CIPS L4M3 Commercial Contracting Online Training
CIPS L4M3 Online Training
The questions for L4M3 were last updated at Nov 23,2024.
- Exam Code: L4M3
- Exam Name: Commercial Contracting
- Certification Provider: CIPS
- Latest update: Nov 23,2024
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
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
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
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
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 #123
Product function
- A . 2 and 4 only
- B . 3 and 4 only
- C . 1 and 2 only
- D . 1 and 3 only
Correct Answer: A
A
Explanation:
There are two main types of specification: performance specification and conformance specification (sometimes called prescriptive or technical specifications). Performance specifications have following features:
– Focus on outputs
– Set out result to be achieved
– The ‘what’, not the ‘how’
– Give supplier flexibility to present solutions that the buyer may not have considered
Reference: CIPS study guide page 8-10
LO 1, AC 1.1
A
Explanation:
There are two main types of specification: performance specification and conformance specification (sometimes called prescriptive or technical specifications). Performance specifications have following features:
– Focus on outputs
– Set out result to be achieved
– The ‘what’, not the ‘how’
– Give supplier flexibility to present solutions that the buyer may not have considered
Reference: CIPS study guide page 8-10
LO 1, AC 1.1
Question #124
A buyer and a supplier plan to sign a contract with cost-plus arrangement. If the cost base is $350 and the markup component is 11% then the invoice price will be…
- A . 393.26
- B . 388.5
- C . 368.5
- D . 362
Correct Answer: B
B
Explanation:
Markup is the percentage between the profit and costs. The cost is $350, markup is 11%. So final price is: 350 + 350×0.11 = 388.5
Reference: CIPS study guide page 177
LO 3, AC 3.3
B
Explanation:
Markup is the percentage between the profit and costs. The cost is $350, markup is 11%. So final price is: 350 + 350×0.11 = 388.5
Reference: CIPS study guide page 177
LO 3, AC 3.3
Question #125
Which of the following are key features of standard terms and conditions? Select TWO that apply
- A . Standard terms always comply with implied terms
- B . Specific to each purchase order
- C . Non-disclosure
- D . Non-negotiable
- E . Designed to be used in repetitive transactions
Correct Answer: D,E
D,E
Explanation:
The key features, advantages and disadvantages of standard terms are summarized below:
– Form: Concise, generic and designed to be attached to purchase or sales orders
– Non-negotiable
– Ineffective terms: may be replaced by implied terms or national legal code rules, or subject to court ‘balance of interest’ judgement.
– Advantages: Basic contractual protection for most common circumstances; Avoid having to create new contract for repeat business.
– User friendly
– Usage: Low value, low risk, repetitive transactions
– Coverage: Definitions, relationship to other contracts, formation of the contract, order of precedence, price, invoicing and payment, specification, legal compliance, warrantee and liability, ownership and risk, intellectual property, data management and ethics.
– Disadvantages: Does not allow for specific circumstances; Risk for creating battle of the forms; Can create contractual uncertainty if used with purchase orders under call-off
contracts.
Reference: CIPS study guide page 139
LO 3, AC 3.1
D,E
Explanation:
The key features, advantages and disadvantages of standard terms are summarized below:
– Form: Concise, generic and designed to be attached to purchase or sales orders
– Non-negotiable
– Ineffective terms: may be replaced by implied terms or national legal code rules, or subject to court ‘balance of interest’ judgement.
– Advantages: Basic contractual protection for most common circumstances; Avoid having to create new contract for repeat business.
– User friendly
– Usage: Low value, low risk, repetitive transactions
– Coverage: Definitions, relationship to other contracts, formation of the contract, order of precedence, price, invoicing and payment, specification, legal compliance, warrantee and liability, ownership and risk, intellectual property, data management and ethics.
– Disadvantages: Does not allow for specific circumstances; Risk for creating battle of the forms; Can create contractual uncertainty if used with purchase orders under call-off
contracts.
Reference: CIPS study guide page 139
LO 3, AC 3.1
Question #126
Which of the following documents are likely to have legal standing? Select TWO that apply:
- A . Quotation
- B . Request for information
- C . Tender
- D . Requisition
- E . Estimate
Correct Answer: A,C
A,C
Explanation:
A quotation and a tender are both firm offers which have legal standing to the offeror. Tenders are more detailed than quotations and will include quality aspects as well as prices.
LO 1, AC 1.1 & AC 1.2
A,C
Explanation:
A quotation and a tender are both firm offers which have legal standing to the offeror. Tenders are more detailed than quotations and will include quality aspects as well as prices.
LO 1, AC 1.1 & AC 1.2
Question #126
Which of the following documents are likely to have legal standing? Select TWO that apply:
- A . Quotation
- B . Request for information
- C . Tender
- D . Requisition
- E . Estimate
Correct Answer: A,C
A,C
Explanation:
A quotation and a tender are both firm offers which have legal standing to the offeror. Tenders are more detailed than quotations and will include quality aspects as well as prices.
LO 1, AC 1.1 & AC 1.2
A,C
Explanation:
A quotation and a tender are both firm offers which have legal standing to the offeror. Tenders are more detailed than quotations and will include quality aspects as well as prices.
LO 1, AC 1.1 & AC 1.2
Question #126
Which of the following documents are likely to have legal standing? Select TWO that apply:
- A . Quotation
- B . Request for information
- C . Tender
- D . Requisition
- E . Estimate
Correct Answer: A,C
A,C
Explanation:
A quotation and a tender are both firm offers which have legal standing to the offeror. Tenders are more detailed than quotations and will include quality aspects as well as prices.
LO 1, AC 1.1 & AC 1.2
A,C
Explanation:
A quotation and a tender are both firm offers which have legal standing to the offeror. Tenders are more detailed than quotations and will include quality aspects as well as prices.
LO 1, AC 1.1 & AC 1.2
Question #126
Which of the following documents are likely to have legal standing? Select TWO that apply:
- A . Quotation
- B . Request for information
- C . Tender
- D . Requisition
- E . Estimate
Correct Answer: A,C
A,C
Explanation:
A quotation and a tender are both firm offers which have legal standing to the offeror. Tenders are more detailed than quotations and will include quality aspects as well as prices.
LO 1, AC 1.1 & AC 1.2
A,C
Explanation:
A quotation and a tender are both firm offers which have legal standing to the offeror. Tenders are more detailed than quotations and will include quality aspects as well as prices.
LO 1, AC 1.1 & AC 1.2
Question #126
Which of the following documents are likely to have legal standing? Select TWO that apply:
- A . Quotation
- B . Request for information
- C . Tender
- D . Requisition
- E . Estimate
Correct Answer: A,C
A,C
Explanation:
A quotation and a tender are both firm offers which have legal standing to the offeror. Tenders are more detailed than quotations and will include quality aspects as well as prices.
LO 1, AC 1.1 & AC 1.2
A,C
Explanation:
A quotation and a tender are both firm offers which have legal standing to the offeror. Tenders are more detailed than quotations and will include quality aspects as well as prices.
LO 1, AC 1.1 & AC 1.2
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