CIPS L4M3 Commercial Contracting Online Training

Question #109

XYZ Ltd and Engineer Corp signed a long-term supply contract in which both parties had agreed on performance targets. Recently, due to increased customer demands, XYZ Ltd realises that they should make changes to the contract with Engineer Corp with regards to performance management. These changes are approved and signed by both the buyer and seller.

The changes to the contract are known as…?

A . An amendment to the prime contract
B . A stand-alone subcontract to the prime contract
C . An appendix to the prime contract
D . A separate counter-offer to the supplier

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Correct Answer: A
A

Explanation:

The changes are made to the prime contract. They are also signed and approved by both parties. These changes are known as amendment (variation) to the contract. A contract amendment allows the parties to make a mutually agreed-upon change to an existing contract. An amendment can add to an existing contract, delete from it, or change parts of it. The original contract remains in place, only with some terms altered by way of the amendment.

Reference:

– Modify an Existing Contract with a Contract Amendment

– CIPS study guide page 26-28

LO 1, AC 1.1

Question #109

XYZ Ltd and Engineer Corp signed a long-term supply contract in which both parties had agreed on performance targets. Recently, due to increased customer demands, XYZ Ltd realises that they should make changes to the contract with Engineer Corp with regards to performance management. These changes are approved and signed by both the buyer and seller.

The changes to the contract are known as…?

A . An amendment to the prime contract
B . A stand-alone subcontract to the prime contract
C . An appendix to the prime contract
D . A separate counter-offer to the supplier

Reveal Solution Hide Solution

Correct Answer: A
A

Explanation:

The changes are made to the prime contract. They are also signed and approved by both parties. These changes are known as amendment (variation) to the contract. A contract amendment allows the parties to make a mutually agreed-upon change to an existing contract. An amendment can add to an existing contract, delete from it, or change parts of it. The original contract remains in place, only with some terms altered by way of the amendment.

Reference:

– Modify an Existing Contract with a Contract Amendment

– CIPS study guide page 26-28

LO 1, AC 1.1

Question #109

XYZ Ltd and Engineer Corp signed a long-term supply contract in which both parties had agreed on performance targets. Recently, due to increased customer demands, XYZ Ltd realises that they should make changes to the contract with Engineer Corp with regards to performance management. These changes are approved and signed by both the buyer and seller.

The changes to the contract are known as…?

A . An amendment to the prime contract
B . A stand-alone subcontract to the prime contract
C . An appendix to the prime contract
D . A separate counter-offer to the supplier

Reveal Solution Hide Solution

Correct Answer: A
A

Explanation:

The changes are made to the prime contract. They are also signed and approved by both parties. These changes are known as amendment (variation) to the contract. A contract amendment allows the parties to make a mutually agreed-upon change to an existing contract. An amendment can add to an existing contract, delete from it, or change parts of it. The original contract remains in place, only with some terms altered by way of the amendment.

Reference:

– Modify an Existing Contract with a Contract Amendment

– CIPS study guide page 26-28

LO 1, AC 1.1

Question #114

Technical and physical characteristics of the product

A . 2 and 4 only
B . 1 and 2 only
C . 1 and 4 only
D . 2 and 3 only

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Correct Answer: D
D

Explanation:

There are 2 major types of specifications:

Question #114

Technical and physical characteristics of the product

A . 2 and 4 only
B . 1 and 2 only
C . 1 and 4 only
D . 2 and 3 only

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Correct Answer: D
D

Explanation:

There are 2 major types of specifications:

Question #114

Technical and physical characteristics of the product

A . 2 and 4 only
B . 1 and 2 only
C . 1 and 4 only
D . 2 and 3 only

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Correct Answer: D
D

Explanation:

There are 2 major types of specifications:

Question #117

Which of the following are reasons why a purchaser wants to embed a subcontracting clause into the main contract? Select TWO that apply:

A . To induce the conflicts between the main contractor and subcontractors
B . To improve supply chain transparency
C . To reduce the main contract complexity
D . To keep main contractor liable
E . To condemn whole liabilities to subcontractors

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Correct Answer: B,D
B,D

Explanation:

There are number of reasons why the purchaser will want to control the supplier’s subcontracting:

– Supply chain transparency: Normally the purchaser has invested a lot of effort into selecting the right contractor. However, the main contractor’s selection of subcontractor might not be in such careful manner, which may result in poor performance. Purchaser must know who subcontractors are. Controlling the subcontracting process can help the purchaser control the outcome.

– Contract terms: the purchaser’s requirements must be reflected in the subcontracts. The subcontracting clauses may require the main contractor to do this.

– Liability: the main contractor may subcontract the whole or a part of its liabilities. Subcontracting clause may bind the contractor to be liable with the work, it cannot just blame the subcontractor for any faults.

Reference: CIPS study guide page 154-155

LO 3, AC 3.2

Question #118

Which of the following contracts would be best suited to a ‘variable pricing’ arrangement?

A . A contract for window cleaning during the next three months
B . A contract for road building estimated to take five years to complete
C . A contract for the supply of 100 printing machines to be delivered next month
D . A contract for the supply of lubricating oil for immediate delivery

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Correct Answer: B
B

Explanation:

Variable pricing is suitable to situations when the cost of certain elements of the product fluctuate unpredictably. For road building, asphalt fluctuates regularly. Furthermore, 5 years are long period, then variable pricing is the most appropriate method to achieve value for money and control budget.

A contract for window cleaning during the next three months is a short-term service contract, fixed price is the most suitable method.

A contract for the supply of lubricating oil for immediate delivery is an one-off contract, only fixed price is applicable.

A contract for the supply of 100 printing machines to be delivered next month is also an one-off contract.

Reference: CIPS study guide page 172-183

LO 3, AC 3.3

Question #118

Which of the following contracts would be best suited to a ‘variable pricing’ arrangement?

A . A contract for window cleaning during the next three months
B . A contract for road building estimated to take five years to complete
C . A contract for the supply of 100 printing machines to be delivered next month
D . A contract for the supply of lubricating oil for immediate delivery

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Correct Answer: B
B

Explanation:

Variable pricing is suitable to situations when the cost of certain elements of the product fluctuate unpredictably. For road building, asphalt fluctuates regularly. Furthermore, 5 years are long period, then variable pricing is the most appropriate method to achieve value for money and control budget.

A contract for window cleaning during the next three months is a short-term service contract, fixed price is the most suitable method.

A contract for the supply of lubricating oil for immediate delivery is an one-off contract, only fixed price is applicable.

A contract for the supply of 100 printing machines to be delivered next month is also an one-off contract.

Reference: CIPS study guide page 172-183

LO 3, AC 3.3

Question #118

Which of the following contracts would be best suited to a ‘variable pricing’ arrangement?

A . A contract for window cleaning during the next three months
B . A contract for road building estimated to take five years to complete
C . A contract for the supply of 100 printing machines to be delivered next month
D . A contract for the supply of lubricating oil for immediate delivery

Reveal Solution Hide Solution

Correct Answer: B
B

Explanation:

Variable pricing is suitable to situations when the cost of certain elements of the product fluctuate unpredictably. For road building, asphalt fluctuates regularly. Furthermore, 5 years are long period, then variable pricing is the most appropriate method to achieve value for money and control budget.

A contract for window cleaning during the next three months is a short-term service contract, fixed price is the most suitable method.

A contract for the supply of lubricating oil for immediate delivery is an one-off contract, only fixed price is applicable.

A contract for the supply of 100 printing machines to be delivered next month is also an one-off contract.

Reference: CIPS study guide page 172-183

LO 3, AC 3.3