CAIIB · Banking Regulations & Business Laws · Module D — Commercial & Other Laws with Reference to Banking Operations
CAIIB BRBL Unit 25 — The Indian Contract Act, 1872 (Units 25A–25F): Free MCQs with Explanations
By Swarnakshi Jha (ex-banker) · Updated 29 October 2026 · Paper IV of the December 2026 cycle (Sunday 20 December 2026)
This is the free practice page for CAIIB BRBL Unit 25 — The Indian Contract Act, 1872 (Units 25A–25F) (Module D — Commercial & Other Laws with Reference to Banking Operations). The CAIIB Mock Centre holds 240 questions on this unit alone, every one with a why-right / why-wrong explanation; below are the facts examiners keep returning to, five practice questions with explanations, and the traps that cost marks.
BRBL · Module D240 MCQs in the Mock Centre5 free belowPaper on 20 December
Key facts examiners test from this unit
Meaning and essentials of a contract — a contract is an agreement enforceable by law, made with free consent by competent parties, for lawful consideration and object, and not declared void.
Contracts of indemnity — an indemnity is a two-party promise to save the other from loss; the indemnity holder recovers damages, costs and prudent compromises.
Contracts of guarantee — a surety answers for a third person's default; his liability is co-extensive, and he is discharged by changes, releases or compositions made without his consent.
Changed since the textbook
Gold and silver loan directions (1 Apr 2026). RBI's (Lending Against Gold and Silver Collateral) Directions, 2025, issued on 6 June 2025 and applying from 1 April 2026, cap the loan-to-value ratio for consumption loans at 85% up to ₹2.5 lakh, 80% above ₹2.5 lakh up to ₹5 lakh and 75% above ₹5 lakh; require pledged ornaments to be returned the same day or within 7 working days of full repayment, with ₹5,000 a day paid to the borrower for delay attributable to the lender; and require auctions with public notice, a reserve price of at least 90% of the current value (85% after two failed auctions) and refund of any surplus within 7 … Source: IndiaLaw
Deceased customers' claims: indemnity limits (31 Mar 2026). RBI's Directions of September 2025 on settling claims of deceased customers, to be implemented by 31 March 2026, require claims to be settled within 15 days of complete documents. Without a nominee or survivor, claims up to ₹15 lakh (₹5 lakh in co-operative banks) are settled on a simplified procedure with an indemnity bond but no third-party surety; nominees and survivors cannot be asked for an indemnity bond. Delay costs interest at Bank Rate plus 4% a year on deposits and ₹5,000 a day for lockers and safe custody articles. Source: IndiaLaw
5 free practice questions — tap an option
Five practice questions from this unit. Answers lock on the first tap, exactly as in the exam, and an explanation opens underneath. The Mock Centre has all 240 questions on this unit, from easy to tough, with caselets and key-in numericals, why every other option is wrong and the exam tip — and tracks your score and revision dates.
Question 1 of 5
Where both parties to an agreement are under a mistake as to a matter of fact essential to it, the agreement is:
Why (c): Section 20 makes an agreement void where both parties are under a mistake as to a matter of fact essential to it. (a) is wrong: Voidability is for misrepresentation or fraud, not mutual mistake. (b) is wrong: A mutual mistake of essential fact defeats the agreement. (d) is wrong: The mistake here is of fact, which voids it.
Question 2 of 5
An indemnifier's liability is:
Why (a): The indemnifier's obligation is a standalone primary one, not dependent on another's default. (b) is wrong: That describes a surety. (c) is wrong: Co-extensiveness does not apply. (d) is wrong: He is liable.
Question 3 of 5
A customer leaves his car at a garage for repair. Under the Contract Act, what is this transaction?
Why (d): Section 148 defines a bailment as the delivery of goods for a purpose, on a contract that they be returned or disposed of as directed when the purpose is done; a car left for repair fits this. (a) is wrong: No price is paid for the car and ownership does not pass, so it is not a sale. (b) is wrong: A pledge is a bailment of goods as security for a debt; the car is left for repair. (c) is wrong: The owner expects the car back, so it is not a gift.
Question 4 of 5
The main difference between a pledge and a lien is that a lien:
Why (a): A lien is only a right to retain; a pledge carries a power of sale. (b) is wrong: That describes a pledge. (c) is wrong: They are different rights. (d) is wrong: A pledge is assignable.
Question 5 of 5
An agent with unlimited authority to do any lawful act is a:
Why (d): A universal agent may bind the principal by any lawful act. (a) is wrong: A broker negotiates deals. (b) is wrong: An insurance agent has limited authority. (c) is wrong: A sub-agent acts under an agent.
0 of 5 answered.
Traps in this unit
Treating the Section 25(1) conditions as alternatives.
Calling fraud or coercion void instead of voidable.
Calling every insurance policy an indemnity.
Practise all 240 questions on Unit 25. The free CAIIB demo opens Units 1–2 of every paper with full explanations; the BRBL Online Mock Centre unlocks all 5,800+ BRBL questions, the full-length papers with caselets and key-ins, module mocks and Smart Revision for 18 months (₹1,499).
Independent study aid — not affiliated with, endorsed by, or sponsored by the Indian Institute of Banking & Finance (IIBF). Exam pattern, dates, fees and passing criteria are set by IIBF — always confirm the current rules at iibf.org.in. CAIIB content follows rules and developments up to IIBF's cut-off of 30 June 2026 (where a rule changed later, the update box says so); verify from official sources before relying on them in practice.