CIPS L4M3 Commercial Contracting Exam Practice Test

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Total 189 questions
Question 1

Which of the following are most likely to be substantive elements of the specification of a truck? Select TWO that apply:



Answer : A, C

The key substantive elements to be included in a specification are:

- Characteristics of the product or service

- Time scale for delivery

- Response times for defects

- KPIs relating to performance and reliability

- Lifespan and durability expectations

- Documentary requirement for training/user manual and/or management information

- Any specific requirements regarding implementation


LO 2, AC 2.1

Question 2

Which of the following should be applied when measuring frequency of on-time deliveries during a contract period?



Answer : B

Number of on-time deliveries can be quantified, then numerical measures can be applied.

Frequency of on-time deliveries is measured as on-time deliveries as a percentage of total no. of deliveries for period.

LO 2, AC 2.2


Question 3

Which of the following are commonly used as model forms of contracts in construction in the UK?



Answer : B, D

- NEC: New Engineering Contract - a family of standard contracts primarily used in construction in the UK; includes works, consultants, services

- JCT: Joint Contracts Tribunal - a family of standard contracts used in construction in the UK; includes works, consultants. subcontracts, services

- AS: Australian Standards contracts - different contracts for a range of purchase types including constructions, consultancy, periodic supply of goods

- IET: Institution of Engineering and Technology which issue jointly agreed model forms covering the design, supply and installation of electrical, electronic and mechanical plant 'including special conditions for the ancillary development of software'

- CIPS: Chartered Institute of Procurement and Supply - CIPS has developed its own suites of standard forms of contract for IT functions including: supply and installation of computer equipment, support and maintenance of bespoke software, servicing of computer equipment.


LO3, AC 3.1

Question 4

Under which of the following scenarios an RFQ is most likely to be used?



Answer : A

The request for quotations is a procurement method that is used for small value procurements of readily available off-the-shelf goods, small value construction works, or small value services procurements. Request for quotations works best under a framework agreement

This procurement method is also known as invitation to quote and shopping, and it does not require the preparation of tender documents to the same extent as open tendering, request for proposals or two-stage tendering.

Among 4 options:

- 'Purchase of a small number of standardised products under a framework agreement': the products are standardised and there is a framework agreement in place, so RFQ is the best solution.

- 'Purchase of complex machinery': Complex machinery is often a large purchase. Furthermore, suppliers' quality may vary. So RFQ is not suitable, instead, depending on the situation, buyer may opt ITT or RFP to purchase this type of machinery.

- 'Design of a unique and complex software code': Unique and complex software is not off-the-shelf, thus RFQ is not suitable.

- 'When the buying organisation does not know the requirements in details and needs the input from suppliers': When the detailed requirements are unknown, the best solution is request for proposal or developing dialogue with suppliers.


- Request for Quotations

- CIPS study guide page 3-4

LO 1, AC 1.1

Question 5

Michelle contacts Hannah and asks her if she would be interested in purchasing her car for 2000. Hannah immediately takes 2000 to Michelle and says she wants to buy the car. Michelle subsequently refuses to proceed. Has the contract between Michelle and Hannah been made?



Answer : A

To solve the question, you must distinguish the following notion:

- Offer: The case of Storer v Manchester City Council [1974] 1 WLR 1403 outlines that an offer is: An expression of willingness to contract on specified terms, with the intention that it is to be binding once accepted

- Acceptance: in order for a contract to be formed, the offer must be accepted. Acceptance represents the meeting of the minds of the parties to the contract -- both agree to exchange something for the other (payment, services, goods, etc.).

- Counter offer: is an offer made in response to a prior offer.

- Invitation to treat: An important distinction to make in contract law is that between an offer and an invitation to treat. An invitation to treat is usually an invitation for another party to make an offer. It may also be defined as an indication that a party is open to negotiation.

Here are some key distinctions of offers and invitation to treats.

Offer:

* Certain promise to be bound

* Clear and specified terms

* The conduct or words of the party show certainty

* There is no room for negotiation

Invitation to treat:

* There is room for negotiation

* There is an invitation for offers

* There is a request for information

* Lack of certainty

In the scenario above, initially Michelle just gives an invitation to treat because she is asking whether Hannah is interested to buy her car (request for information from Hannah). Hannah may reject or go into a negotiation with Michelle. Then, Hannah makes an offer by taking the money and shows her intention to be legally bound. At this point, when Hannah's offer is present, Michelle can accept or reject. When she rejects, the contract is not formed. The answer must be 'No, because Michelle has rejected Hannah's offer on buying the car'.


- Definition of Counter Offer

- Formation of the contract

- CIPS study guide page 28-35

LO 1, AC 1.2

Question 6

Which of the following is an example of liquidated damages clause?

1. "In the event of a delay to the Offshore Installation Completion Date as per the Contract Schedule for which Contractor is solely responsible, Contractor shall pay to Company 0.25% per day of delay, subject to a maximum of 10% of the Initial Contract Price."

2. ''If Seller breaches its obligation to deliver goods in accordance with the schedule provided for in this contract, Seller shall pay Buyer $x per day for each day of delay"

3. "The Contractor shall defend and hold the Buyer, its officers, officials, employees and volunteers harmless from any and all claims, injuries, damages, losses or suits including attorney fees, arising out of or in connection with the performance of this Agreement, except for injuries and damages caused by the sole negligence of the Buyer."

4. "The contract is subjected to delay remedies. The amount will be agreed by both parties during the delivery"



Answer : D

Liquidated damages, also referred to as 'liquidated and ascertained damages' (LADs) are damages whose amount the parties designate during the formation of a contract[2] for the injured party to collect as compensation upon a specific breach (e.g. late performance). In supply contracts and work contracts, the liquidated damages clause often take form as known damages to be paid per day delayed. Number 1 and 2 are examples of this clause.


- Liquidated damages

- CIPS study guide 158-159

LO 3, AC 3.2

Question 7

Which of the following are likely to be implied terms in a contract? Select TWO that apply:



Answer : A, D

An implied term is a term which the courts imply into a contract because it has not been expressly included by the parties. This may be because the parties did not consider it, did not think that any problem would arise in relation to it or simply omitted to include it.

The courts are very reluctant to imply terms into contracts and will only do so in the following circumstances:

- terms implied under statute

- terms implied under common law

- terms implied because of custom or usage

- terms implied due to previous dealings

- terms implied 'in fact' or to reflect the parties' intentions


- Contracts: Express and Implied Terms

- CIPS study guide page 32

LO 1, AC 1.2

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Total 189 questions