CAF-4 · Chapter 9

Discharge of a contract MCQs with Answers

12 multiple-choice questions on Discharge of a contract for CAF-4 Business Law Dynamics. Try each one before revealing the answer and explanation.

1. Question 1

   If the performance of an act becomes impossible after the contract is made, by reason of some event which the promisor could not prevent, the contract becomes:

   • A) Voidable.
   • B) Void.
   • C) Enforceable.
   • D) Illegal.
   Show answer & explanation

   Answer: B) Void.

   Section 56 states that a contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.

2. Question 2

   If the parties to a contract agree to substitute a new contract for it, or to rescind it, or alter it, the original contract:

   • A) Must still be performed.
   • B) Need not be performed.
   • C) Becomes illegal.
   • D) Is suspended.
   Show answer & explanation

   Answer: B) Need not be performed.

   Section 62 (Novation) states that if the parties agree to a new contract (or rescission/alteration), the original contract is discharged.

3. Question 3

   The substitution of a new contract in place of an existing one is legally known as:

   • A) Rescission
   • B) Alteration
   • C) Novation
   • D) Remission
   Show answer & explanation

   Answer: C) Novation

   Novation occurs when a new contract is substituted for an old one, either between the same parties or different parties.

4. Question 4

   Every promisee may dispense with or 'remit', wholly or in part, the performance of the promise made to him. This is known as:

   • A) Novation
   • B) Remission
   • C) Rescission
   • D) Waiver
   Show answer & explanation

   Answer: B) Remission

   Section 63 allows a promisee to remit (forgive) the performance of a promise or extend the time for performance.

5. Question 5

   When a person at whose option a contract is voidable 'rescinds' it, the other party:

   • A) Must still perform his part.
   • B) Need not perform any promise therein contained.
   • C) Is entitled to a refund only.
   • D) Can sue for breach.
   Show answer & explanation

   Answer: B) Need not perform any promise therein contained.

   Section 64 states that when a voidable contract is rescinded, the other party is discharged from performance.

6. Question 6

   Which of the following describes 'discharge by operation of law'?

   • A) Death of a party in a contract involving personal skills.
   • B) Insolvency of a party.
   • C) Merger of a lower right into a higher right.
   • D) All of the above.
   Show answer & explanation

   Answer: D) All of the above.

   Death (in personal contracts), insolvency, and merger are all ways a contract is discharged by the operation of law, without any action by the parties.

7. Question 7

   A contract is discharged by 'breach' when a party:

   • A) Performs the contract.
   • B) Fails to perform his obligation without a legal excuse.
   • C) Agrees to a new contract.
   • D) Dies.
   Show answer & explanation

   Answer: B) Fails to perform his obligation without a legal excuse.

   Breach occurs when a party fails to fulfill their contractual duty either at the time of performance or before (anticipatory breach).

8. Question 8

   Azam owes Babar Rs. 5,000. Azam pays Babar, and Babar accepts, in satisfaction of the whole debt, Rs. 2,000 paid at the time and place at which the Rs. 5,000 were payable. The whole debt is:

   • A) Still Rs. 3,000.
   • B) Discharged.
   • C) Voidable.
   • D) Illegal.
   Show answer & explanation

   Answer: B) Discharged.

   Under Section 63 (Remission), a promisee can accept a smaller sum in full satisfaction of a larger debt, and the debt is discharged.

9. Question 9

   Alteration of a contract means:

   • A) Changing one or more of the terms of the contract with the consent of all parties.
   • B) Replacing the parties.
   • C) Cancelling the contract.
   • D) Forgiving the debt.
   Show answer & explanation

   Answer: A) Changing one or more of the terms of the contract with the consent of all parties.

   Alteration involves modifying existing terms without changing the parties, whereas novation often involves changing the parties or the entire contract.

10. Question 10

    If a contract is broken by the promisor, the promisee may:

    • A) Terminate the contract.
    • B) File a suit for damages.
    • C) File a suit for specific performance.
    • D) Any of the above, depending on circumstances.
    Show answer & explanation

    Answer: D) Any of the above, depending on circumstances.

    The law provides several remedies for breach, including rescission (termination), damages, and specific performance.

11. Question 11

    Which of the following is NOT a ground for 'frustration' (impossibility) of contract?

    • A) Destruction of subject matter.
    • B) Change of law.
    • C) Commercial impossibility (performance becomes un-profitable).
    • D) Outbreak of war.
    Show answer & explanation

    Answer: C) Commercial impossibility (performance becomes un-profitable).

    Commercial hardship or a drop in profits is NOT a legal excuse for non-performance. Performance must be 'legally' or 'physically' impossible for frustration to apply.

12. Question 12

    Rescission of a contract means:

    • A) Cancellation of the contract.
    • B) Modification of the contract.
    • C) Substitution of the contract.
    • D) Performance of the contract.
    Show answer & explanation

    Answer: A) Cancellation of the contract.

    Rescission is the act of revoking or cancelling a contract, which brings the parties back to their original position (status quo ante).