CIPS L5M3 Exam Practice Test Instant Access

Question 1

Conciliation differs from mediation in which of the following ways?

Amediation is voluntary and conciliation is mandatory

Bmediation is cheaper than conciliation

Cthe outcome of mediation is not binding and the outcome of conciliation is binding

Dthe mediator has no decision making power but a conciliator can provide recommen-dations

Answer : D

The true statement is 'the mediator has no decision making power but a conciliator can provide recommendations'. The other statements are false; both processes are voluntary, cheap and non-binding.

Question 2

Logan Gin Distillery is creating a contract for one of its new suppliers. It is a complicated item that they are ordering and if things go wrong, it would have an extremely negative impact on production, and therefore on revenue. However it is impossible to say what the cost of this would be if things were to go wrong. What type of clause should be included in the contract?

Aliquidated damages

Bunliquidated damages

Cpenalty clause

Dservice credit

Answer : C

Unliquidated damages would be the best to include as there is no way of identifying a figure for liquidated damages. This would be the safest thing for the buyer to do. P.108 - section on Unliqui-dated Damages.

Question 3

R3D3 is a computer manufacturer who has had an issue with their supplier. They are seeking a conflict resolution approach which is flexible but will provide a binding and enforceable outcome. They would like the resolution to be confidential and directed by an independent third party that is appointed for them. Which of the following would be the best conflict resolution for them to select?

Amediation

Barbitration

Cnegotiation

Dlitigation

Answer : B

Arbitration ticks all of the boxes required by R3D3. Mediation isn't correct because it's not binding. Negotiation isn't correct because there's no 3rd party. Litigation isn't correct because it's not confidential. See p. 80 for more on arbitration.

Question 4

Lollypop Manufacturer has a long standing contract with Retailer

AThey are three years into a five year contract and have been providing lollypops at 10p each since the beginning of the contract. Due to changes in the supply chain Lollypop Manufacturer would like a price increase. Can this be done?

Ano- the contract is ongoing for another 2 years

Bno- this would be unfair on the buyer

Cyes- if there is a variation clause and both parties agree

Dyes- prices always go up in contracts

Answer : C

yes- if there is a variation clause and both parties agree. This would usually be written in as a 'price adjustment clause' but if it's not, then it could be agreed and signed by both parties as a 'contract variation'. See p.16 for more details

Question 5

Which of the following would constitute an offer? Select TWO:

Aa display in a shop window

Ban advert on a website

Can auction

Da bid on an auction

Ea price proposal that is valid for 14 days

Answer : D, E

Offers include bids on an auction and a price proposal that is valid for 14 days. The other three options are Invitations to Treat. See p.3 for the full list of what constitutes an Invitation to Treat. The tricky thing here is that an auction is an invitation to treat but a bid on an auction is an offer. An auction is an ITT because you're encouraging people to make an offer to you. A bid on the auction is the offer (you offer to buy something at a price you propose).

Question 6

Which of the following is usually the default method for resolving disputes?

Alitigation

Bmediation

Cnegotiation

Dconciliation

Answer : C

Negotiation is usually the default method for resolving disputes. This is a direct quote from p.63

Question 7

Tutu Incorporated has a contract with a software company to provide their IT software. They want to ensure that the supplier pays compensation if there are any issues with service (e.g. the software doesn't work for a day). Which two items would Tutu Incorporated need to include in the contract?

Aunliquidated damages

Bletter of credit

Cservice level agreement

Dservice credit

Einsurance

Answer : C, D

They should include service credits and a service level agreement. Service Credits allow the buyer to claim back if the service drops below an agreed standard. That standard needs to be clearly out-lined in an SLA. See p.31 for more details

CIPS Managing Contractual Risk L5M3 Exam Practice Test