COMPREHENSIVE UNIVERSITY-LEVEL EXAMINATION IN CONTRACT LAW: FORMATION,
PERFORMANCE, AND REMEDIES
Exam Code: LAW-401-CON
SECTION A: FORMATION OF CONTRACT – OFFER, ACCEPTANCE, AND INTENTION
Questions 1-30
1. In the context of contract law, the principle that an advertisement for the sale of
goods at a stated price is generally considered an invitation to treat, not an offer, was
established in which landmark case?
A. Carlill v Carbolic Smoke Ball Company
B. Fisher v Bell
C. Pharmaceutical Society of Great Britain v Boots Cash Chemists
D. Hyde v Wrench
Correct Answer: C
Rationale: The display of goods with a price tag in a self-service store is an invitation to
treat, not an offer. The offer is made by the customer when they present the item for
purchase, which the shop can accept or reject. Fisher v Bell established that displaying a
flick knife was not an offer for sale but an invitation to treat .
2. Which of the following statements correctly describes the "postal rule" regarding
acceptance?
A. Acceptance is effective only when it is received by the offeror.
B. Acceptance is complete as against the proposer when it is put into a course of
transmission to him, so as to be out of the power of the acceptor.
C. The postal rule applies to all forms of communication, including instantaneous
methods.
D. The postal rule allows the offeror to revoke an offer at any time before acceptance is
received.
Correct Answer: B
Rationale: The postal rule, established in Adams v Lindsell, dictates that acceptance is
,complete upon posting, provided it is reasonable to use post. This means the contract is
formed at the moment of posting, even if the letter is delayed or lost .
3. A counter-offer has the legal effect of:
A. Accepting the original offer on modified terms.
B. Rejecting the original offer and creating a new offer.
C. Extending the time for acceptance indefinitely.
D. Keeping the original offer open for a reasonable period.
Correct Answer: B
Rationale: A counter-offer is a rejection of the original offer and a new offer made by the
offeree. The original offer is terminated, and cannot be accepted later. This principle was
established in Hyde v Wrench .
4. A person is said to be of sound mind for the purpose of making a contract if, at the
time he makes it, he is capable of understanding it and of forming a rational judgment
as to its effect upon his interests. Which of the following scenarios would render a
contract voidable due to incapacity?
A. A person who is drunk but understands the nature of the contract.
B. A person who is of sound mind but acting under the influence of a strong emotion.
C. A person who is usually of sound mind, but occasionally of unsound mind, enters into a
contract when he is of unsound mind.
D. A person who is a minor but has a guardian.
Correct Answer: C
Rationale: Under the Indian Contract Act 1872, a person who is usually of sound mind but
occasionally of unsound mind cannot make a contract when he is of unsound mind. The
contract is voidable at his option .
5. Which of the following is NOT a necessary element for the formation of a valid
contract?
A. Offer and acceptance
B. Intention to create legal relations
C. Consideration
D. The contract must be in writing
Correct Answer: D
Rationale: While some contracts must be in writing under the Statute of Frauds, most
contracts can be oral or implied by conduct. Writing is not a universal requirement for
contract formation .
,6. In the case of Carlill v Carbolic Smoke Ball Company, the court held that:
A. The advertisement was an invitation to treat.
B. The plaintiff could not claim the reward because she did not notify the company of her
acceptance.
C. The advertisement constituted a unilateral offer, which could be accepted by
performance without notification.
D. The contract was void for uncertainty because the terms were not clear.
Correct Answer: C
Rationale: The case established that a unilateral offer to the world at large can be
accepted by anyone who performs the stipulated conditions. Notification of acceptance is
not required if the offeror has waived that right. The court also held that the deposit of
£1000 showed serious intent .
7. A contract that contains a promise by both parties is known as:
A. Unilateral contract
B. Bilateral contract
C. Void contract
D. Express contract
Correct Answer: B
Rationale: A bilateral contract involves an exchange of promises between both parties.
Each party is both a promisor and a promisee. A unilateral contract involves a promise in
exchange for an act .
8. The taking back of an offer by the offeror is called:
A. Rejection
B. Revocation
C. Cancellation
D. Counter-offer
Correct Answer: B
Rationale: Revocation is the withdrawal of an offer by the offeror before it is accepted. For
revocation to be effective, it must be communicated to the offeree before acceptance .
9. Consideration in a contract means:
A. A person has the mental capacity to enter into a contract.
B. The two parties deal with the contract in a polite manner.
C. The contract is legal and fully valid.
D. Something of value is being exchanged by the two parties.
, Correct Answer: D
Rationale: Consideration is the price paid for the other party's promise. It can be a benefit
to the promisor or a detriment to the promisee. It is essential for the enforceability of a
contract, except under seal or by promissory estoppel .
10. Which of the following is NOT an exception to the rule that past consideration is no
consideration?
A. A promise to pay a debt barred by the Statute of Limitations.
B. A promise to pay for services rendered at the request of the promisor where payment
was implied.
C. A promise to pay a debt discharged in bankruptcy.
D. A promise to pay for services rendered voluntarily without request.
Correct Answer: D
Rationale: Past consideration is generally no consideration. However, exceptions exist,
such as promises to pay debts barred by limitation, bankrupt debts, and services rendered
at request with implied payment. Voluntary acts without request do not constitute good
consideration .
11. An agreement, the meaning of which is not certain, or not capable of being made
certain, is:
A. Voidable
B. Void
C. Valid
D. Illegal
Correct Answer: B
Rationale: Section 29 of the Indian Contract Act, 1872, states that agreements, the
meaning of which is not certain, or not capable of being made certain, are void. For
example, a promise to pay £500 more if a horse is lucky is void for uncertainty .
12. In the case of Pharmaceutical Society of Great Britain v Boots Cash Chemists, the
court held that:
A. The display of goods in a shop window is an offer.
B. The display of goods on shelves is an invitation to treat.
C. The customer makes a counter-offer when they take the goods to the cashier.
D. The contract is formed when the customer picks up the goods from the shelf.
Correct Answer: B
Rationale: The case established that the display of goods on shelves with price tags is an
PERFORMANCE, AND REMEDIES
Exam Code: LAW-401-CON
SECTION A: FORMATION OF CONTRACT – OFFER, ACCEPTANCE, AND INTENTION
Questions 1-30
1. In the context of contract law, the principle that an advertisement for the sale of
goods at a stated price is generally considered an invitation to treat, not an offer, was
established in which landmark case?
A. Carlill v Carbolic Smoke Ball Company
B. Fisher v Bell
C. Pharmaceutical Society of Great Britain v Boots Cash Chemists
D. Hyde v Wrench
Correct Answer: C
Rationale: The display of goods with a price tag in a self-service store is an invitation to
treat, not an offer. The offer is made by the customer when they present the item for
purchase, which the shop can accept or reject. Fisher v Bell established that displaying a
flick knife was not an offer for sale but an invitation to treat .
2. Which of the following statements correctly describes the "postal rule" regarding
acceptance?
A. Acceptance is effective only when it is received by the offeror.
B. Acceptance is complete as against the proposer when it is put into a course of
transmission to him, so as to be out of the power of the acceptor.
C. The postal rule applies to all forms of communication, including instantaneous
methods.
D. The postal rule allows the offeror to revoke an offer at any time before acceptance is
received.
Correct Answer: B
Rationale: The postal rule, established in Adams v Lindsell, dictates that acceptance is
,complete upon posting, provided it is reasonable to use post. This means the contract is
formed at the moment of posting, even if the letter is delayed or lost .
3. A counter-offer has the legal effect of:
A. Accepting the original offer on modified terms.
B. Rejecting the original offer and creating a new offer.
C. Extending the time for acceptance indefinitely.
D. Keeping the original offer open for a reasonable period.
Correct Answer: B
Rationale: A counter-offer is a rejection of the original offer and a new offer made by the
offeree. The original offer is terminated, and cannot be accepted later. This principle was
established in Hyde v Wrench .
4. A person is said to be of sound mind for the purpose of making a contract if, at the
time he makes it, he is capable of understanding it and of forming a rational judgment
as to its effect upon his interests. Which of the following scenarios would render a
contract voidable due to incapacity?
A. A person who is drunk but understands the nature of the contract.
B. A person who is of sound mind but acting under the influence of a strong emotion.
C. A person who is usually of sound mind, but occasionally of unsound mind, enters into a
contract when he is of unsound mind.
D. A person who is a minor but has a guardian.
Correct Answer: C
Rationale: Under the Indian Contract Act 1872, a person who is usually of sound mind but
occasionally of unsound mind cannot make a contract when he is of unsound mind. The
contract is voidable at his option .
5. Which of the following is NOT a necessary element for the formation of a valid
contract?
A. Offer and acceptance
B. Intention to create legal relations
C. Consideration
D. The contract must be in writing
Correct Answer: D
Rationale: While some contracts must be in writing under the Statute of Frauds, most
contracts can be oral or implied by conduct. Writing is not a universal requirement for
contract formation .
,6. In the case of Carlill v Carbolic Smoke Ball Company, the court held that:
A. The advertisement was an invitation to treat.
B. The plaintiff could not claim the reward because she did not notify the company of her
acceptance.
C. The advertisement constituted a unilateral offer, which could be accepted by
performance without notification.
D. The contract was void for uncertainty because the terms were not clear.
Correct Answer: C
Rationale: The case established that a unilateral offer to the world at large can be
accepted by anyone who performs the stipulated conditions. Notification of acceptance is
not required if the offeror has waived that right. The court also held that the deposit of
£1000 showed serious intent .
7. A contract that contains a promise by both parties is known as:
A. Unilateral contract
B. Bilateral contract
C. Void contract
D. Express contract
Correct Answer: B
Rationale: A bilateral contract involves an exchange of promises between both parties.
Each party is both a promisor and a promisee. A unilateral contract involves a promise in
exchange for an act .
8. The taking back of an offer by the offeror is called:
A. Rejection
B. Revocation
C. Cancellation
D. Counter-offer
Correct Answer: B
Rationale: Revocation is the withdrawal of an offer by the offeror before it is accepted. For
revocation to be effective, it must be communicated to the offeree before acceptance .
9. Consideration in a contract means:
A. A person has the mental capacity to enter into a contract.
B. The two parties deal with the contract in a polite manner.
C. The contract is legal and fully valid.
D. Something of value is being exchanged by the two parties.
, Correct Answer: D
Rationale: Consideration is the price paid for the other party's promise. It can be a benefit
to the promisor or a detriment to the promisee. It is essential for the enforceability of a
contract, except under seal or by promissory estoppel .
10. Which of the following is NOT an exception to the rule that past consideration is no
consideration?
A. A promise to pay a debt barred by the Statute of Limitations.
B. A promise to pay for services rendered at the request of the promisor where payment
was implied.
C. A promise to pay a debt discharged in bankruptcy.
D. A promise to pay for services rendered voluntarily without request.
Correct Answer: D
Rationale: Past consideration is generally no consideration. However, exceptions exist,
such as promises to pay debts barred by limitation, bankrupt debts, and services rendered
at request with implied payment. Voluntary acts without request do not constitute good
consideration .
11. An agreement, the meaning of which is not certain, or not capable of being made
certain, is:
A. Voidable
B. Void
C. Valid
D. Illegal
Correct Answer: B
Rationale: Section 29 of the Indian Contract Act, 1872, states that agreements, the
meaning of which is not certain, or not capable of being made certain, are void. For
example, a promise to pay £500 more if a horse is lucky is void for uncertainty .
12. In the case of Pharmaceutical Society of Great Britain v Boots Cash Chemists, the
court held that:
A. The display of goods in a shop window is an offer.
B. The display of goods on shelves is an invitation to treat.
C. The customer makes a counter-offer when they take the goods to the cashier.
D. The contract is formed when the customer picks up the goods from the shelf.
Correct Answer: B
Rationale: The case established that the display of goods on shelves with price tags is an
