CIPS L5M3 Exam Practice Test Instant Access

Question 1

If a party is to 'repudiate' a contract, what does this mean?

Athe party is cancelling the contract as it is no longer needed

Bthe party is using the break-clause to end the contract

Cthe party indicates they no longer intend to fulfil their contractual obligations, usually in response to a breach

Dthe party gives notice that they anticipate that they will not be able to fulfil their future obligations

Answer : C

'the party indicates they no longer intend to fulfil their contractual obligations, usually in response to a breach'. This is the definition of 'repudiate' given on p. 128 Before the exam check you understand the difference between repudiate, rescind and revoke. These are all ways contracts can end but are slightly different.

Question 2

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 3

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 4

Which of the following conflict resolution styles may involve a private caucus and a joint ses-sion?

Amediation

Badjudication

Cnegotiation

Dlitigation

Answer : A

This is Mediation. The private caucus is when each of the parties meets in private with the media-tor, this is usually after a joint session between the three parties. See p.71 for more information on mediation

Question 5

Robert has a contract with Farmer Ted who provides his manufacturing firm with potatoes. There is a contract in place, signed by both parties that Ted will deliver 2 tonnes of potatoes per week. Due to changes in demand, Robert would like Ted to start providing 3 tonnes of potatoes every three weeks. What must be in place for this change to occur?

Aa variation clause and a new liquidated damage fee

Ba variation clause and a signed agreement by both parties

Ca notification of change and adequate compensation

Da notification of change and indemnity

Answer : B

A variation clause and signed agreement by both parties is required to make the change. See p.16-17 for more information on contract variations. Note a 'notification of change' isn't valid unless it's accepted by the other party- so it's a good idea for both parties to sign to say they agree to the change.

Question 6

Which of the following is not a way in which a contract can end?

Aperformance

Bagreement

Clitigation

Dbreach

Answer : C

Litigation is the correct answer. This is not a way in which a contract can end- it is a conflict resolution method. The three ways in which a contract can end are; performance, agreement and breach. See p. 42 for more details on how contracts end

Question 7

Tyrone Enterprises has just come out of a meeting with one of its suppliers Bob. The meeting has not gone well and the contract has become frustrated. What does this mean?

ANegotiations between the buyer and supplier have failed and dispute resolution will need to take place

Bthe supplier has committed a major breach and is unable to fulfil the contract

Ca situation has occurred which means that the contract can no longer be performed

DThe buyer no longer requires the supplier but is tied into the contract

Answer : C

Frustrated is when 'a situation has occurred which means that the contract can no longer be per-formed'. The situation is one which is outside of the control of either party and its no one's fault that this has happened. A common example of this is when contracts were unable to be performed due to Covid-19 and the national lockdown. The government mandated everyone 'stay at home' and therefore some business contracts were unable to be fulfilled, and were therefore 'frustrated' (for example the delivery of popcorn to cinemas- the cinemas were told by the government to close so the popcorn couldn't be delivered. This wasn't anyone's fault). See p. 47 for more information on Contract Frustration

CIPS Managing Contractual Risk L5M3 Exam Practice Test