CIPS L5M3 Exam Questions Instant Access - No Installation Required

Question 1

What is the name given to a term in a contract where one party promises to compensate the other party for a trigger event?

Aliability

Bwarranty

Cdamages

Dindemnity

Answer : D

Indemnity- this is the definition given on p. 20

Question 2

Which of the following processes is the most adversarial?

Amediation

Blitigation

Cadjudication

Dnegotiation

Answer : B

Litigation is the most adversarial. It's usually the last resort and shouldn't be used if you want to preserve the working relationship. P. 145

Question 3

Kranky Kat Ltd has just been through an adjudication process with a supplier it worked with who committed a breach in the contract. Kranky Kat is not happy with the outcome of the adjudication, what can Kranky Kat do?

Amove on to litigation

Bappeal the decision

Cnothing - the decision made by the adjudicator is binding

Dnothing - the decision made by the adjudicator is legally enforceable

Answer : B

If you're not happy with the decision of an adjudication you can appeal the decision. So option 2 is correct. If the appeal is turned down then unfortunately there's not much more you can do as adjudication is binding and legally enforceable. See p. 143 for more info on adjudication

Question 4

Molly is a wedding planner who has just set up as a sole-trader. She has a meeting with a po-tential couple to organise their wedding. The couple is extremely risk adverse and have asked Molly to email them a copy of her insurances. Which insurances should Molly send? Select TWO

AProducts Liability Insurance

BEmployers Liability Insurance

CProfessional Indemnity Insurance

DPublic Liability Insurance

Answer : C, D

The correct answers are indemnity insurance and public liability insurance. Molly doesn't have any products so this wouldn't be required- she's a consultant. As a sole-trader she doesn't have employees so doesn't need Employer's Liability Insurance. The book does not go into much detail about types of insurances - but this is a known exam topic. So if you aren't confident on these four types of insurance and when you'd expect a supplier to have them - do some extra research before the exam. Insurance types are briefly mentioned on p. 25

Question 5

A breach of representation by party A in a contract would allow party B to do what?

Arescind the contract

Bclaim damages

Crescind the contract and claim damages

Dnothing - this is not a fundamental breach

Answer : C

A breach of representation is a major/ fundamental breach and allows the innocent party to rescind the contract and claim damages. A Breach of Representation is when you provide false information about who you are- this might have been a fundamental reason as to why the contract went ahead. If it turns out not to be true, the other party has the right to cancel the contract and claim damages. See p.126

Question 6

Verity Fashion is a clothing manufacturer and has an order to create 10,000 pairs of flipflops for a retailer for the summer. The order was placed over the phone in February. The order has been completed and has been boxed up ready for delivery. The retailer calls Verity Fashion in June and says that the order is no longer required. What action can Verity Fashion take?

Asue for damages as the flip flops have already been made and this incurred costs

Bnothing- there is no written contract in place

Csubcontract the manufacturing of the flipflops to a third party

Dclaim on insurance

Answer : A

Verity can sue for damages. The order was placed over the phone meaning that there was a verbal contract in place. Contracts do not need to be written to be enforceable so option 2 is incorrect. There is no termination clause mentioned in the question so you can assume that there isn't one. This means that the retailer is committing a breach of the verbal contract by cancelling the order. Verity could therefore apply for damages. (Whether or not they'd be awarded is a different matter!). This question tests your understanding of when contracts can be terminated and remedies for breaches. See p. 134.

Question 7

Fishfingers Ltd has a contract with a supplier of cod. When the contract was set up it was not known how important specific delivery times would be for the arrival of the fish. After several months it has now become apparent that delivering the fish within 3 hours of them being caught is fundamental to the contract as delayed delivery results in poorer quality Fish Fingers. When the contract was set up what was the delivery times?

Aa condition of the contract

Ba warranty

Can innominate term

Da time is of the essence clause

Answer : C

An Innominate Term is the correct answer. At the time the contract was written, we didn't know how important the delivery time was - therefore it wasn't a condition or a warranty- it was an innominate term. An innominate term is a term that is difficult to classify at the time of drafting a contract. A time is of the essence clause would be a good thing to include in this contract now that we know how important the delivery times are. For more information on Conditions, Warranties and Innominate Terms see p. 43

CIPS Managing Contractual Risk L5M3 Exam Questions