diff --git a/contracts/governance/src/lib.rs b/contracts/governance/src/lib.rs
index 09c1e8c..4da09a1 100644
--- a/contracts/governance/src/lib.rs
+++ b/contracts/governance/src/lib.rs
@@ -21,6 +21,8 @@ mod prop_tests;
 mod benchmarks;
 #[cfg(test)]
 mod event_tests;
+#[cfg(test)]
+mod quorum_tests;
 
 use soroban_sdk::{contract, contractimpl, Address, BytesN, Env, String, Vec};
 
diff --git a/contracts/governance/src/quorum_tests.rs b/contracts/governance/src/quorum_tests.rs
new file mode 100644
index 0000000..4da8e2d
--- /dev/null
+++ b/contracts/governance/src/quorum_tests.rs
@@ -0,0 +1,237 @@
+//! Quorum and majority validation tests — issue #296
+//!
+//! Covers all edge cases for proposal finalization rules:
+//! - Quorum exactly met vs. just below quorum
+//! - Abstain counting toward quorum but not toward outcome
+//! - Tie (yes == no) results in rejection
+//! - Majority (yes > no) with quorum met results in pass
+
+#![cfg(test)]
+
+use soroban_sdk::{testutils::{Address as _, Ledger}, Address, Env, String};
+
+use crate::{
+    types::{ProposalState, Vote},
+    GovernanceContract, GovernanceContractClient,
+};
+use cosmosvote_token::{TokenContract, TokenContractClient};
+
+// ---------------------------------------------------------------------------
+// Helpers
+// ---------------------------------------------------------------------------
+
+fn setup(env: &Env) -> (GovernanceContractClient<'_>, TokenContractClient<'_>, Address) {
+    env.mock_all_auths();
+    let admin = Address::generate(env);
+
+    let token_id = env.register(TokenContract, ());
+    let token = TokenContractClient::new(env, &token_id);
+    token.initialize(
+        &admin,
+        &1_000_000_000i128,
+        &String::from_str(env, "CosmosVote"),
+        &String::from_str(env, "VOTE"),
+        &7u32,
+    );
+
+    let gov_id = env.register(GovernanceContract, ());
+    let gov = GovernanceContractClient::new(env, &gov_id);
+    gov.initialize(&admin, &token_id, &0i128, &0u64, &0u32, &false, &None);
+
+    (gov, token, admin)
+}
+
+fn make_voter(env: &Env, token: &TokenContractClient, admin: &Address, balance: i128) -> Address {
+    let voter = Address::generate(env);
+    token.mint(admin, &voter, &balance);
+    voter
+}
+
+fn create_proposal(gov: &GovernanceContractClient, env: &Env, proposer: &Address, quorum: i128) -> u64 {
+    gov.create_proposal(
+        proposer,
+        &String::from_str(env, "Quorum Test"),
+        &String::from_str(env, "Testing quorum and majority rules"),
+        &quorum,
+        &3600u64,
+        &None,
+        &None,
+    )
+}
+
+fn finalise(gov: &GovernanceContractClient, env: &Env, id: u64) {
+    let end = gov.get_proposal(&id).end_time;
+    env.ledger().with_mut(|l| l.timestamp = end + 1);
+    gov.finalise(&id);
+}
+
+// ---------------------------------------------------------------------------
+// Quorum edge cases
+// ---------------------------------------------------------------------------
+
+/// Quorum is exactly met (total_votes == quorum) and yes > no → Passed.
+#[test]
+fn test_quorum_exactly_met_passes() {
+    let env = Env::default();
+    let (gov, token, admin) = setup(&env);
+    // quorum = 1_000; voter has exactly 1_000 tokens
+    let voter = make_voter(&env, &token, &admin, 1_000);
+    let id = create_proposal(&gov, &env, &voter, 1_000);
+    gov.cast_vote(&voter, &id, &Vote::Yes);
+    finalise(&gov, &env, id);
+    assert_eq!(gov.get_proposal(&id).state, ProposalState::Passed);
+}
+
+/// One token below quorum → Rejected even if yes > no.
+#[test]
+fn test_quorum_one_below_rejects() {
+    let env = Env::default();
+    let (gov, token, admin) = setup(&env);
+    // quorum = 1_000; voter has only 999 tokens
+    let voter = make_voter(&env, &token, &admin, 999);
+    let id = create_proposal(&gov, &env, &voter, 1_000);
+    gov.cast_vote(&voter, &id, &Vote::Yes);
+    finalise(&gov, &env, id);
+    assert_eq!(gov.get_proposal(&id).state, ProposalState::Rejected);
+}
+
+/// No votes cast at all → Rejected (quorum not met).
+#[test]
+fn test_no_votes_rejects() {
+    let env = Env::default();
+    let (gov, token, admin) = setup(&env);
+    let proposer = make_voter(&env, &token, &admin, 10_000);
+    let id = create_proposal(&gov, &env, &proposer, 1_000);
+    finalise(&gov, &env, id);
+    assert_eq!(gov.get_proposal(&id).state, ProposalState::Rejected);
+}
+
+// ---------------------------------------------------------------------------
+// Abstain counting
+// ---------------------------------------------------------------------------
+
+/// Abstain votes count toward quorum but not toward yes/no outcome.
+/// abstain_weight >= quorum, but yes == 0 → Rejected (yes not > no).
+#[test]
+fn test_abstain_meets_quorum_but_no_majority_rejects() {
+    let env = Env::default();
+    let (gov, token, admin) = setup(&env);
+    let voter = make_voter(&env, &token, &admin, 5_000);
+    let id = create_proposal(&gov, &env, &voter, 5_000);
+    gov.cast_vote(&voter, &id, &Vote::Abstain);
+    finalise(&gov, &env, id);
+    assert_eq!(gov.get_proposal(&id).state, ProposalState::Rejected);
+}
+
+/// Abstain helps reach quorum; yes > no → Passed.
+#[test]
+fn test_abstain_plus_yes_meets_quorum_passes() {
+    let env = Env::default();
+    let (gov, token, admin) = setup(&env);
+    // quorum = 3_000; yes_voter = 2_000, abstain_voter = 1_000 → total = 3_000
+    let yes_voter = make_voter(&env, &token, &admin, 2_000);
+    let abs_voter = make_voter(&env, &token, &admin, 1_000);
+    let id = create_proposal(&gov, &env, &yes_voter, 3_000);
+    gov.cast_vote(&yes_voter, &id, &Vote::Yes);
+    gov.cast_vote(&abs_voter, &id, &Vote::Abstain);
+    finalise(&gov, &env, id);
+    assert_eq!(gov.get_proposal(&id).state, ProposalState::Passed);
+}
+
+/// Abstain alone is below quorum; yes > no but total < quorum → Rejected.
+#[test]
+fn test_abstain_below_quorum_rejects() {
+    let env = Env::default();
+    let (gov, token, admin) = setup(&env);
+    let yes_voter = make_voter(&env, &token, &admin, 1_000);
+    let abs_voter = make_voter(&env, &token, &admin, 500);
+    // quorum = 2_000; yes=1_000 + abstain=500 = 1_500 < 2_000
+    let id = create_proposal(&gov, &env, &yes_voter, 2_000);
+    gov.cast_vote(&yes_voter, &id, &Vote::Yes);
+    gov.cast_vote(&abs_voter, &id, &Vote::Abstain);
+    finalise(&gov, &env, id);
+    assert_eq!(gov.get_proposal(&id).state, ProposalState::Rejected);
+}
+
+// ---------------------------------------------------------------------------
+// Tie handling
+// ---------------------------------------------------------------------------
+
+/// Yes votes equal No votes (tie) → Rejected regardless of quorum.
+#[test]
+fn test_tie_yes_equals_no_rejects() {
+    let env = Env::default();
+    let (gov, token, admin) = setup(&env);
+    let yes_voter = make_voter(&env, &token, &admin, 5_000);
+    let no_voter = make_voter(&env, &token, &admin, 5_000);
+    // quorum = 10_000; both sides vote, total = 10_000 >= quorum but yes == no
+    let id = create_proposal(&gov, &env, &yes_voter, 10_000);
+    gov.cast_vote(&yes_voter, &id, &Vote::Yes);
+    gov.cast_vote(&no_voter, &id, &Vote::No);
+    finalise(&gov, &env, id);
+    assert_eq!(gov.get_proposal(&id).state, ProposalState::Rejected);
+}
+
+/// Tie with abstain also present → Rejected (yes still == no).
+#[test]
+fn test_tie_with_abstain_still_rejects() {
+    let env = Env::default();
+    let (gov, token, admin) = setup(&env);
+    let yes_voter = make_voter(&env, &token, &admin, 4_000);
+    let no_voter = make_voter(&env, &token, &admin, 4_000);
+    let abs_voter = make_voter(&env, &token, &admin, 2_000);
+    // quorum = 10_000; yes=4k no=4k abstain=2k → total=10k >= quorum, yes == no
+    let id = create_proposal(&gov, &env, &yes_voter, 10_000);
+    gov.cast_vote(&yes_voter, &id, &Vote::Yes);
+    gov.cast_vote(&no_voter, &id, &Vote::No);
+    gov.cast_vote(&abs_voter, &id, &Vote::Abstain);
+    finalise(&gov, &env, id);
+    assert_eq!(gov.get_proposal(&id).state, ProposalState::Rejected);
+}
+
+// ---------------------------------------------------------------------------
+// Majority scenarios
+// ---------------------------------------------------------------------------
+
+/// Yes > No, quorum met → Passed.
+#[test]
+fn test_yes_majority_quorum_met_passes() {
+    let env = Env::default();
+    let (gov, token, admin) = setup(&env);
+    let yes_voter = make_voter(&env, &token, &admin, 6_000);
+    let no_voter = make_voter(&env, &token, &admin, 4_000);
+    let id = create_proposal(&gov, &env, &yes_voter, 10_000);
+    gov.cast_vote(&yes_voter, &id, &Vote::Yes);
+    gov.cast_vote(&no_voter, &id, &Vote::No);
+    finalise(&gov, &env, id);
+    assert_eq!(gov.get_proposal(&id).state, ProposalState::Passed);
+}
+
+/// No > Yes, quorum met → Rejected.
+#[test]
+fn test_no_majority_quorum_met_rejects() {
+    let env = Env::default();
+    let (gov, token, admin) = setup(&env);
+    let yes_voter = make_voter(&env, &token, &admin, 3_000);
+    let no_voter = make_voter(&env, &token, &admin, 7_000);
+    let id = create_proposal(&gov, &env, &yes_voter, 10_000);
+    gov.cast_vote(&yes_voter, &id, &Vote::Yes);
+    gov.cast_vote(&no_voter, &id, &Vote::No);
+    finalise(&gov, &env, id);
+    assert_eq!(gov.get_proposal(&id).state, ProposalState::Rejected);
+}
+
+/// Yes by single token margin, quorum exactly met → Passed.
+#[test]
+fn test_yes_wins_by_one_token_passes() {
+    let env = Env::default();
+    let (gov, token, admin) = setup(&env);
+    let yes_voter = make_voter(&env, &token, &admin, 5_001);
+    let no_voter = make_voter(&env, &token, &admin, 5_000);
+    // quorum = 10_001
+    let id = create_proposal(&gov, &env, &yes_voter, 10_001);
+    gov.cast_vote(&yes_voter, &id, &Vote::Yes);
+    gov.cast_vote(&no_voter, &id, &Vote::No);
+    finalise(&gov, &env, id);
+    assert_eq!(gov.get_proposal(&id).state, ProposalState::Passed);
+}