidable at the option of the party who under mistake.

Answer. : B

20)Which one of the following sections of the Indian Contract

Act,1872 relates to the rule no consent, no agreement  ?

Page 51 of 56
A) Section 13
B) Section 21
C) Section 20
D) Section 22

Answer : A

21) Which is not the correct statement ? 

A) If consent is the result of coercion, the agreement is void.

B) If a party is minor, the agreement is void .
C) If the object of an agreement is unlawful, the  agreement is void. 
 D) If the consideration of an agreement is unlawful, the agreement is void .

Answer. : A

22) Which section of The Indian Contract Act, 1872 provides that
where both parties to an agreement are under a mistake of fact, the
agreement is void.

A) Section 13
B) Section 20
C) Section 21
D) Section 22.

Answer. : B

23) Which may render an agreement void ?

 
A) Coercion causing consent.
B) Undue influence causing consent.
C) Fraud causing consent.
D) Agreement in restraint of trade.

Answer. : D

24) Where both the parties to an agreement under a mistake of fact

essential to the agreement, the agreement is :

Page 52 of 56
A) Voidable at the option of sufferer
B) Illegal
C) Void
D) Not enforceable in a court.

Answer. : C

25)Unlawful detaining or threatening to detain any property with the

intention of causing any person to enter into an agreement would
amount to which one of the following ?  

A) Duress
B) Undue. influence.
C) Coercion
D) Unlawful detaintion.

Answer. : C

26) A promise made without intention to perform is:

A)  Misrepresentation.

B)  Fraud
C) Undue influence
D) Coercion.

Answer. : B

27) Under which one of the following sections of The Indian Contract
Act, for the purpose of contract, the term sound mind has been
defined :

A) Section 12
B) Section 10
C) Section 11 
D) Section 13

Answer. :  A

Page 53 of 56
28)  Which statement is not correct ?

A) Coercion renders a contract voidable

B) Undue influence renders a contract voidable.
C) fraud renders a contract voidable.
D) Mistakes of Indian law renders a contract voidable.

Answer: D

29) A and B makes a contract grounded on the erroneous belief that

a particular Debt is barred by the Indian law of limitation.

The contract is :

A) Void
B) Voidable
C) Not voidable .
D) All of the above
Answer : C

 30)A being entitled to an estate for the life of B ,  agrees to sell it to

C,  B was dead at the time of agreement, but both parties were
ignorant of that fact. The agreement is : 

A) Valid

B) Void

C) Voidable

D) Illegal

Answer : C

31) A intending to deceive B falsely represents that 500 mounds of

Indigo are made annual at A's factory and thereby induces B to buy
the factory.  The contract is :

Page 54 of 56
A) Voidable at the option of B.

B) Voidable at the option of A.

C) Valid.

D) Void .

Answer : A

32) B, having discovered a vein of ore on the estate of A, adopts the 

means to conceal, and does conceal the existence of the ore from A.
Through A's ignorance B is entitled to buy the estate at an under
value . The contract :

A) Is voidable at the option of A.

B) Is voidable at the option of B.

C) Is valid

D) Is Void

Answer : A.

33) A agrees to buy from B a certain house. It turns out that the
house was dead at the time of bargain,  through neither party was
aware of the fact. The agreement :

A) Void
B) Valid
C) Voidable
D) Illegal

Answer : A

34) B says to A if you do not deny it .I shall  assume that is sound'. A

says nothing. Here A's silence is equivalent to :

A) Fraud

B) misrepresentation

Page 55 of 56
C) Coercion

D) Speech

Answer : D

Page 56 of 56