CAF-4 · Chapter 3

Capacity of parties MCQs with Answers

15 multiple-choice questions on Capacity of parties for CAF-4 Business Law Dynamics. Try each one before revealing the answer and explanation.

1. Question 1

   What is the general status of an agreement made by a minor under the Contract Act, 1872?

   • A) Voidable at the option of the minor.
   • B) Voidable at the option of the other party.
   • C) Void and completely unenforceable from the beginning (void ab initio).
   • D) Valid if the minor is over 15 years old.
   Show answer & explanation

   Answer: C) Void and completely unenforceable from the beginning (void ab initio).

   As established in the landmark case Mohiri Bibee v. Dharmodas Ghose, a minor's agreement is void ab initio and cannot be enforced against them.

2. Question 2

   If a person of unsound mind occasionally has lucid intervals, when can they validly make a contract?

   • A) At any time, provided their guardian signs.
   • B) Only when they are of sound mind.
   • C) Never, they are permanently disqualified.
   • D) Only for the purchase of essential goods.
   Show answer & explanation

   Answer: B) Only when they are of sound mind.

   According to Section 12, a person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind.

3. Question 3

   Can a person who has attained majority ratify an agreement they made while they were still a minor?

   • A) Yes, by giving a verbal confirmation.
   • B) Yes, if they receive fresh consideration.
   • C) No, an agreement which is void from the beginning cannot be made valid by subsequent ratification.
   • D) Only with the permission of the High Court.
   Show answer & explanation

   Answer: C) No, an agreement which is void from the beginning cannot be made valid by subsequent ratification.

   Since a minor's agreement is void ab initio, it has no legal existence and therefore cannot be ratified (confirmed) after the minor reaches the age of majority.

4. Question 4

   If a person is supplied with 'necessaries' suited to their condition in life, who is liable to pay for them if the person is legally incapable of contracting?

   • A) The person is personally liable.
   • B) Their guardian is personally liable.
   • C) No one is liable since the contract is void.
   • D) The supplier is entitled to be reimbursed from the property of such incapable person.
   Show answer & explanation

   Answer: D) The supplier is entitled to be reimbursed from the property of such incapable person.

   Under Section 68, if necessaries are supplied to a person incapable of contracting (like a minor or person of unsound mind), the supplier can recover the price from that person's property.

5. Question 5

   At what age does a person generally attain majority in Pakistan under the Majority Act, 1875 (excluding cases with court-appointed guardians)?

   • A) 16 years
   • B) 18 years
   • C) 21 years
   • D) 25 years
   Show answer & explanation

   Answer: B) 18 years

   According to the Majority Act, 1875, every person residing in Pakistan is deemed to have attained majority when they complete the age of 18 years.

6. Question 6

   Saad, a minor, borrows Rs. 50,000 from Fahad by falsely representing that he is 20 years old. Fahad sues for the money. What is the most likely outcome?

   • A) Saad must pay back the money because he committed fraud.
   • B) The court will apply the 'Doctrine of Estoppel' against Saad.
   • C) The contract is void, and Saad cannot be forced to repay the loan.
   • D) Saad's parents will be ordered to pay on his behalf.
   Show answer & explanation

   Answer: C) The contract is void, and Saad cannot be forced to repay the loan.

   Even if a minor misrepresents their age, the contract remains void. The rule of estoppel (preventing someone from denying a previous statement) does not apply to a minor in this context.

7. Question 7

   A contract made by a person while they are in a state of 'drunkenness' to the extent that they cannot understand the terms is:

   • A) Valid but unethical.
   • B) Voidable at the option of the sober party.
   • C) Comparable to a contract by a person of unsound mind and is not valid.
   • D) Perfectly valid because drunkenness is a self-inflicted state.
   Show answer & explanation

   Answer: C) Comparable to a contract by a person of unsound mind and is not valid.

   Under Section 12, a person who is so drunk that he cannot form a rational judgment as to the effect of the contract upon his interests cannot make a valid contract while in that state.

8. Question 8

   Which of the following is NOT a category of persons disqualified from contracting by law?

   • A) Alien enemies
   • B) Insolvents
   • C) Convicts during their period of sentence.
   • D) Unmarried women over the age of 18.
   Show answer & explanation

   Answer: D) Unmarried women over the age of 18.

   Unmarried women (and married women) over the age of 18 have full legal capacity to contract. Others listed (alien enemies, insolvents, convicts) face specific legal disqualifications.

9. Question 9

   Muneeb, a minor, purchased a laptop on credit for his university studies. He has no other means of completing his assignments. Is the laptop considered a 'necessary'?

   • A) No, because electronics are luxury items.
   • B) Yes, if it is considered essential for his education and suited to his condition in life.
   • C) No, because he could have used a library computer.
   • D) Yes, all laptops ever bought by minors are necessaries.
   Show answer & explanation

   Answer: B) Yes, if it is considered essential for his education and suited to his condition in life.

   Necessaries are not just food and clothes; they include things required for a person's education or professional training depending on their social status and actual needs.

10. Question 10

    If a minor and an adult enter into a joint agreement with a third party, who is liable to the third party?

    • A) Only the adult is liable.
    • B) Only the minor is liable.
    • C) Both are jointly liable.
    • D) Neither is liable because the agreement is partially void.
    Show answer & explanation

    Answer: A) Only the adult is liable.

    In a joint contract between a minor and an adult, the minor has no liability, and the entire liability for the performance of the contract falls on the adult.

11. Question 11

    Can a minor be appointed as an agent in a contract?

    • A) No, an agent must have full capacity to contract.
    • B) Yes, but the minor will not be personally liable to the principal.
    • C) Yes, and the minor will be fully liable for all their acts.
    • D) Only if the minor's parents sign the agency agreement.
    Show answer & explanation

    Answer: B) Yes, but the minor will not be personally liable to the principal.

    A minor can be an agent because an agent is just a conduit between the principal and a third party. However, the minor cannot be held personally liable for their actions as an agent.

12. Question 12

    Which of the following describes the liability of a guardian for a contract entered into by a minor?

    • A) The guardian is always personally liable.
    • B) The guardian is never liable.
    • C) The guardian is liable only if the minor acted as their agent or the contract is for necessaries.
    • D) The guardian is liable for 50% of the minor's debts.
    Show answer & explanation

    Answer: C) The guardian is liable only if the minor acted as their agent or the contract is for necessaries.

    A guardian is not liable for a minor's contracts unless the minor was acting as an agent for the guardian or the contract was specifically for the minor's necessaries.

13. Question 13

    If a person is usually of sound mind, but occasionally of unsound mind, can they make a contract when they are of unsound mind?

    • A) Yes, if the contract is fair.
    • B) No, they may not make a contract during those intervals.
    • C) Yes, because their 'general' state is sound mind.
    • D) Only if they are over 21 years old.
    Show answer & explanation

    Answer: B) No, they may not make a contract during those intervals.

    Section 12 states that a person who is usually of sound mind, but occasionally of unsound mind, may NOT make a contract when he is of unsound mind.

14. Question 14

    A contract made with an 'Alien Enemy' (a citizen of a country at war with Pakistan) during the wartime is:

    • A) Valid
    • B) Voidable
    • C) Void and illegal
    • D) Suspended until the war ends
    Show answer & explanation

    Answer: C) Void and illegal

    Contracts made with alien enemies during wartime are void on the grounds of public policy, as they could benefit the enemy nation.

15. Question 15

    Under the Contract Act, every person is competent to contract who is of the age of __________, is of __________, and is not __________ from contracting by any law.

    • A) 21; sound mind; disqualified
    • B) 18; sound mind; disqualified
    • C) 18; high intelligence; restricted
    • D) 15; sound mind; insolvent
    Show answer & explanation

    Answer: B) 18; sound mind; disqualified

    Section 11 defines competency: 'Every person is competent to contract who is of the age of majority according to the law... and who is of sound mind, and is not disqualified from contracting by any law to which he is subject'.