Legal reasoning notes – CSEET
ICSI CSEET: The Council of the ICSI has released a notice regarding CSEET on the day of the inauguration of ICSI Golden Jubilee Celebrations on 4th Oct 2017.
The Gazette Notification on the Company Secretaries (Amendment) Regulations, 2020 has been published on 3rd February 2020 in the Official Gazette of India and the same shall be applicable from the said date of publication.
Now ICSI Published a notice regarding CSEET Test which going to start from 2020 May.
We are now going to discuss the details of CSEET Paper-2 Legal Aptitude and Logical Reasoning – Legal reasoning notes.
Legal reasoning is the method that a person use to apply laws to facts in order to answer legal questions. Good legal reasoning requires logical argument. In legal reasoning, legal principles have to be applied to the given factual situations to arrive at the most reasonable conclusion. The meaning of a legal rule and how it should be applied are often subject to multiple interpretations. When the meaning of a legal rule is ambiguous, a person use legal reasoning to argue for the interpretation that they find most convincing or that is most favorable to him. Derive a conclusion from given statements provided in question, and no deviation from it is allowed.
Questions in the Legal Reasoning may be asked mainly from the following areas:—
(A) Indian Constitution
(B) Indian Contract Act
(C) Law of Torts
(D) Element of Company Law
- Legal Principle : All citizens shall have the right to freedom of speech and expression under Article 19 of the Constitution of India and it is a Fundamental Right.
Factual Situation : Mr. Sinha a famous english writer and orator criticized another novelist, Mr. Rahul stating that: ”The novel of Mr. Rahul is irrational and indecent, his mind is impure, he is a loose character, he should write decent and good novel.”
Can Mr. Rahul be sued for defamation?
(a) He is not liable because he has just expressed his personal views
(b) He is liable to be sued for defamation if his statement, was not true or said in mala fide intention
(c) He cannot be liable because he has fundamental right to freedom of speech and expression
(d) He cannot be sued, because both are writer and novelists and both can criticize each other.
- Legal Principle : Every citizen of India has a fundamental right to carry on any trade or business or profession of his choice subject to the imposition of reasonable restrictions by the State.
Factual Situation : In pursuance of an order passed by the Institute of Company Secretary of India (ICSI), prohibit a person from Practice the profession of Company Secretary unless such person passed the Company Secretaryship Course and hold a certificate of practice prom the ICSI. Mr. Manoj, a Executive Programme passed student of Company Secretaryship Course challenges the ban as it violates his right to carry his profession.
(a) Institute of Company Secretary of India (ICSI) has a superior right to ban.
(b) The ban is justified, as the right of Mr. Manoj to carry his profession is not absolute
(c) The ban is not justified, as the Institute of Company Secretary of India (ICSI) cannot deprive any person of his right to carry on his profession
(d) None of the above.
- Legal Principle : A contract is an agreement which the law will enforce. all agreements are contracts if they are made with free consent by parties competent to contract for a lawful consideration and with a lawful object.
Factual Situation : Mr. Raja offered to buy Mr. Ram’s Car for Rs. 5 lakhs but Mr. Ram refused. Subsequently, Mr. Raja threatened to kill Mr. Ram and Mr. Ram agreed to the sale. Mr. Ram subsequently rescinded from the contract.
Mr. Raja suit to enforce the contract—
(a) Will succeed because Mr. Raja was offering lawful consideration for the car
(b) Will succeed because buying and selling of car is lawful
(c) Will succeed because both parties have capacity to contract
(d) Will fail because Mr. Ram was forced to agree to the contract.
- Legal Principle : A contract is an agreement which the law will enforce. All agreements are contracts if they are made with free consent by parties competent to contract for a lawful consideration and with a lawful object.
Factual Situation : Mr. Joy a young boy of 27 years without any consideration agrees to give Ms. Jooly Rs. 10, 000/-. Mr. Joy fails to fulfil his promise. Ms. Jooly sues Mr. Joy for the amount.
(a) Ms. Jooly will succeed as Mr. Joy made the promise of his own free will
(b) Ms. Jooly will fail as the agreement is without consideration
(c) Ms. Jooly will succeed as Mr. Joy has the capacity to make the contract
(d) Ms. Jooly will succeed as the money is not being paid for any illegal object.
- Legal Principle : Constitution of India empowers the President of India to appoint the Judge of the High Courts and Supreme Court.
Factual Situation : There is a deadlock between the Council of Minister including Prime Minister of India and the President of India. President of India appointed Mr. Adarsh as the Justice of Supreme Court of India and Mr. Garg appointed as Judge of Delhi High Court by the Prime Minister of India.
(a) Appointment of Mr. Garg is valid in the eyes of law
(b) Appointment of Mr. Adarsh is valid as per the Constitution of India
(c) Appointment of Mr. Adarsh and Mr. Garg void abinitio
(d) None of the above.
- Legal Principle : A violation of a legal Right, with or without damage, gives rise to a tort.
Factual Situation : Mr. Ketan establishes a coaching class for Company Secretary Students of Executive Programme and charges Rs.10, 000/- per year as tuition fees. Mr. Ketan’s neighbor Mr. Kalia establishes another coaching class for Company Secretary Students of Executive Programme thereby creating a competition between them. This forces Mr. Ketan to reduce his tuition fees to Rs. 7000/- per year.
Can Mr. Ketan claim damages from Mr. Kalia for the loss caused to him?
(a) Yes, he can as Mr. Kalia has violated his Legal Right
(b) No, Mr. Ketan has reduced the fees on his own
(c) No, because though, there was damage there was no legal injury
(d) None of the above.
- Legal Principle : Company means a company incorporated under the Companies Act, 2013, or under any previous company law.
Factual Situation : (i) ABC Limited is incorporated under the Companies Act, 1956; (ii) ABC LLP incorporated under Limited Liability Partnership Act, 2008;(iii) ABC & Co registered under Partnership Act, 1832 and (iv) ABC Charitable Trust established under Trust Act, 1882.
Which of the above entity as mentioned in factual situation is a company?
(a) ABC Limited
(b) ABC LLP
(c) ABC & Co
(d) ABC Charitable Trust
- Legal Principle : A master shall be responsible for the wrongful acts of his servants in the course of his employment.
Factual Situation : ABC Limited is a Non-Banking Financial Company (NBFC) is registered with Reserve Bank of India to accept deposit from public. Mr. Shyam appointed as authorised agent by ABC Limited to collect deposit money from several people on daily basis. Mr. Shyam, collecting deposits from people on daily basis. One day he disappeared. One Ms. Shyamlee , who had been handing over her deposit money to Mr. Shyam found that nearly for a month before his disappearance, he was not depositing her money at all. Ms. Shyamlee when approached the ABC Limited, the NBFC took the stand that Mr. Shyam was not its employee, he is his agent and therefore, ABC Limited is not responsible for his misconduct. Ms. Shyamlee files a suit against the ABC Limited.
Who is liable?
(a) ABC Limited
(b) Mr. Shyam
(c) Ms. Shyamlee
(d) None of the above.
- Legal Principle : The members of both Lok Sabha and Rajya Sabha are eligible to be Ministers of the Union Government.
Factual Situation : Mr. Ram Sing is siting member of Upper House of Parliament and as Recommendations of Prime Minister of India, President of India appointed Mr. Ram Singh as Minister for the Ministry of Education.
Appointment of Mr. Ram Singh as Minister for the Ministry of Education is valid?
(c) President of India cannot be appointed
(d) Prime Minister of India cannot be recommended
- Legal Principle : Tort is a civil wrong for which the remedy is a common law action for unliquidated damages and which is not exclusively the breach of a contract or the breach of a trust or other merely equitable obligation.
Factual Situation : Mr. Sunil has six pet dogs which are very ferocious and bark a lot. Mr. Surendra is his next door neighbor and feels that he is not able to enjoy his property due to the presence of a large number of dogs in the adjacent house. He is contemplating initiating a legal action against Mr. Sunil. Mr. Surendra can:
(a) Initiate action for breach of contract against Mr. Sunil as there is an implied contract between the neighbours.
(b) Initiate action for unliquidated damages under torts because there is no contract between the neighbours.
(c) Initiate criminal action against Mr. Sunil because having a large number of ferocious dogs is a criminal act.
(d) Not be successful as Mr. Sunil has an unrestricted right to enjoy his personal property and has no duty towards Mr. Surendra.
- Legal Principle : Causing damage, however substantial to another person is not actionable in law unless there is also a violation of a legal right of the plaintiff.
Factual Situation : Mr. Nandan opened a petrol pump next to earlier existing petrol pump of Mr. Chandan as a result of which Mr. Chandan suffered huge losses.
Mr. Chandan wants to initiate action against Mr. Nandan for the losses suffered. He will
(a) Succeed because he has suffered losses because of Mr. Nandan.
(b) Fail because no legal right of Mr. Chandan was infringed.
(c) Succeed because Mr. Nandan was wrong in opening a petrol pump next to already existing one.
(d) Succeed because Mr. Chandan is entitled to earn reasonable profit on his investments.
- Legal Principle : Even where there is infringement of a legal right which does not result in harm, plaintiff can still sue in tort.
Factual Situation : Cattle owned by Mr. Vinay entered the fields of Mr. Vipin and roamed about freely for considerable time without causing any kind of loss to Mr. Vinay. Mr. Vinay did not like Mr. Vipin and thought of initating legal action against him using this opportunity. Mr. Vinay will:
(a) Fail because he did not suffer any monetary loss.
(b) Fail because he did not suffer any infringement of his legal right.
(c) Succeed because his legal right was infringed.
(d) Fail because he initiated the legal action because of his dislike for the defendant.
- Legal Principle : Normally, the tort-feasor is liable for his tort but in some cases a person may be held liable for the tort committed by another.
Factual situation : Mr. Rahul’s car was being driven by his driver when it hit a pedestrian as a result of which the pedestrian suffered heavy injuries. He brought a legal action against Mr. Rahul because the car belonged to him and the driver was employed by him. The legal action of the pedestrian against Mr. Rahul will:
(a) Fail because Mr. Rahul had nothing to do with the accident.
(b) Succeed because responsibility in such cases is imputed by law on grounds of social policy or expediency.
(c) Succeed because a master is always liable for the acts of his or her servant.
(d) Fail because it was the duty of the driver to be careful while driving.
- Legal Principle : The defendant is liable if he makes a non-natural use of land.
Factual Situation : Mr. Kundan had stored chemicals on his land which escaped and caused damaged to the adjacent properties one of which belonged to Mr. Ankit. Mr. Ankit is
(a) Fail because Mr. Kundan had stored chemicals on his own property.
(b) Succeed because storing chemicals is a non-natural use of land.
(c) Fail because storing chemicals is a natural use of land.
(d) Fail because Mr. Ankit should have taken adequate precautions against the chemicals.
- Legal Principle : Absolute or strict liability are exceptions to the requirement of mens rea.
Factual Situation : B, a mill owner employed independent contractors, who were apparently competent to construct a reservoir on his land to provide water for his mill. There were old disused mining shafts under the site of the reservoir which the contractors failed to observe because they were filled with earth. The contractors therefore, did not block them. When the water was filled in the reservoir, it bursts through the shafts and flooded the plaintiff’s coal mines on the adjoining land. It was found as a fact that B did not know of the shafts and had not been negligent.
(a) Even though the independent contractors had been negligible, B will be held liable for the losses suffered by the plaintiff.
(b) B will be held liable for the losses suffered by the plaintiff only if B was negligent and not otherwise.
(c) Independent contractors would be liable to the plaintiff as there is privity of contract between them.
(d) Neither B nor the independent contractors would be held liable as there was no guilty mind at work.
- Legal Principle : Consent of the Plaintiff is an exception to the rule of Strict liability.
Factual Situation : Mr. Jagdish was subjected to a risk owing to a defect in the machinery at the factory at which he was employed. He complained of this to the person who had the general management of the business, but was told nevertheless to go on with his work. He did so and sustained the injury for which he brought his action against the factory.
(a) The suit will fail because it must be assumed Mr. Jagdish had assented to take upon himself the risk.
(b) The suit will succeed because Mr. Jagdish had highlighted the risk to the Factory management and his refusal to work might have led to his termination.
(c) The suit will fail because Mr. Jagdish should have stopped working at the factory if the management had refused to address his concerns regarding safety.
(d) The suit will succeed because in a suit between an employer and an employee, the employee is favoured because he/ she is generally poor.
- Legal Principle : For the tort committed by a partner in the ordinary course of the business of the firm, all the other partners are liable to the same extent as the guilty partner.
Factual Situation : A, B and C ran a Chartered Accountancy firm in parternership. In order to solicit work from a big bank, A, one of the three partners bribed the Bank’s senior manager and induced him to hand over the audit work to their firm.
(a) All the partners are liable for the tort committed by only one of them.
(b) Only the partner who paid the bribe is liable.
(c) Whether or not all partners are liable would depend on the fact whether B and C had knowledge of bribe or not.
(d) The liability of B and C would be established only if they had given there written consent to A to bribe the bank official.
- Legal Principle : The State can claim immunity from the tortuous liability only in the cases of sovereign function, otherwise not.
Factual Position : Chandra and his father Gopal were lodged in a jail, wherein one day bombs were hurled at them by their rivals, causing the death of Gopal and injuries Chandra. The victims were having previous knowledge of the impending attack, which they conveyed to the authorities, but no additional security was provided to them. On the contrary, there was gross negligence since there was a great relaxation in the number of police men who were to guard the jail on that fateful day. Thus, on the grounds of negligence a suit was filed Chandra against the Government. The suit will
(a) Succeed because there was gross negligence on part of the State.
(b) Fail because maintain jail facilities is part of the sovereign function of the State.
(c) Succeed because securing law and order is not a sovereign function of the State.
(d) Fail because the State cannot be held responsible in any way if people lose life because of their personal rivalries even in facilities maintained and operated by the State.
- Legal Principle : Under Article 12, unless the context otherwise requires, “the State” includes—
(a) the Government and Parliament of India;
(b) the Government and Legislature of each of the States; and
(c) all local or other authorities: (i) within the territory of India; or (ii) under the control of the Government of India.
Factual Situation : Mr. Arvind is employed with Oil and Natural Gas Corporation (ONGC). He faces discrimination at work at the hands of the Management and thinks that his right to equality is violated. He contemplates moving a writ petition against ONGC but his colleague suggests that Mr. Arvind will not succeed because ONGC is not ‘State’.
(a) ONCG is ‘State’ as per Article 12 of the Constitution.
(b) ONGC is not ‘State’ as per Article 12 of the Constitution.
(c) Mr. Arvind will not succeed because a writ cannot be brought against a Company.
(d) ONGC is not ‘State’ because its shares are listed in the stock market.
- Legal Principle : No person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence.
Factual Situation : Ms. Chandni had an altercation with her classmate in her college and in the heat of the moment she hurled a racist abuse at her classmate and her classmate was deeply offended by it. Ms. Chandni had later apologized for it. In the next few months, a law was passed which made racist abuse punishable. Aware of the fact that the law of limitation does not apply to criminal acts, she moved an application to the court to initiate criminal action against Ms. Chandni for the racist abuse. The classmate’s application will:
(a) Fail because racist abuse was not punishable when it was hurled.
(b) Succeed because the law made racist abuse punishable with imprisonment and it is undeniable that Ms. Chandni has hurled that abuse.
(c) Succeed because law of limitation does not apply to criminal acts.
(d) Fail because it was not a serious offence and Ms. Chandni had already apologized for it.
- Legal Principle : No person shall be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence.
Factual Situation : A person was accused of cheating and before he was arrested and committed to trial for it, the law relating to cheating was changed and the punishment for it was increased to life imprisonment. The person was found guilty and sentenced to life imprisonment. He decides to challenge his sentence of life imprisonment. He will
(a) Fail because the punishment for cheating was increased to life imprisonment before his trial began.
(b) Succeed because the punishment for cheating was not life imprisonment when he committed it.
(c) Fail because the law does not provide for such leniency to guilty persons.
(d) Succeed only if he is able to prove his innocence.
- Legal Principle : Parliament can amend any part of the Constitution including the Fundamental Rights but the Parliament cannot alter the basic structure or framework of the Constitution.
Factual Situation : The Government of India passed a Constitutional amendment Act which has the effect of curbing the independence of the judiciary. The Act has been challenged in the Supreme Court of India by a group of NGOs and public spirited individuals as being violative of the Constitution. The challenge will:
(a) Succeed because any amendment that compromises the independence of the judiciary is unconstitutional.
(b) Fail because the Parliament has unlimited power to amend the Constitution as per the Kesavananda Bharati judgment.
(c) Succeed because the amendment was not brought to the Parliament with the consent of the Supreme Court of India.
(d) Fail because the Supreme Court cannot sit in judgment over a matter that affects its own independence.
- Legal Principle : Directive Principles of State Policy (DPSP) are non-justiciable in nature.
Factual Situation : Mr. Sumit works for the protection of cows. He has come to know that in some states slaughtering of cows is permissible under law. He also knows that one of the Directive Principles of State Policy calls upon the State to prohibit cow slaughter. Based on this, Mr. Sumit approaches the Supreme Court of India for getting direction to the states to enact anti-cow slaughtering law. His petition will:
(a) Succeed because DPSP clearly says that states should take steps to prevent cow slaughter.
(b) Fail because DPSP cannot be enforced by the Courts.
(c) Succeed because laws in contravention of DPSP are unconstitutional.
(d) Fail because only a section of Indian population holds cow as sacred and its views cannot be forced on others.
- Legal Principle : The right of all citizens to practise any profession or to carry on any occupation, trade or business is a Fundamental Right.
Factual Situation : Due to a law passed by the Government, even a person with good knowledge of law cannot appear in the Court as lawyer unless he has a law degree from a recognized university and fulfils other mandatory conditions. Due to this Mr. Dinesh is not able to appear in courts and believes that government is denying him of his Fundamental Right to practice any profession or to carry on any occupation, trade or business. He decides to challenge this as a violation of his Fundamental Right. He will
(a) Succeed because the requirements to be eligible to appear before the Court deny him the opportunity to earn his livelihood.
(b) Succeed because government cannot abridge Fundamental Rights in any manner under any condition.
(c) Fail because the Government is well within its rights to prescribe eligibility and other conditions for profession, trade or business.
(d) Fail because Government has the power to abrogate the Fundamental Rights.
- Legal Principle : Article 14 of the Constitution says that “the State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India”.
Factual Situation : Due to the growing menace of terrorism in the country, the Government of India decided to have a new substantive criminal laws for terrorists from other countries. A foreign terrorist captured by the police and subjected to the new law claimed that his rights under Article 14 of the Indian constitution were violated. His claim will:
(a) Fail because the rights under Article 14 are available only to the citizens of India.
(b) Fail because the rights under the Article cannot be made available to people who engage in terrorist activities in India.
(c) Succeed because he is entitled to be subjected to the same laws as any other person charged with the same offence.
(d) Succeed because once he is captured by the Indian authorities, he acquired all the Fundamental Rights that are enjoyed by the citizens of India.
- Legal Principle : The ambit of this Ordinance-making power of the President is co-extensive with the legislative powers of Parliament.
Factual Situation : During a time when the Lok Sabha was not in session the President of India promulgated an ordinance on a matter which was not very urgent. A non-governmental organization decided to challenge the ordinance as ultra vires the Constitution. His challenge will:
(a) Succeed because the ordinance is to be promulgated only in urgent matters.
(b) Fail because the use of the power to promulgate ordinance is left to the discretion of the President.
(c) Fail because the use of the power to promulgate ordinance is left to the discretion of the Government.
(d) Succeed because an ordinance can be issued only when both the houses of the Parliament are not in session.
- Legal Principle : The State shall not make any law which takes away or abridges the rights conferred by Part III and if such a law is made, it shall be void to the extent to which it curtails any such right.
Factual Situation : Right to Property was a Fundamental Right but was abolished as such by a Constitutional amendment. Mr. Gautam decides to challenge the constitutional validity of the amendment. He will
(a) Succeed because the State cannot make any law which takes away or abridges the rights conferred by Part III.
(b) Fail because ‘law’ referred to in the above statement does not apply to Constitutional amendment Acts.
(c) Succeed because even constitutional amendments cannot take away Part III rights.
(d) Fail because Right to Property was not conferred by Part III.
- Legal Principle : There shall be a Council of Ministers with the Prime Minister at the head to aid and advise the President who shall, in the exercise of his functions, act in accordance with such advice.
Factual Situation : The Lok Sabha general elections in 1996 did not give any party a clear majority and various political parties in their individual capacity and is association with other parties staked claim with the President to form government. The President had to invite one such party or a group to form the government. He was:
(a) Bound to follow the advice of the outgoing Prime Minister on who should be first called to form the government.
(b) Free to exercise his discretion in such a situation.
(c) Bound to consult the Chief Justice of India in a situation of no clear majority in favour of a party or an alliance.
(d) Bound to invite the single largest party to form the government.
- Legal Principle : An agreement enforceable by law is a contract.
Factual Situation : Mr. A and Mr. B, father of a minor boy P and minor girl Q respectively enter into an agreement that they would marry their children P and Q to each other. Mr. B, later refused to honour this agreement. Aggrieved by this, Mr. A decided to sue Mr. B and Ms. Q for breach. Mr. A will:
(a) Succeed because Mr. B has refused to fulfil his obligation under the agreement.
(b) Fail because the agreement between them is not a contract.
(c) Succeed because the agreement between them is a contract.
(d) Fail because Mr. A should have sued Mr. B and Ms. Q together with Mr. P and not alone as Mr. P has also suffered because of the breach.
- Legal Principle : All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object.
Factual Situation : A was planning to sell his property to B but B was not aware of it. Since B was interested in the property, he threatened to harm the only child of A if A did not enter into an agreement to sell the property to B. The price at which the agreement to sell was agreed upon was much more than the expectation of A or the prevailing market price of the property. Once the agreement was signed, B got to know that A was anyway interested in selling the property to B and at a lower price. A later refused to execute the sale deed and claimed that the contract between the parties was not valid. A will:
(a) Fail because there was a valid contract between him and B.
(b) Succeed because the consent of A for the agreement to sell was not a free consent.
(c) Fail because in the given facts and circumstances even with the free consent the same transaction would have taken place. A is even better placed because he is receiving a higher price.
(d) Succeed because there is no lawful object in the contract.
- Legal Principle : A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind.
Factual Situation : Mr. Jamal is a patient in a lunatic asylum who experiences intervals of sound mind. Jamal entered into a contract during such interval of sound mind. On having suffered losses, he challenged the validity of the contract on the ground that he not only was mentally unsound but also lived in lunatic asylum.
(a) The contract is valid.
(b) The contract is invalid.
(c) The contract is voidable at the option of Mr. Jamal.
(d) The contract is voidable at the option of the opposite party.
- Legal Principle : A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind.
Factual Situation : One of the purposes of the business party was to strike business deals and Mr. Animesh was well aware of it. Still, Mr. Animesh drank so much at the party that he could not understand the terms of a contract, or form a rational judgment as to its effect on his interests. He still went ahead and entered into a few contracts at the party. One of such agreements had very oppressive terms and conditions for Mr. Animesh and therefore he challenges the validity of the contract. He will:
(a) Fail because he knew the purpose of the business party and should have behaved more responsibly.
(b) Succeed because he was temporarily of unsound mind because of his drunk state.
(c) Fail because being drunk even to the extent of not being able to understand the terms of the contract cannot be considered as ‘unsound mind’
(d) Succeed because oppressive terms and conditions in the contract show that it could have been agreed to only by a person of unsound mind.
- Legal Principle : A contract is said to be induced by “undue influence” where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.
Factual Situation : Mr. Ashwini having advanced money to his son, Bhuvan, during his minority, upon Bhuvan’s coming of age obtains, by misuse of parental influence, a bond from Bhuvan for a greater amount than the sum due in respect of the advance.
(a) Ashwini employed undue influence.
(b) Ashwini did not employ undue influence.
(c) Father and son cannot ever enter into a valid contract.
(d) Ashwini employed coercion.
- Legal Principle : When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused.
Factual Situation : Mr. Arun, intending to deceive Mr. Prakash, falsely represented that five hundred tonnes of fertilizer are made annually at his factory, and thereby induced Mr. Prakash to buy the factory.
(a) The contract is voidable at the option of Mr. Prakash.
(b) The contract is voidable at the option of Mr. Arun.
(c) The contract is void.
(d) The contract is valid.
- Legal Principle : Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void.
Factual Situation : Mr. Rupesh agrees to buy from Mr. Jalaj a certain car. It turns out that the car was scraped at the time of bargain, though neither party was aware of the fact.
(a) The agreement is valid.
(b) The agreement is void.
(c) The agreement is voidable at the instance of either parties.
(d) The agreement is void because Mr. Jalaj played a fraud upon Mr. Rupesh.
- Legal Principle : Every agreement of which the object or consideration is unlawful is void.
Factual Situation : Mr. Thomas promises Mr. Jhonson to drop a prosecution which he has instituted against Mr. Jhonson for robbery, and Mr. Jhonson promises to restore the value of the things taken.
(a) The agreement is void, as its object is unlawful.
(b) The agreement is valid.
(c) The agreement is voidable at the instance of Mr. Thomas.
(d) The agreement is voidable at the instance of Mr. Jhonson.
- Legal Principle : A stranger to a contract cannot sue for want of privity of contract.
Factual situation : A, who is indebted to B, sells his property to C, and C the purchaser of the property, promises to pay off the debt to B. C fails to pay B.
(a) B has no right to sue C for there is no privity of contract between B and C.
(b) B has the right to sue C as there is privity of contract between B and C.
(c) C has no legal obligation to A to pay B off.
(d) Once the property is sold to C, B can only sue C and not A.
- Legal Principle : All illegal agreements are void but all void agreements are not necessarily illegal.
Factual Situation : A had borrowed Rs. 1,000 from B to buy a pistol to shoot C which he did. He, however, failed to repay B and B decides to recover this money from A by filing a suit.
(a) The contract between A and B is illegal.
(b) The contract between A and B will be illegal only if it is established that B was aware of the purpose at the time of the borrowing.
(c) The contract between A and B is void but not illegal.
(d) The contract between A and B is valid even if B was aware of the purpose at the time of borrowing.