1. An offer can’t be accepted after it has been terminated.

Explain when an offer ceases to be

capable of acceptance.

Ans: Yes, an offer can’t be accepted after it has been terminated. An offer ceases to be capable of
acceptance or offer lapses or comes to an end in the following circumstances:

1) By communication of notice of termination of offer to the offree

2) By lapse of the specified or reasonable time

3) By death or insanity of the offer

4) By counter offer

5) By not being accepted according to the prescribed or usual mode.

6) By non-fulfillment of a condition precedent.

2. Whether a promise to pay time barred bet is valid and if so under what conditions?

Ans: An agreement without consideration is void. But to this rule, certain exceptions are recognized
and amongst them promise to pay a time barred debt is one. It is set out u/s.25(3) of the Indian
Contract Act,1872. The conditions to be fulfilled for its maintainability in the court of law are: – It
shall be in writing and signed by the person or by his agent to pay debt either in part or full, which
the creditor might have enforced but for the law for the limitation of suits.

3. Doctrine of Quantum Meruit:

Ans: Quantum meruit literally means “as much as merited or earned”. When a person has done
some work under a contract and the other party repudiates the contract or some event happens
which makes the further performance of the contract impossible then the party who has performed
the work can claim remuneration for the work he has already done. The claim for quantum meruit
arises in the following cases:- 1) When an agreement is discovered to be void u/S.65. 2) When
something is done without any intention to do so gratuitously u/s.70 3) when there is an express or
implied contract to render service but there is no agreement as to remuneration 4) When the
completion of the contract has been prevented by the act of the other party to the contract 5) When
a contract is divisible. 6) When an indivisible contract is completely but badly.

4. Write a note on Quasi Contracts?

Ans: Quasi Contracts: A Quasi contract is not a contract between two parties but a legal obligation
imposed by court of law, which puts both parties in the same position as if there is a contract
between them.

The concept of quasi contracts is dealt under S.68 to 72.

S.68: If a person under obligation or to a person who can’t enter into contract is supplied with
Necessaries suited to his condition in life, the person who has furnished such supplied must be
reimbursed from the property of that person.
S.69: Person who is interested in payment of money which another is bound to pay.

S.70: Obligation of person enjoying benefit of non-gratuitous act: New Model car.

S.71: Responsibility of finder of goods.

5. Define “Contract of Guarantee”, Surety”,”Principal debtor”, and “Creditor”.What are the

nature of liablities under Contracts of Indeminty and Guarantee?

Indeminty Contract: S.124 of the Contract Act, says “A contract by which one party promises to save
the other from the loss caused to him by the conduct of the promisor himself or by the conduct of
any other person”.

The person who gives the indeminty is called the indemnifier, the person for whose protection
indemnity is called Indeminty holder.

Example: A contracts to indemnify B against consequences of any proceedings which C may take
against B in respect of a certain sum of Rs 2000. This is called Contract of indeminty.

Contract of Guarantee: A contract of Guarantee is also known as Contract of surety ship. S.126 of
the contract Act defines a contract of guarantee as “ a contract to perform the promise or discharge
the liability of a third person in case of his default”.

Example:A advances a loan of Rs100 to B and c promises to A that if B doesnot repay loan, he will do
so. This is a Contract of Guarntee.

6. Give the meaning of ‘Caveat Emptor’ What are the exceptions to it? Caveat Emptor – The
principle termed as ‘caveat emptor’ means ‘buyer be aware’. It is based on the fundamental
premise that once a buyer satisfies himself as to the suitability of the product for his use, he
would subsequently have no right to reject the same. Generally, buyer is expected to be
careful while purchasing the goods and seller is not liable for any defects in goods sold by
him. This principle in basic form is embodied in section 16 that subject to provisions of Sale
of Goods Act and any other law.

Exception-I: S.16 says when the buyer makes known to the seller, the particular purpose for which
he wants goods and he relies on the seller’s skills and judgment, then there is an implied condition
that the goods shall be reasonably fit for the purpose. However, there is no implied condition if the
article is sold under a trade name.

Exception-II: Where the goods are purchased by description from a seller who deals in such goods
then there is an implied condition that the goods shall be of merchantable quality. A seller who is
guilty of fraud shall not have protection of this rule.

7.What is the true test for Partnership?

Ans: Test of Partnership: In order to determine the existence of partnership one must look to the
agreement between them if the agreement between them is to share the profits of a business
carried on by all or any of them acting for all, there is a partnership (S.4).

The difficulty arises when there is no specific agreement. In such a case, we have to refer to S.6
which embodies the rule laid down in the case of Cox v. Hickman(1860) HLC268. “In determining
whether a group of persons is or is not a firm or whether a person is not a partner in a firm, regard
shall be had to the real relation between the parties, as shown by all relevant facts taken together.
Ex: books of account, correspondence, evidence of employees etc.” Again, statement by the parties
in a document that they are partners doesn’t necessarily constitute them partners in law.

Sec.6 further enumerates in its two explanations cases where the partnership relation doesn’t exist.
These cases are:

1. Joint owners sharing gross returns: Joint owners of some property sharing profits or gross
returns arising from the property do not become partners. If, however, co-owners start a
business with a view to share its profits they may become partners.

2. Sharing of Profits: The sharing of profits is prima facie evidence of partnership but the
receipt by a person of a share of the profits of a business or of a payment contingent upon
the earning of profits or varying with the profits earned by a business doesn’t of itself make
him a partner with the persons carrying on the business. In particular, there is no
partnership in the following cases: (a) where, a person has let money to persons engaged or
about to engage in business and receives a rate of interest varying with the profits or a share
of profits. (b) Where a servant or agent is engaged in a business and receives
his remuneration as a share of profit. (c) Where a widow or child of a deceased partner
receives a portion of profits. (d) Where a person has sold his business along with its good will
and receives a portion of the profits in consideration of the sale.

To conclude, one can say that the true test of partnership is not the sharing of profits by a person or
the contribution of capital or the holding of a particular property jointly but whether the business is
carried on by him or by another o his account so that there is a mutual agency between them. If
relation of principal and agent exists between the parties constituting a group, formed with view to
earn profits of a business, we can say that there is partnership.

8.Agency doesn’t require consideration – Comment

Ans: S.185 says no consideration is necessary to create an agency. The reason is as the affairs of the
principal are placed in the hands of the agent, consideration in the sense of determent is enough to
support the contract and as such no further consideration is necessary. Therefore, an agent under a
gratuitous contract of agency will be as much bound by his contract as a paid agent.

9. Holder in due course: – It is defined u/S.9 of the Negotiable Instruments Act, 1881. Holder in
due course means any person who for consideration became the possessor of a Negotiable
instrument if payable to bearer, or the payee or indorsee thereof, if payable to order, before
the amount mentioned in it became payable and without having sufficient cause to believe
that any defect existed in the title of the person from whom he derived his title.
 10. A minor issues a cheque in discharge of a liability and it was dishonored, whether he is
liable to be prosecuted u/S.138 of the N.I Act.

Minor or unsound person is incompetent to enter into a contract as per S.11of the Indian Contract
Act, 1872. However, S.26 of the Negotiable Instruments Act 1888 permits unsound or minor to draw,
indorse, deliver and negotiate a negotiable instrument so as to bind all parties except himself. Thus
they are empowered to convey valid title and acquire rights over the negotiable instrument but can’t
be burdened with liability.