Question #1
In a contract, both buyer and supplier agreed the lead time is 3 days. The contract also requires that any variation must be made in writing. Then the buyer places an order by phone call and requests delivery the next day, but the supplier delivers on the third day since the order.
Can buyer refuse to pay as supplier did not deliver per time?
- A . No, the supplier delivers within a reasonable time
- B . Yes, late delivery is a force majeure event
- C . Yes, the supplier has breached the contract
- D . No, supplier has shortened lead time to 1 day
Correct Answer: A
A
Explanation:
Lead time is the amount of time that passes from the start of a process until its conclusion. In procurement, lead time can be understood as the amount of time that passes from placing an order until the delivery.
In the scenario, the contract requires the supplier to make a delivery within 3 days since the order. This contract can only be amended with written consent from both parties. Therefore, there is no ground for shortening the lead time to 1 day because the new lead time is only the request of buyer. Then the supplier still makes delivery within agreed lead time.
LO 1, AC 1.1
A
Explanation:
Lead time is the amount of time that passes from the start of a process until its conclusion. In procurement, lead time can be understood as the amount of time that passes from placing an order until the delivery.
In the scenario, the contract requires the supplier to make a delivery within 3 days since the order. This contract can only be amended with written consent from both parties. Therefore, there is no ground for shortening the lead time to 1 day because the new lead time is only the request of buyer. Then the supplier still makes delivery within agreed lead time.
LO 1, AC 1.1
Question #2
Which of the following may be a benefit for purchaser in using call off contract?
- A . Ability to discover new potential suppliers
- B . No long-term commitment required
- C . Secured supply
- D . Maintaining a degree of competition between suppliers
Correct Answer: C
C
Explanation:
Benefits for the purchaser in using call off contract are as below:
– The benefit of a call off contract is that they allow the supply of materials, goods and services to be secured over multiple delivery dates across the length of a project.
– Agreed prices, either fixed or pre-agreed mechanism for adjustment. This helps with setting and controlling budgets.
– Simple order mechanisms at the point of need
– Schedules of rates pricing enables electronic procure-to-pay systems, which gives greater control and visibility of spend
– The value of spend ad length of contract justify the cost of proper market engagement and tender or negotiation processes resulting in better value for money
– The longer the contract, the greater the opportunities for aligning working practices to create joint efficiency.
Reference:
– Call Off Contracts C What are they and how are they used?
– CIPS study guide page 63-64
LO 1, AC 1.3
C
Explanation:
Benefits for the purchaser in using call off contract are as below:
– The benefit of a call off contract is that they allow the supply of materials, goods and services to be secured over multiple delivery dates across the length of a project.
– Agreed prices, either fixed or pre-agreed mechanism for adjustment. This helps with setting and controlling budgets.
– Simple order mechanisms at the point of need
– Schedules of rates pricing enables electronic procure-to-pay systems, which gives greater control and visibility of spend
– The value of spend ad length of contract justify the cost of proper market engagement and tender or negotiation processes resulting in better value for money
– The longer the contract, the greater the opportunities for aligning working practices to create joint efficiency.
Reference:
– Call Off Contracts C What are they and how are they used?
– CIPS study guide page 63-64
LO 1, AC 1.3
Question #3
An organization has a normal tender process that often last 1 month from defining the needs to contract award. Manufacturing department suddenly required a new special part that they could not foresee within a month.
Which of the following should be the priority actions of procurement manager in this urgent situation? Select TWO that apply:
- A . Design new specification
- B . Develop relationships with potential suppliers
- C . Review contract performance
- D . Get high-level authority approval
- E . Submit full business justification
Correct Answer: E
E
Explanation:
This urgent needs occasionally occur due to a sudden change in circumstances. The process for selecting a replacement supplier must still be controlled. If there is a reason for normal processes to be waived, this must be fully documented and approved at a high level.
Reference: CIPS study guide page 7
LO 1, AC 1.1
E
Explanation:
This urgent needs occasionally occur due to a sudden change in circumstances. The process for selecting a replacement supplier must still be controlled. If there is a reason for normal processes to be waived, this must be fully documented and approved at a high level.
Reference: CIPS study guide page 7
LO 1, AC 1.1
Question #4
Which of the following are examples of incentives which can be embedded in contract terms? Select THREE that apply
- A . Gainshare
- B . Indemnity
- C . Contract extensions
- D . Service credits
- E . Liquidated damages
- F . Faster payment
Correct Answer: A,C,F
A,C,F
Explanation:
Gainsharing is a system of management used by a business to increase profitability by motivating suppliers to improve their performance. As their performance meets the targets, suppliers share financially in the gain (improvement). Gainshare is an incentive for cost control.
Other incentives for good performance are:
– Contract extensions: Buyer can extend the contract duration as an incentive to supplier for meeting their targets.
– Accelerated payments
Reference: CIPS study guide page 187-188
LO 3, AC 3.3
A,C,F
Explanation:
Gainsharing is a system of management used by a business to increase profitability by motivating suppliers to improve their performance. As their performance meets the targets, suppliers share financially in the gain (improvement). Gainshare is an incentive for cost control.
Other incentives for good performance are:
– Contract extensions: Buyer can extend the contract duration as an incentive to supplier for meeting their targets.
– Accelerated payments
Reference: CIPS study guide page 187-188
LO 3, AC 3.3
Question #5
Cleveland Insurance (Cleveland) offers a range of insurance services. The main software used in the call centre is a customer relationship management (CRM) system. Cleveland perceived an urgent need to replace the existing CRM system to deal with the increasing number of customers and services.
Urgent Digital Ltd (Digital) is one of the bidders of Cleveland’s ITT. Its bid team is led by Hank Irvine, its technical director. Hank realises that winning the Cleveland contract (valued at approximately £50M) will enhance his career. During discussions with Cleveland, Hank offers certain assurances regarding timescales for the project. He has not carried out any investigations into the viability of the timescales. Hank has little idea whether the timescales can be met.
Cleveland decides that Digital’s bid meets with its requirements, especially given the assurances in timescale offered by Hank, and decides to proceed with it, subject to a formal contract. Eventually, a formal contract is signed by both parties. The initial assurances given by Hank about the timing of the project are never going to be achieved
and are at best grossly exaggerated.
Hank’s pre-contractual assurance is most likely to be an example of which of the following?
- A . Inaccuracy in communication
- B . Threat
- C . Initial impossibility
- D . Fraudulent misrepresentation
Correct Answer: C
C
Explanation:
Hank’s pre-contractual assurances may amount to misrepresentation. Fraudulent misrepresentation is a strong possibility since Hank had carried out no investigations into the viability of the project timescales. This could amount to recklessness in using information without taking any steps to see if it is true or not.
The scenario above was constructed based on the case BSkyB v EDS, a famous case in IT sector.
LO 1, AC 1.2
C
Explanation:
Hank’s pre-contractual assurances may amount to misrepresentation. Fraudulent misrepresentation is a strong possibility since Hank had carried out no investigations into the viability of the project timescales. This could amount to recklessness in using information without taking any steps to see if it is true or not.
The scenario above was constructed based on the case BSkyB v EDS, a famous case in IT sector.
LO 1, AC 1.2
Question #6
Southwark is negotiating a contract with Orchard to provide software and IT services. Orchard will manufacture and install the products which are contractually supplied by IBM. Southwark’s procurement manager is worried that during the contract there would be some problems that they would not able to claim for damages from Orchard.
Which of the following should be included in the head contract so that Southward can sue IBM, should the need arise?
- A . Negligence
- B . Indemnity
- C . Collateral warranty deed
- D . Insurance
Correct Answer: C
C
Explanation:
A Collateral Warranty is a contract under which a consultant, a building contractor or a sub-contractor warrants to a third party that is has fulfilled its obligations under its professional appointment, building contract or sub-contract. The purpose of a Collateral Warranty is to give a third party, who is not a party to the original contract, rights to enforce that original contract.
In this case, IBM is the subcontractor, then purchaser can use collateral warranty deed to bind them.
Reference:
– Collateral Warranties C an Overview
– CIPS study guide page 39-40
LO 1, AC 1.2
C
Explanation:
A Collateral Warranty is a contract under which a consultant, a building contractor or a sub-contractor warrants to a third party that is has fulfilled its obligations under its professional appointment, building contract or sub-contract. The purpose of a Collateral Warranty is to give a third party, who is not a party to the original contract, rights to enforce that original contract.
In this case, IBM is the subcontractor, then purchaser can use collateral warranty deed to bind them.
Reference:
– Collateral Warranties C an Overview
– CIPS study guide page 39-40
LO 1, AC 1.2
Question #6
Southwark is negotiating a contract with Orchard to provide software and IT services. Orchard will manufacture and install the products which are contractually supplied by IBM. Southwark’s procurement manager is worried that during the contract there would be some problems that they would not able to claim for damages from Orchard.
Which of the following should be included in the head contract so that Southward can sue IBM, should the need arise?
- A . Negligence
- B . Indemnity
- C . Collateral warranty deed
- D . Insurance
Correct Answer: C
C
Explanation:
A Collateral Warranty is a contract under which a consultant, a building contractor or a sub-contractor warrants to a third party that is has fulfilled its obligations under its professional appointment, building contract or sub-contract. The purpose of a Collateral Warranty is to give a third party, who is not a party to the original contract, rights to enforce that original contract.
In this case, IBM is the subcontractor, then purchaser can use collateral warranty deed to bind them.
Reference:
– Collateral Warranties C an Overview
– CIPS study guide page 39-40
LO 1, AC 1.2
C
Explanation:
A Collateral Warranty is a contract under which a consultant, a building contractor or a sub-contractor warrants to a third party that is has fulfilled its obligations under its professional appointment, building contract or sub-contract. The purpose of a Collateral Warranty is to give a third party, who is not a party to the original contract, rights to enforce that original contract.
In this case, IBM is the subcontractor, then purchaser can use collateral warranty deed to bind them.
Reference:
– Collateral Warranties C an Overview
– CIPS study guide page 39-40
LO 1, AC 1.2
Question #6
Southwark is negotiating a contract with Orchard to provide software and IT services. Orchard will manufacture and install the products which are contractually supplied by IBM. Southwark’s procurement manager is worried that during the contract there would be some problems that they would not able to claim for damages from Orchard.
Which of the following should be included in the head contract so that Southward can sue IBM, should the need arise?
- A . Negligence
- B . Indemnity
- C . Collateral warranty deed
- D . Insurance
Correct Answer: C
C
Explanation:
A Collateral Warranty is a contract under which a consultant, a building contractor or a sub-contractor warrants to a third party that is has fulfilled its obligations under its professional appointment, building contract or sub-contract. The purpose of a Collateral Warranty is to give a third party, who is not a party to the original contract, rights to enforce that original contract.
In this case, IBM is the subcontractor, then purchaser can use collateral warranty deed to bind them.
Reference:
– Collateral Warranties C an Overview
– CIPS study guide page 39-40
LO 1, AC 1.2
C
Explanation:
A Collateral Warranty is a contract under which a consultant, a building contractor or a sub-contractor warrants to a third party that is has fulfilled its obligations under its professional appointment, building contract or sub-contract. The purpose of a Collateral Warranty is to give a third party, who is not a party to the original contract, rights to enforce that original contract.
In this case, IBM is the subcontractor, then purchaser can use collateral warranty deed to bind them.
Reference:
– Collateral Warranties C an Overview
– CIPS study guide page 39-40
LO 1, AC 1.2
Question #6
Southwark is negotiating a contract with Orchard to provide software and IT services. Orchard will manufacture and install the products which are contractually supplied by IBM. Southwark’s procurement manager is worried that during the contract there would be some problems that they would not able to claim for damages from Orchard.
Which of the following should be included in the head contract so that Southward can sue IBM, should the need arise?
- A . Negligence
- B . Indemnity
- C . Collateral warranty deed
- D . Insurance
Correct Answer: C
C
Explanation:
A Collateral Warranty is a contract under which a consultant, a building contractor or a sub-contractor warrants to a third party that is has fulfilled its obligations under its professional appointment, building contract or sub-contract. The purpose of a Collateral Warranty is to give a third party, who is not a party to the original contract, rights to enforce that original contract.
In this case, IBM is the subcontractor, then purchaser can use collateral warranty deed to bind them.
Reference:
– Collateral Warranties C an Overview
– CIPS study guide page 39-40
LO 1, AC 1.2
C
Explanation:
A Collateral Warranty is a contract under which a consultant, a building contractor or a sub-contractor warrants to a third party that is has fulfilled its obligations under its professional appointment, building contract or sub-contract. The purpose of a Collateral Warranty is to give a third party, who is not a party to the original contract, rights to enforce that original contract.
In this case, IBM is the subcontractor, then purchaser can use collateral warranty deed to bind them.
Reference:
– Collateral Warranties C an Overview
– CIPS study guide page 39-40
LO 1, AC 1.2
Question #6
Southwark is negotiating a contract with Orchard to provide software and IT services. Orchard will manufacture and install the products which are contractually supplied by IBM. Southwark’s procurement manager is worried that during the contract there would be some problems that they would not able to claim for damages from Orchard.
Which of the following should be included in the head contract so that Southward can sue IBM, should the need arise?
- A . Negligence
- B . Indemnity
- C . Collateral warranty deed
- D . Insurance
Correct Answer: C
C
Explanation:
A Collateral Warranty is a contract under which a consultant, a building contractor or a sub-contractor warrants to a third party that is has fulfilled its obligations under its professional appointment, building contract or sub-contract. The purpose of a Collateral Warranty is to give a third party, who is not a party to the original contract, rights to enforce that original contract.
In this case, IBM is the subcontractor, then purchaser can use collateral warranty deed to bind them.
Reference:
– Collateral Warranties C an Overview
– CIPS study guide page 39-40
LO 1, AC 1.2
C
Explanation:
A Collateral Warranty is a contract under which a consultant, a building contractor or a sub-contractor warrants to a third party that is has fulfilled its obligations under its professional appointment, building contract or sub-contract. The purpose of a Collateral Warranty is to give a third party, who is not a party to the original contract, rights to enforce that original contract.
In this case, IBM is the subcontractor, then purchaser can use collateral warranty deed to bind them.
Reference:
– Collateral Warranties C an Overview
– CIPS study guide page 39-40
LO 1, AC 1.2
Question #11
Required safety level
- A . 1 and 2 only
- B . 1 and 3 only
- C . 1 and 4 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
According to CIPS, there are two main types of specification:
– Conformance specification C is more output driven as it outlines the product details exactly which may include the material, dimensions, tolerances, source, ingredients, packaging, storage of the part or material.
– Performance specification C is more output driven in terms of what the part or material must achieve.
Among the four options, only 2. ‘Description of the operating environments’ and 3. ‘Chemical formulae’ are possible components of a conformance specification. Brand names can be a part of a performance specification, according to a document published by CIPS and NIGP.
D
Explanation:
According to CIPS, there are two main types of specification:
– Conformance specification C is more output driven as it outlines the product details exactly which may include the material, dimensions, tolerances, source, ingredients, packaging, storage of the part or material.
– Performance specification C is more output driven in terms of what the part or material must achieve.
Among the four options, only 2. ‘Description of the operating environments’ and 3. ‘Chemical formulae’ are possible components of a conformance specification. Brand names can be a part of a performance specification, according to a document published by CIPS and NIGP.
Graphical user interface, text, application
Description automatically generated
Reference:
– CIPS study guide page 8-10
– Knowledge Byte – Specification Development
– Principles and Practices of Public Procurement: Specifications LO 1, AC 1.1
Question #12
A construction company often subcontracts approximately 50% of the project works because of unpredictable customer’s demand. Although larger corporate customers require quick response to RFQ, the time lapse between tender bid submission and contract commencement is usually long.
Which of the following arrangement would benefit both the contractor and customer?
- A . Collateral contract
- B . Bilateral contract
- C . Indemnity agreement
- D . Framework agreement
Correct Answer: D
D
Explanation:
According to the scenario, customers’ demand changes regularly but the construction project commencement often delays. If the contractor and the customer mutually sign a legally binding contract too soon long before the commencement, the contractor may suffer poor cash flow (it must buy the materials first but has to wait for long time to be paid). A framework agreement may help both parties.
A framework agreement is a formal agreement between two organisations that is intended
to become legally binding in the event that a contract is created.
A framework agreement could benefit the both parties in the following ways:
– At the time of signing, the framework agreement has not yet become a legally binding contract. The contractor and client only agree on the principles of future contracts (such as whether the work can be subcontracted or how payment will be proceeded). A well structured framework agreement will allow both parties to apply changes before contract commencement, especially regarding price and quality.
– The framework agreement assures a certainty between the contractor and client.
– The administrative works is reduced under a framework agreement.
Reference:
– CIPS study guide page 60-62
– Framework Agreements: Practice and Pitfalls LO 1, AC 1.3
D
Explanation:
According to the scenario, customers’ demand changes regularly but the construction project commencement often delays. If the contractor and the customer mutually sign a legally binding contract too soon long before the commencement, the contractor may suffer poor cash flow (it must buy the materials first but has to wait for long time to be paid). A framework agreement may help both parties.
A framework agreement is a formal agreement between two organisations that is intended
to become legally binding in the event that a contract is created.
A framework agreement could benefit the both parties in the following ways:
– At the time of signing, the framework agreement has not yet become a legally binding contract. The contractor and client only agree on the principles of future contracts (such as whether the work can be subcontracted or how payment will be proceeded). A well structured framework agreement will allow both parties to apply changes before contract commencement, especially regarding price and quality.
– The framework agreement assures a certainty between the contractor and client.
– The administrative works is reduced under a framework agreement.
Reference:
– CIPS study guide page 60-62
– Framework Agreements: Practice and Pitfalls LO 1, AC 1.3
Question #13
The model form contract invented by Institute of Civil Engineers is…?
- A . NEC
- B . IMechE/IET
- C . FIDIC
- D . JCT
Correct Answer: A
A
Explanation:
NEC – New Engineering Contracts is a family of contracts invented by Institute of Civil Engineers. The contracts are suitable for procuring a diverse range of works, services and supply, ranging from major framework projects through to minor works and the purchase of supplies and goods.
FIDIC is a French language acronym for Fédération Internationale Des Ingénieurs-Conseils, which means the international federation of consulting engineers. It was started in 1913 by the trio of France, Belgium and Switzerland. The United Kingdom joined the Federation in 1949. FIDIC is headquartered in Switzerland and now boasts of membership from over 60 different countries. FIDIC published its first contract, titled The Form of contract for works of Civil Engineering construction, in 1957. As the title indicated, this first contract was aimed at the Civil Engineering sector and it soon became known for the colour of its cover, and thus, The Red Book. It has become the tradition that FIDIC contracts are known in popular parlance by the colour of their cover. This first contract by FIDIC was undertaken jointly with the International federation of Building and Public works. FIDIC’s concerted effort at achieving broad consultation and acceptance of its contract forms has seen subsequent editions of its contracts being ratified by the International Federation of Asian and Western Pacific Contractors Association, Associated General Contractors of America and the Inter-American Federation of the Construction Industry, Multilateral Development Banks among others. Because of the broad support it enjoys, FIDIC contracts are the foremost contracts in international construction.
The Joint Contracts Tribunal, also known as the JCT, produces standard forms of contract for construction, guidance notes and other standard documentation for use in the construction industry in the United Kingdom. From its establishment in 1931, JCT has expanded the number of contributing organisations.
IMechE/IET: Institution of Mechanical Engineers/Institution of Engineering and Technology
– two separate institutes that issue jointly agreed model forms covering the design, supply and installation of electrical, electronic and mechanical plant including special conditions for
the ancillary development of software.
Reference: CIPS study guide page 142
LO 3, AC 3.1
A
Explanation:
NEC – New Engineering Contracts is a family of contracts invented by Institute of Civil Engineers. The contracts are suitable for procuring a diverse range of works, services and supply, ranging from major framework projects through to minor works and the purchase of supplies and goods.
FIDIC is a French language acronym for Fédération Internationale Des Ingénieurs-Conseils, which means the international federation of consulting engineers. It was started in 1913 by the trio of France, Belgium and Switzerland. The United Kingdom joined the Federation in 1949. FIDIC is headquartered in Switzerland and now boasts of membership from over 60 different countries. FIDIC published its first contract, titled The Form of contract for works of Civil Engineering construction, in 1957. As the title indicated, this first contract was aimed at the Civil Engineering sector and it soon became known for the colour of its cover, and thus, The Red Book. It has become the tradition that FIDIC contracts are known in popular parlance by the colour of their cover. This first contract by FIDIC was undertaken jointly with the International federation of Building and Public works. FIDIC’s concerted effort at achieving broad consultation and acceptance of its contract forms has seen subsequent editions of its contracts being ratified by the International Federation of Asian and Western Pacific Contractors Association, Associated General Contractors of America and the Inter-American Federation of the Construction Industry, Multilateral Development Banks among others. Because of the broad support it enjoys, FIDIC contracts are the foremost contracts in international construction.
The Joint Contracts Tribunal, also known as the JCT, produces standard forms of contract for construction, guidance notes and other standard documentation for use in the construction industry in the United Kingdom. From its establishment in 1931, JCT has expanded the number of contributing organisations.
IMechE/IET: Institution of Mechanical Engineers/Institution of Engineering and Technology
– two separate institutes that issue jointly agreed model forms covering the design, supply and installation of electrical, electronic and mechanical plant including special conditions for
the ancillary development of software.
Reference: CIPS study guide page 142
LO 3, AC 3.1
Question #14
Which of the following is the procedure that makes no further competition under a framework agreement?
- A . Closed system
- B . Direct call-off
- C . Standing offer
- D . Blanket order
Correct Answer: B
B
Explanation:
Direct call off is the act of placing an order under a framework agreement without having further competition.
Standing offer is an available offer.
Blanket order is another name of framework agreement
Closed system is a requirement of framework agreement. It is a system or process that, once started, does not allow new entrants.
Reference: CIPS study guide page 59-62
LO 1, AC 1.3
B
Explanation:
Direct call off is the act of placing an order under a framework agreement without having further competition.
Standing offer is an available offer.
Blanket order is another name of framework agreement
Closed system is a requirement of framework agreement. It is a system or process that, once started, does not allow new entrants.
Reference: CIPS study guide page 59-62
LO 1, AC 1.3
Question #14
Which of the following is the procedure that makes no further competition under a framework agreement?
- A . Closed system
- B . Direct call-off
- C . Standing offer
- D . Blanket order
Correct Answer: B
B
Explanation:
Direct call off is the act of placing an order under a framework agreement without having further competition.
Standing offer is an available offer.
Blanket order is another name of framework agreement
Closed system is a requirement of framework agreement. It is a system or process that, once started, does not allow new entrants.
Reference: CIPS study guide page 59-62
LO 1, AC 1.3
B
Explanation:
Direct call off is the act of placing an order under a framework agreement without having further competition.
Standing offer is an available offer.
Blanket order is another name of framework agreement
Closed system is a requirement of framework agreement. It is a system or process that, once started, does not allow new entrants.
Reference: CIPS study guide page 59-62
LO 1, AC 1.3
Question #14
Which of the following is the procedure that makes no further competition under a framework agreement?
- A . Closed system
- B . Direct call-off
- C . Standing offer
- D . Blanket order
Correct Answer: B
B
Explanation:
Direct call off is the act of placing an order under a framework agreement without having further competition.
Standing offer is an available offer.
Blanket order is another name of framework agreement
Closed system is a requirement of framework agreement. It is a system or process that, once started, does not allow new entrants.
Reference: CIPS study guide page 59-62
LO 1, AC 1.3
B
Explanation:
Direct call off is the act of placing an order under a framework agreement without having further competition.
Standing offer is an available offer.
Blanket order is another name of framework agreement
Closed system is a requirement of framework agreement. It is a system or process that, once started, does not allow new entrants.
Reference: CIPS study guide page 59-62
LO 1, AC 1.3
Question #14
Which of the following is the procedure that makes no further competition under a framework agreement?
- A . Closed system
- B . Direct call-off
- C . Standing offer
- D . Blanket order
Correct Answer: B
B
Explanation:
Direct call off is the act of placing an order under a framework agreement without having further competition.
Standing offer is an available offer.
Blanket order is another name of framework agreement
Closed system is a requirement of framework agreement. It is a system or process that, once started, does not allow new entrants.
Reference: CIPS study guide page 59-62
LO 1, AC 1.3
B
Explanation:
Direct call off is the act of placing an order under a framework agreement without having further competition.
Standing offer is an available offer.
Blanket order is another name of framework agreement
Closed system is a requirement of framework agreement. It is a system or process that, once started, does not allow new entrants.
Reference: CIPS study guide page 59-62
LO 1, AC 1.3
Question #14
Which of the following is the procedure that makes no further competition under a framework agreement?
- A . Closed system
- B . Direct call-off
- C . Standing offer
- D . Blanket order
Correct Answer: B
B
Explanation:
Direct call off is the act of placing an order under a framework agreement without having further competition.
Standing offer is an available offer.
Blanket order is another name of framework agreement
Closed system is a requirement of framework agreement. It is a system or process that, once started, does not allow new entrants.
Reference: CIPS study guide page 59-62
LO 1, AC 1.3
B
Explanation:
Direct call off is the act of placing an order under a framework agreement without having further competition.
Standing offer is an available offer.
Blanket order is another name of framework agreement
Closed system is a requirement of framework agreement. It is a system or process that, once started, does not allow new entrants.
Reference: CIPS study guide page 59-62
LO 1, AC 1.3
Question #19
Non-disclosure
- A . 3 and 4 only
- B . 1 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question #19
Non-disclosure
- A . 3 and 4 only
- B . 1 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question #19
Non-disclosure
- A . 3 and 4 only
- B . 1 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question #19
Non-disclosure
- A . 3 and 4 only
- B . 1 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question #19
Non-disclosure
- A . 3 and 4 only
- B . 1 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question #19
Non-disclosure
- A . 3 and 4 only
- B . 1 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question #19
Non-disclosure
- A . 3 and 4 only
- B . 1 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question #19
Non-disclosure
- A . 3 and 4 only
- B . 1 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question #19
Non-disclosure
- A . 3 and 4 only
- B . 1 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question #28
Under English law’s general legal principles of contract formation, which of the following are likely to be offers? Select TWO that apply.
- A . Invitation to tender
- B . Quotation
- C . Purchase order
- D . Advertisement
- E . Catalogue
Correct Answer: B
B
Explanation:
An offer is a full statement of what the offeror is willing to provide and the terms by which they are willing to provide it.
There are some statements that are not offers:
– Invitation to treat: this states that a person or organisation is willing to enter into discussions about the possibility of a deal, but does not confirm a willingness to be bound by any terms mentioned. Catalogues, goods on display and ITTs are invitation to treat. Civil law countries may have different perspective on this matter. Article 2:201 (3) of The Principles of European Contract Law states: ‘A proposal to supply goods or services at stated prices made by a professional supplier in a public advertisement or a catalogue, or by a display of goods, is presumed to be an offer to sell or supply at that price until the stock of goods, or the supplier’s capacity to supply the service, is exhausted.’ Learners are advised to look at their countries’ legislation for more information on offer and acceptance.
– Declaration of intention: this is defined as an aim or a plan.
– A ‘mere puff’ (or boast): this is anything which is not intended to be taken literally or seriously, such as many advertisement.
– Provision of information: merely provides information, but provider does not confirm willingness to be bound.
Reference: CIPS study guide page 29-30
LO 1, AC 1.2
B
Explanation:
An offer is a full statement of what the offeror is willing to provide and the terms by which they are willing to provide it.
There are some statements that are not offers:
– Invitation to treat: this states that a person or organisation is willing to enter into discussions about the possibility of a deal, but does not confirm a willingness to be bound by any terms mentioned. Catalogues, goods on display and ITTs are invitation to treat. Civil law countries may have different perspective on this matter. Article 2:201 (3) of The Principles of European Contract Law states: ‘A proposal to supply goods or services at stated prices made by a professional supplier in a public advertisement or a catalogue, or by a display of goods, is presumed to be an offer to sell or supply at that price until the stock of goods, or the supplier’s capacity to supply the service, is exhausted.’ Learners are advised to look at their countries’ legislation for more information on offer and acceptance.
– Declaration of intention: this is defined as an aim or a plan.
– A ‘mere puff’ (or boast): this is anything which is not intended to be taken literally or seriously, such as many advertisement.
– Provision of information: merely provides information, but provider does not confirm willingness to be bound.
Reference: CIPS study guide page 29-30
LO 1, AC 1.2
Question #29
Under a framework agreement, which of the following are supplier selection mechanisms? Select TWO that apply:
- A . Rescission of contract
- B . Mini competition
- C . Contract for lease
- D . Direct call-off
- E . Call off contract
Correct Answer: B,D
B,D
Explanation:
A framework agreement is an agreement with one or more suppliers/providers which sets out terms and conditions under which individual contracts (call-offs) can be made throughout the term of the agreement.
A framework agreement itself is not a contract, but the call-offs made from it are. Framework arrangements create a streamlined and flexible process for procuring goods, works or services
Where a framework for the same goods, works or services is awarded to several suppliers, there are three possible options for awarding call-off contracts: direct award (or direct call-off), mini-competition or a combination of both.
Option 1 C Apply the terms of the framework agreement (direct award).
Where your requirements match the terms and/or specification of the framework agreement (in the event of any query, you should clarify the situation with the organisation that established the framework), a particular call-off should be awarded without re-opening competition. The call-off should be awarded to the provider who is identified as the most economically advantageous tender based on the award criteria used at the time that the framework was established (i.e. the supplier ranked no. 1). Randomly selecting a supplier off a framework is not permitted.
Option 2 C Hold a mini-competition between capable suppliers.
If your requirements do not match the terms and/or the specification of the framework, you should conduct a mini-competition exercise. Whilst it is not permitted to substantially change the basic terms or specification of the framework, in running a mini-competition it is possible to supplement or refine the basic terms of the framework prior to making a call-off.
Examples of such terms are:
– The particular goods/services/works required;
– Particular delivery timescales;
– Particular invoicing arrangements and payment profiles;
– Associated services such as installation, maintenance and training;
– Quantity;
– Functional specification.
Under no circumstances should brand names or brand-specific descriptions of goods be used e.g. BIC Biro Pen, Hewlett-Packard Printer, Dell computer. Descriptions should give reference to the characteristics and outputs of the product or service. Where no other description is possible, any reference should be qualified by adding the words ‘or equivalent’.
When a mini-competition exercise is held, all suppliers appointed to the framework that are capable of meeting the requirement must be invited to submit a tender. (This might just relate to suppliers within a particular ‘lot’). You must not limit the mini-competition exercise to selected providers. A time limit for submitting the tender must be set and advised to competing suppliers. This time limit must be reasonable, taking account of the complexity of the requirement.
The call-off must be awarded on the basis of the framework award criteria and new criteria cannot be added, although, where permitted, the weightings may be varied to take account of a particular requirement. However, in adjusting the weightings, care must be taken to ensure that any such changes do not have an adverse effect on competition. Option 3 – Combination of direct award and mini-competition
To use a combination approach, the procurement documents must state that this route may be used. The procurement documents will also specify which terms may be subject to the re-opening of competition.
Reference:
– Guidance on the Use of Framework Agreements
– CIPS study guide page 60-62
LO 1, AC 1.3
B,D
Explanation:
A framework agreement is an agreement with one or more suppliers/providers which sets out terms and conditions under which individual contracts (call-offs) can be made throughout the term of the agreement.
A framework agreement itself is not a contract, but the call-offs made from it are. Framework arrangements create a streamlined and flexible process for procuring goods, works or services
Where a framework for the same goods, works or services is awarded to several suppliers, there are three possible options for awarding call-off contracts: direct award (or direct call-off), mini-competition or a combination of both.
Option 1 C Apply the terms of the framework agreement (direct award).
Where your requirements match the terms and/or specification of the framework agreement (in the event of any query, you should clarify the situation with the organisation that established the framework), a particular call-off should be awarded without re-opening competition. The call-off should be awarded to the provider who is identified as the most economically advantageous tender based on the award criteria used at the time that the framework was established (i.e. the supplier ranked no. 1). Randomly selecting a supplier off a framework is not permitted.
Option 2 C Hold a mini-competition between capable suppliers.
If your requirements do not match the terms and/or the specification of the framework, you should conduct a mini-competition exercise. Whilst it is not permitted to substantially change the basic terms or specification of the framework, in running a mini-competition it is possible to supplement or refine the basic terms of the framework prior to making a call-off.
Examples of such terms are:
– The particular goods/services/works required;
– Particular delivery timescales;
– Particular invoicing arrangements and payment profiles;
– Associated services such as installation, maintenance and training;
– Quantity;
– Functional specification.
Under no circumstances should brand names or brand-specific descriptions of goods be used e.g. BIC Biro Pen, Hewlett-Packard Printer, Dell computer. Descriptions should give reference to the characteristics and outputs of the product or service. Where no other description is possible, any reference should be qualified by adding the words ‘or equivalent’.
When a mini-competition exercise is held, all suppliers appointed to the framework that are capable of meeting the requirement must be invited to submit a tender. (This might just relate to suppliers within a particular ‘lot’). You must not limit the mini-competition exercise to selected providers. A time limit for submitting the tender must be set and advised to competing suppliers. This time limit must be reasonable, taking account of the complexity of the requirement.
The call-off must be awarded on the basis of the framework award criteria and new criteria cannot be added, although, where permitted, the weightings may be varied to take account of a particular requirement. However, in adjusting the weightings, care must be taken to ensure that any such changes do not have an adverse effect on competition. Option 3 – Combination of direct award and mini-competition
To use a combination approach, the procurement documents must state that this route may be used. The procurement documents will also specify which terms may be subject to the re-opening of competition.
Reference:
– Guidance on the Use of Framework Agreements
– CIPS study guide page 60-62
LO 1, AC 1.3
Question #30
Which of the following is used to detail the complex matter that may be verbiage to the main document?
- A . Contract variation
- B . Schedule
- C . Subcontracting
- D . Standard terms and conditions
Correct Answer: B
B
Explanation:
Without further explanation, a schedule may be deemed to form an integral part of the obligations of either or both parties. Obviously, the scope or binding nature of such schedule depends on the way it is referred to in the obligatory language of the main agreement. Accordingly, merely attaching the general terms and conditions of sale without explaining to which part of the sale they apply or which provisions apply does not subject a sale pursuant to the body text of the agreement to those general terms and conditions. Subcontracting is the practice of assigning, or outsourcing, part of the obligations and tasks under a contract to another party known as a subcontractor.
Reference:
– Schedules, annexes and exhibits
– CIPS study guide page 22-26 LO 1, AC 1.1
B
Explanation:
Without further explanation, a schedule may be deemed to form an integral part of the obligations of either or both parties. Obviously, the scope or binding nature of such schedule depends on the way it is referred to in the obligatory language of the main agreement. Accordingly, merely attaching the general terms and conditions of sale without explaining to which part of the sale they apply or which provisions apply does not subject a sale pursuant to the body text of the agreement to those general terms and conditions. Subcontracting is the practice of assigning, or outsourcing, part of the obligations and tasks under a contract to another party known as a subcontractor.
Reference:
– Schedules, annexes and exhibits
– CIPS study guide page 22-26 LO 1, AC 1.1
Question #30
Which of the following is used to detail the complex matter that may be verbiage to the main document?
- A . Contract variation
- B . Schedule
- C . Subcontracting
- D . Standard terms and conditions
Correct Answer: B
B
Explanation:
Without further explanation, a schedule may be deemed to form an integral part of the obligations of either or both parties. Obviously, the scope or binding nature of such schedule depends on the way it is referred to in the obligatory language of the main agreement. Accordingly, merely attaching the general terms and conditions of sale without explaining to which part of the sale they apply or which provisions apply does not subject a sale pursuant to the body text of the agreement to those general terms and conditions. Subcontracting is the practice of assigning, or outsourcing, part of the obligations and tasks under a contract to another party known as a subcontractor.
Reference:
– Schedules, annexes and exhibits
– CIPS study guide page 22-26 LO 1, AC 1.1
B
Explanation:
Without further explanation, a schedule may be deemed to form an integral part of the obligations of either or both parties. Obviously, the scope or binding nature of such schedule depends on the way it is referred to in the obligatory language of the main agreement. Accordingly, merely attaching the general terms and conditions of sale without explaining to which part of the sale they apply or which provisions apply does not subject a sale pursuant to the body text of the agreement to those general terms and conditions. Subcontracting is the practice of assigning, or outsourcing, part of the obligations and tasks under a contract to another party known as a subcontractor.
Reference:
– Schedules, annexes and exhibits
– CIPS study guide page 22-26 LO 1, AC 1.1
Question #30
Which of the following is used to detail the complex matter that may be verbiage to the main document?
- A . Contract variation
- B . Schedule
- C . Subcontracting
- D . Standard terms and conditions
Correct Answer: B
B
Explanation:
Without further explanation, a schedule may be deemed to form an integral part of the obligations of either or both parties. Obviously, the scope or binding nature of such schedule depends on the way it is referred to in the obligatory language of the main agreement. Accordingly, merely attaching the general terms and conditions of sale without explaining to which part of the sale they apply or which provisions apply does not subject a sale pursuant to the body text of the agreement to those general terms and conditions. Subcontracting is the practice of assigning, or outsourcing, part of the obligations and tasks under a contract to another party known as a subcontractor.
Reference:
– Schedules, annexes and exhibits
– CIPS study guide page 22-26 LO 1, AC 1.1
B
Explanation:
Without further explanation, a schedule may be deemed to form an integral part of the obligations of either or both parties. Obviously, the scope or binding nature of such schedule depends on the way it is referred to in the obligatory language of the main agreement. Accordingly, merely attaching the general terms and conditions of sale without explaining to which part of the sale they apply or which provisions apply does not subject a sale pursuant to the body text of the agreement to those general terms and conditions. Subcontracting is the practice of assigning, or outsourcing, part of the obligations and tasks under a contract to another party known as a subcontractor.
Reference:
– Schedules, annexes and exhibits
– CIPS study guide page 22-26 LO 1, AC 1.1
Question #30
Which of the following is used to detail the complex matter that may be verbiage to the main document?
- A . Contract variation
- B . Schedule
- C . Subcontracting
- D . Standard terms and conditions
Correct Answer: B
B
Explanation:
Without further explanation, a schedule may be deemed to form an integral part of the obligations of either or both parties. Obviously, the scope or binding nature of such schedule depends on the way it is referred to in the obligatory language of the main agreement. Accordingly, merely attaching the general terms and conditions of sale without explaining to which part of the sale they apply or which provisions apply does not subject a sale pursuant to the body text of the agreement to those general terms and conditions. Subcontracting is the practice of assigning, or outsourcing, part of the obligations and tasks under a contract to another party known as a subcontractor.
Reference:
– Schedules, annexes and exhibits
– CIPS study guide page 22-26 LO 1, AC 1.1
B
Explanation:
Without further explanation, a schedule may be deemed to form an integral part of the obligations of either or both parties. Obviously, the scope or binding nature of such schedule depends on the way it is referred to in the obligatory language of the main agreement. Accordingly, merely attaching the general terms and conditions of sale without explaining to which part of the sale they apply or which provisions apply does not subject a sale pursuant to the body text of the agreement to those general terms and conditions. Subcontracting is the practice of assigning, or outsourcing, part of the obligations and tasks under a contract to another party known as a subcontractor.
Reference:
– Schedules, annexes and exhibits
– CIPS study guide page 22-26 LO 1, AC 1.1
Question #30
Which of the following is used to detail the complex matter that may be verbiage to the main document?
- A . Contract variation
- B . Schedule
- C . Subcontracting
- D . Standard terms and conditions
Correct Answer: B
B
Explanation:
Without further explanation, a schedule may be deemed to form an integral part of the obligations of either or both parties. Obviously, the scope or binding nature of such schedule depends on the way it is referred to in the obligatory language of the main agreement. Accordingly, merely attaching the general terms and conditions of sale without explaining to which part of the sale they apply or which provisions apply does not subject a sale pursuant to the body text of the agreement to those general terms and conditions. Subcontracting is the practice of assigning, or outsourcing, part of the obligations and tasks under a contract to another party known as a subcontractor.
Reference:
– Schedules, annexes and exhibits
– CIPS study guide page 22-26 LO 1, AC 1.1
B
Explanation:
Without further explanation, a schedule may be deemed to form an integral part of the obligations of either or both parties. Obviously, the scope or binding nature of such schedule depends on the way it is referred to in the obligatory language of the main agreement. Accordingly, merely attaching the general terms and conditions of sale without explaining to which part of the sale they apply or which provisions apply does not subject a sale pursuant to the body text of the agreement to those general terms and conditions. Subcontracting is the practice of assigning, or outsourcing, part of the obligations and tasks under a contract to another party known as a subcontractor.
Reference:
– Schedules, annexes and exhibits
– CIPS study guide page 22-26 LO 1, AC 1.1
Question #35
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
Correct Answer: D
D
Explanation:
There are 2 major types of specifications:
D
Explanation:
There are 2 major types of specifications:
Question #35
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
Correct Answer: D
D
Explanation:
There are 2 major types of specifications:
D
Explanation:
There are 2 major types of specifications:
Question #35
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
Correct Answer: D
D
Explanation:
There are 2 major types of specifications:
D
Explanation:
There are 2 major types of specifications:
Question #38
Consequences and actions that arise from certain KPI scores must be…? Select TWO that apply.
- A . Mutually agreed
- B . Deliberately omitted
- C . Documented
- D . Unilaterally imposed by the purchaser
- E . Terminated
Correct Answer: A,C
A,C
Explanation:
Supplier performance management and monitoring is a fundamental part of contract management. It starts with setting KPIs, targets and consequences or actions that arise from KPI scores. The measures, objectives and targets used in the monitoring of the supplier’s performance must reflect those that were agreed when the contract was let. That is why it is important to specify a commitment to continuous improvement at the outset. It would be unfair to the supplier to suddenly introduce a range of measures after the contract had begun – however if such an introduction mid-term through the contract is unavoidable then it should be negotiated and agreed in a professional manner and not merely imposed on the supplier.
In conclusion, the details of how KPIs will be monitored and the actions or consequences resulting from scores achieved must be documented and agreed between the parties. This details may be embedded in the specification or the main body of the contract or it may be set out in a SLA.
Reference:
– Performance Monitoring of Suppliers – CIPS Knowledge summary
– CIPS study guide page 101-109
LO 2, AC 2.2
A,C
Explanation:
Supplier performance management and monitoring is a fundamental part of contract management. It starts with setting KPIs, targets and consequences or actions that arise from KPI scores. The measures, objectives and targets used in the monitoring of the supplier’s performance must reflect those that were agreed when the contract was let. That is why it is important to specify a commitment to continuous improvement at the outset. It would be unfair to the supplier to suddenly introduce a range of measures after the contract had begun – however if such an introduction mid-term through the contract is unavoidable then it should be negotiated and agreed in a professional manner and not merely imposed on the supplier.
In conclusion, the details of how KPIs will be monitored and the actions or consequences resulting from scores achieved must be documented and agreed between the parties. This details may be embedded in the specification or the main body of the contract or it may be set out in a SLA.
Reference:
– Performance Monitoring of Suppliers – CIPS Knowledge summary
– CIPS study guide page 101-109
LO 2, AC 2.2
Question #39
Blakenall District Hospital (BDH) is a large hospital that is a major part of the government’s health service. Purchasing staff are in the habit of placing many long-term contracts with suppliers and sub-contractors. Whilst these contracts are usually carried out successfully, prices are often paid that are well over budget. The purchasing manager is concerned to find that, in some cases, members of staff are forcing suppliers to accept fixed price contracts. The policy has caused several problems such as some suppliers refusing to deal with BDH and a few going out of business mid-way through performing a contract with BDH. This is due to fluctuating market prices of materials. The procurement manager suggests supplier to adopt variable pricing arrangement with price index.
Is this a right course of action?
- A . No, variable pricing would only benefit the suppliers
- B . Yes, this type of arrangement would provide absolute certainty when budgeting
- C . Yes, this pricing arrangement would reimburse the fluctuation of material prices
- D . No, price adjustment should be applied to short-term supply contract only (3-month
duration or less)
Correct Answer: C
C
Explanation:
Procurement staff in the Hospital is forcing suppliers into fixed price contract. If the costs generally rise, supplier may operate at a loss. This situation can disrupt the relationship, that is the reason why some suppliers refusing to deal with BDH and a few going out of business mid-way.
Alternative methods could be variable pricing arrangement. This method would reimburse the fluctuation of market price. It will also benefit buyer if the market price drops. This type of arrangement should be applied to long-term contracts (i.e. 18 months or more).
Reference: CIPS study guide page 179-184
LO 3, AC 3.3
C
Explanation:
Procurement staff in the Hospital is forcing suppliers into fixed price contract. If the costs generally rise, supplier may operate at a loss. This situation can disrupt the relationship, that is the reason why some suppliers refusing to deal with BDH and a few going out of business mid-way.
Alternative methods could be variable pricing arrangement. This method would reimburse the fluctuation of market price. It will also benefit buyer if the market price drops. This type of arrangement should be applied to long-term contracts (i.e. 18 months or more).
Reference: CIPS study guide page 179-184
LO 3, AC 3.3
Question #39
Blakenall District Hospital (BDH) is a large hospital that is a major part of the government’s health service. Purchasing staff are in the habit of placing many long-term contracts with suppliers and sub-contractors. Whilst these contracts are usually carried out successfully, prices are often paid that are well over budget. The purchasing manager is concerned to find that, in some cases, members of staff are forcing suppliers to accept fixed price contracts. The policy has caused several problems such as some suppliers refusing to deal with BDH and a few going out of business mid-way through performing a contract with BDH. This is due to fluctuating market prices of materials. The procurement manager suggests supplier to adopt variable pricing arrangement with price index.
Is this a right course of action?
- A . No, variable pricing would only benefit the suppliers
- B . Yes, this type of arrangement would provide absolute certainty when budgeting
- C . Yes, this pricing arrangement would reimburse the fluctuation of material prices
- D . No, price adjustment should be applied to short-term supply contract only (3-month
duration or less)
Correct Answer: C
C
Explanation:
Procurement staff in the Hospital is forcing suppliers into fixed price contract. If the costs generally rise, supplier may operate at a loss. This situation can disrupt the relationship, that is the reason why some suppliers refusing to deal with BDH and a few going out of business mid-way.
Alternative methods could be variable pricing arrangement. This method would reimburse the fluctuation of market price. It will also benefit buyer if the market price drops. This type of arrangement should be applied to long-term contracts (i.e. 18 months or more).
Reference: CIPS study guide page 179-184
LO 3, AC 3.3
C
Explanation:
Procurement staff in the Hospital is forcing suppliers into fixed price contract. If the costs generally rise, supplier may operate at a loss. This situation can disrupt the relationship, that is the reason why some suppliers refusing to deal with BDH and a few going out of business mid-way.
Alternative methods could be variable pricing arrangement. This method would reimburse the fluctuation of market price. It will also benefit buyer if the market price drops. This type of arrangement should be applied to long-term contracts (i.e. 18 months or more).
Reference: CIPS study guide page 179-184
LO 3, AC 3.3
Question #39
Blakenall District Hospital (BDH) is a large hospital that is a major part of the government’s health service. Purchasing staff are in the habit of placing many long-term contracts with suppliers and sub-contractors. Whilst these contracts are usually carried out successfully, prices are often paid that are well over budget. The purchasing manager is concerned to find that, in some cases, members of staff are forcing suppliers to accept fixed price contracts. The policy has caused several problems such as some suppliers refusing to deal with BDH and a few going out of business mid-way through performing a contract with BDH. This is due to fluctuating market prices of materials. The procurement manager suggests supplier to adopt variable pricing arrangement with price index.
Is this a right course of action?
- A . No, variable pricing would only benefit the suppliers
- B . Yes, this type of arrangement would provide absolute certainty when budgeting
- C . Yes, this pricing arrangement would reimburse the fluctuation of material prices
- D . No, price adjustment should be applied to short-term supply contract only (3-month
duration or less)
Correct Answer: C
C
Explanation:
Procurement staff in the Hospital is forcing suppliers into fixed price contract. If the costs generally rise, supplier may operate at a loss. This situation can disrupt the relationship, that is the reason why some suppliers refusing to deal with BDH and a few going out of business mid-way.
Alternative methods could be variable pricing arrangement. This method would reimburse the fluctuation of market price. It will also benefit buyer if the market price drops. This type of arrangement should be applied to long-term contracts (i.e. 18 months or more).
Reference: CIPS study guide page 179-184
LO 3, AC 3.3
C
Explanation:
Procurement staff in the Hospital is forcing suppliers into fixed price contract. If the costs generally rise, supplier may operate at a loss. This situation can disrupt the relationship, that is the reason why some suppliers refusing to deal with BDH and a few going out of business mid-way.
Alternative methods could be variable pricing arrangement. This method would reimburse the fluctuation of market price. It will also benefit buyer if the market price drops. This type of arrangement should be applied to long-term contracts (i.e. 18 months or more).
Reference: CIPS study guide page 179-184
LO 3, AC 3.3
Question #39
Blakenall District Hospital (BDH) is a large hospital that is a major part of the government’s health service. Purchasing staff are in the habit of placing many long-term contracts with suppliers and sub-contractors. Whilst these contracts are usually carried out successfully, prices are often paid that are well over budget. The purchasing manager is concerned to find that, in some cases, members of staff are forcing suppliers to accept fixed price contracts. The policy has caused several problems such as some suppliers refusing to deal with BDH and a few going out of business mid-way through performing a contract with BDH. This is due to fluctuating market prices of materials. The procurement manager suggests supplier to adopt variable pricing arrangement with price index.
Is this a right course of action?
- A . No, variable pricing would only benefit the suppliers
- B . Yes, this type of arrangement would provide absolute certainty when budgeting
- C . Yes, this pricing arrangement would reimburse the fluctuation of material prices
- D . No, price adjustment should be applied to short-term supply contract only (3-month
duration or less)
Correct Answer: C
C
Explanation:
Procurement staff in the Hospital is forcing suppliers into fixed price contract. If the costs generally rise, supplier may operate at a loss. This situation can disrupt the relationship, that is the reason why some suppliers refusing to deal with BDH and a few going out of business mid-way.
Alternative methods could be variable pricing arrangement. This method would reimburse the fluctuation of market price. It will also benefit buyer if the market price drops. This type of arrangement should be applied to long-term contracts (i.e. 18 months or more).
Reference: CIPS study guide page 179-184
LO 3, AC 3.3
C
Explanation:
Procurement staff in the Hospital is forcing suppliers into fixed price contract. If the costs generally rise, supplier may operate at a loss. This situation can disrupt the relationship, that is the reason why some suppliers refusing to deal with BDH and a few going out of business mid-way.
Alternative methods could be variable pricing arrangement. This method would reimburse the fluctuation of market price. It will also benefit buyer if the market price drops. This type of arrangement should be applied to long-term contracts (i.e. 18 months or more).
Reference: CIPS study guide page 179-184
LO 3, AC 3.3
Question #39
Blakenall District Hospital (BDH) is a large hospital that is a major part of the government’s health service. Purchasing staff are in the habit of placing many long-term contracts with suppliers and sub-contractors. Whilst these contracts are usually carried out successfully, prices are often paid that are well over budget. The purchasing manager is concerned to find that, in some cases, members of staff are forcing suppliers to accept fixed price contracts. The policy has caused several problems such as some suppliers refusing to deal with BDH and a few going out of business mid-way through performing a contract with BDH. This is due to fluctuating market prices of materials. The procurement manager suggests supplier to adopt variable pricing arrangement with price index.
Is this a right course of action?
- A . No, variable pricing would only benefit the suppliers
- B . Yes, this type of arrangement would provide absolute certainty when budgeting
- C . Yes, this pricing arrangement would reimburse the fluctuation of material prices
- D . No, price adjustment should be applied to short-term supply contract only (3-month
duration or less)
Correct Answer: C
C
Explanation:
Procurement staff in the Hospital is forcing suppliers into fixed price contract. If the costs generally rise, supplier may operate at a loss. This situation can disrupt the relationship, that is the reason why some suppliers refusing to deal with BDH and a few going out of business mid-way.
Alternative methods could be variable pricing arrangement. This method would reimburse the fluctuation of market price. It will also benefit buyer if the market price drops. This type of arrangement should be applied to long-term contracts (i.e. 18 months or more).
Reference: CIPS study guide page 179-184
LO 3, AC 3.3
C
Explanation:
Procurement staff in the Hospital is forcing suppliers into fixed price contract. If the costs generally rise, supplier may operate at a loss. This situation can disrupt the relationship, that is the reason why some suppliers refusing to deal with BDH and a few going out of business mid-way.
Alternative methods could be variable pricing arrangement. This method would reimburse the fluctuation of market price. It will also benefit buyer if the market price drops. This type of arrangement should be applied to long-term contracts (i.e. 18 months or more).
Reference: CIPS study guide page 179-184
LO 3, AC 3.3
Question #44
A term can never be implied, it must always be expressed by the parties
- A . 1,3 and 4 only
- B . 1, 2 and 3 only
- C . 1, 2 and 4 only
- D . 2, 3 and 4 only
Correct Answer: B
B
Explanation:
An implied term is a term which the courts imply into a contract because it has not been expressly included by the parties. This may be because the parties did not consider it, did not think that any problem would arise in relation to it or simply omitted to include it.
The courts are very reluctant to imply terms into contracts and will only do so in the following circumstances:
B
Explanation:
An implied term is a term which the courts imply into a contract because it has not been expressly included by the parties. This may be because the parties did not consider it, did not think that any problem would arise in relation to it or simply omitted to include it.
The courts are very reluctant to imply terms into contracts and will only do so in the following circumstances:
Question #44
A term can never be implied, it must always be expressed by the parties
- A . 1,3 and 4 only
- B . 1, 2 and 3 only
- C . 1, 2 and 4 only
- D . 2, 3 and 4 only
Correct Answer: B
B
Explanation:
An implied term is a term which the courts imply into a contract because it has not been expressly included by the parties. This may be because the parties did not consider it, did not think that any problem would arise in relation to it or simply omitted to include it.
The courts are very reluctant to imply terms into contracts and will only do so in the following circumstances:
B
Explanation:
An implied term is a term which the courts imply into a contract because it has not been expressly included by the parties. This may be because the parties did not consider it, did not think that any problem would arise in relation to it or simply omitted to include it.
The courts are very reluctant to imply terms into contracts and will only do so in the following circumstances:
Question #44
A term can never be implied, it must always be expressed by the parties
- A . 1,3 and 4 only
- B . 1, 2 and 3 only
- C . 1, 2 and 4 only
- D . 2, 3 and 4 only
Correct Answer: B
B
Explanation:
An implied term is a term which the courts imply into a contract because it has not been expressly included by the parties. This may be because the parties did not consider it, did not think that any problem would arise in relation to it or simply omitted to include it.
The courts are very reluctant to imply terms into contracts and will only do so in the following circumstances:
B
Explanation:
An implied term is a term which the courts imply into a contract because it has not been expressly included by the parties. This may be because the parties did not consider it, did not think that any problem would arise in relation to it or simply omitted to include it.
The courts are very reluctant to imply terms into contracts and will only do so in the following circumstances:
Question #44
A term can never be implied, it must always be expressed by the parties
- A . 1,3 and 4 only
- B . 1, 2 and 3 only
- C . 1, 2 and 4 only
- D . 2, 3 and 4 only
Correct Answer: B
B
Explanation:
An implied term is a term which the courts imply into a contract because it has not been expressly included by the parties. This may be because the parties did not consider it, did not think that any problem would arise in relation to it or simply omitted to include it.
The courts are very reluctant to imply terms into contracts and will only do so in the following circumstances:
B
Explanation:
An implied term is a term which the courts imply into a contract because it has not been expressly included by the parties. This may be because the parties did not consider it, did not think that any problem would arise in relation to it or simply omitted to include it.
The courts are very reluctant to imply terms into contracts and will only do so in the following circumstances:
Question #44
A term can never be implied, it must always be expressed by the parties
- A . 1,3 and 4 only
- B . 1, 2 and 3 only
- C . 1, 2 and 4 only
- D . 2, 3 and 4 only
Correct Answer: B
B
Explanation:
An implied term is a term which the courts imply into a contract because it has not been expressly included by the parties. This may be because the parties did not consider it, did not think that any problem would arise in relation to it or simply omitted to include it.
The courts are very reluctant to imply terms into contracts and will only do so in the following circumstances:
B
Explanation:
An implied term is a term which the courts imply into a contract because it has not been expressly included by the parties. This may be because the parties did not consider it, did not think that any problem would arise in relation to it or simply omitted to include it.
The courts are very reluctant to imply terms into contracts and will only do so in the following circumstances:
Question #44
A term can never be implied, it must always be expressed by the parties
- A . 1,3 and 4 only
- B . 1, 2 and 3 only
- C . 1, 2 and 4 only
- D . 2, 3 and 4 only
Correct Answer: B
B
Explanation:
An implied term is a term which the courts imply into a contract because it has not been expressly included by the parties. This may be because the parties did not consider it, did not think that any problem would arise in relation to it or simply omitted to include it.
The courts are very reluctant to imply terms into contracts and will only do so in the following circumstances:
B
Explanation:
An implied term is a term which the courts imply into a contract because it has not been expressly included by the parties. This may be because the parties did not consider it, did not think that any problem would arise in relation to it or simply omitted to include it.
The courts are very reluctant to imply terms into contracts and will only do so in the following circumstances:
Question #50
A purchase order can become a contract between supplier and purchaser if it is…?
- A . Received by the supplier
- B . Accepted by the supplier
- C . Issued by the buyer
- D . Edited by the supplier
Correct Answer: B
B
Explanation:
A purchase order is a document sent from a buyer to a seller, with a request to order a product. The purchase order often has its number, description and quantity of the goods, unit prices and total price, name of issuer, time of delivery, standard terms and conditions, etc. It is effectively an offer to supplier. The purchase order will become a formal contract if supplier accepted it by written notice or by performance (such as deliver the goods to the buyer’s premise).
Reference: CIPS study guide page 33
LO 1, AC 1.2
B
Explanation:
A purchase order is a document sent from a buyer to a seller, with a request to order a product. The purchase order often has its number, description and quantity of the goods, unit prices and total price, name of issuer, time of delivery, standard terms and conditions, etc. It is effectively an offer to supplier. The purchase order will become a formal contract if supplier accepted it by written notice or by performance (such as deliver the goods to the buyer’s premise).
Reference: CIPS study guide page 33
LO 1, AC 1.2
Question #51
Which of the following are likely to be advantages of using invitation to tender? Select TWO that apply:
- A . Short turnaround times
- B . Quick implementation
- C . Driving forward planning culture
- D . Lower administration costs
- E . Reducing risks of bribery and corruption
Correct Answer: C,E
C,E
Explanation:
Advantages of using invitation to tender may be as below:
No Nepotism: Tenders or bids are evaluated on the basis of certain predetermined criteria, such as price, quality and value for money. In other words, the firm offering the highest quality product or service at the lowest price point would win the contract. As most tender documents are opened and evaluated in a public process, I think that there remains little room for nepotism or favoritism of any kind.
Value for Money: From the perspective of the client, tenders offer the greatest value for the amount of money spent. This is due to the fact that the client can choose from a wide pool of potential suppliers to select the ones that can produce the highest quality product or service at the lowest price point. This allows the company, establishment or organization to save money without having to compromise on quality. Therefore, despite being quite time consuming, tendering is, in my opinion, a profitable long-term process from an organization’s point of view.
Encourages Competition: The process of tendering helps promote a competitive market. This is because a number of potential contractors, firms or suppliers get a chance to bid for every project. And because selection depends on quality and price, every bidder tries to reduce operational inefficiencies and redundancies as much as possible in order to lower expenses and improve quality. This entire process encourages healthy competition in the market and prevents complacency and laziness, which in turn provides a boost to innovation and new ideas.
Easier Entry: The system of tendering makes it easier and simpler for new firms to enter the market or even a particular industry. This is due to the fact that contracts under this system are awarded on the basis of predetermined, objective criteria. As a result, even a
firm that is a new entrant to the market, having no connections or contacts in the industry, can win a prestigious and lucrative contract by providing the highest value for the client’s money. This process therefore helps new firms to quickly get a foothold in the market or industry, thus significantly lowering the traditional barriers to entry.
Reference:
– Characteristics and Benefits of the Tendering Process
– CIPS study guide page 6-8
LO 1, AC 1.1
C,E
Explanation:
Advantages of using invitation to tender may be as below:
No Nepotism: Tenders or bids are evaluated on the basis of certain predetermined criteria, such as price, quality and value for money. In other words, the firm offering the highest quality product or service at the lowest price point would win the contract. As most tender documents are opened and evaluated in a public process, I think that there remains little room for nepotism or favoritism of any kind.
Value for Money: From the perspective of the client, tenders offer the greatest value for the amount of money spent. This is due to the fact that the client can choose from a wide pool of potential suppliers to select the ones that can produce the highest quality product or service at the lowest price point. This allows the company, establishment or organization to save money without having to compromise on quality. Therefore, despite being quite time consuming, tendering is, in my opinion, a profitable long-term process from an organization’s point of view.
Encourages Competition: The process of tendering helps promote a competitive market. This is because a number of potential contractors, firms or suppliers get a chance to bid for every project. And because selection depends on quality and price, every bidder tries to reduce operational inefficiencies and redundancies as much as possible in order to lower expenses and improve quality. This entire process encourages healthy competition in the market and prevents complacency and laziness, which in turn provides a boost to innovation and new ideas.
Easier Entry: The system of tendering makes it easier and simpler for new firms to enter the market or even a particular industry. This is due to the fact that contracts under this system are awarded on the basis of predetermined, objective criteria. As a result, even a
firm that is a new entrant to the market, having no connections or contacts in the industry, can win a prestigious and lucrative contract by providing the highest value for the client’s money. This process therefore helps new firms to quickly get a foothold in the market or industry, thus significantly lowering the traditional barriers to entry.
Reference:
– Characteristics and Benefits of the Tendering Process
– CIPS study guide page 6-8
LO 1, AC 1.1
Question #52
CMS Corp goes into a gainshare agreement with the contractor, EIP Ltd. Both parties agree that the final fee will be calculated on target cost – target fee basis.
Which of the following will affect the final fee payable in this gainshare agreement? Select TWO that apply:
- A . Accrual expense
- B . Final price
- C . Purchaser goodwill
- D . Supplier share
- E . Actual cost
Correct Answer: D,E
D,E
Explanation:
An incentive contract is a sub-segment of a fixed-price or cost-reimbursement contract when there are specific cost or time commitments that are desired for a project. The standard incentive contract will allow for a fixed price to be paid for work to be completed by a specific deadline and at a specific cost.
There are two major types of incentive contracts: Cost-plus-incentive fee and Fixed-price incentive (firm target) contracts. Both types have the same formula for calculating final fee and final price.
The target fee is the amount that will be paid if the actual costs (which can be proven) match the target costs
The actual fee will be adjusted in proportion to the difference between the target cost and the actual cost.
The usual calculation is:
Target fee + ((target cost – actual cost) x Supplier share) = final fee
The final price then becomes:
Actual cost + final fee = final price
Reference: CIPS study guide page 185
LO 3, AC 3.3
D,E
Explanation:
An incentive contract is a sub-segment of a fixed-price or cost-reimbursement contract when there are specific cost or time commitments that are desired for a project. The standard incentive contract will allow for a fixed price to be paid for work to be completed by a specific deadline and at a specific cost.
There are two major types of incentive contracts: Cost-plus-incentive fee and Fixed-price incentive (firm target) contracts. Both types have the same formula for calculating final fee and final price.
The target fee is the amount that will be paid if the actual costs (which can be proven) match the target costs
The actual fee will be adjusted in proportion to the difference between the target cost and the actual cost.
The usual calculation is:
Target fee + ((target cost – actual cost) x Supplier share) = final fee
The final price then becomes:
Actual cost + final fee = final price
Reference: CIPS study guide page 185
LO 3, AC 3.3
Question #53
Which of the following is the set of principles that enables courts to determine exactly what the written contract says and what that must mean, then the court will uphold that?
- A . Order of precedence
- B . Rules of interpretation
- C . Unfair Contract Act 1977
- D . Rules of contract formation
Correct Answer: B
B
Explanation:
Courts may be called upon to interpret a statute due to disputes over the meaning of a word or phrase contained within a statute. These disputes may arise through a variety of reasons. It has long been held that words are an imperfect means of communication. Omissions may have occurred at the drafting stage, word or phraseology ambiguity, etymological change through time, oversight on specific points, or a failure to adapt legislation to new developments. This may result in the judiciary providing a role in statutory interpretation. Statutory interpretation in its broadest sense is the process of determining the true meaning of a written document. In UK, the Interpretation Act 1978 provides limited scope to assist judges with statutory interpretation in that it only provides standard definitions to common provisions such as a rebuttable presumption that terminology in the masculine gender also include the feminine, and that the singular includes plural.
An order of precedence clause sets out the order in which the contract documents take precedence in the event of an inconsistency.
The Unfair Contract Terms Act 1977 (c 50) is an Act of Parliament of the United Kingdom which regulates contracts by restricting the operation and legality of some contract terms. It extends to nearly all forms of contract and one of its most important functions is limiting the applicability of disclaimers of liability. The terms extend to both actual contract terms and notices that are seen to constitute a contractual obligation.
Reference:
– Rules of Statutory Interpretation
– CIPS study guide page 43-46
LO 1, AC 1.2
B
Explanation:
Courts may be called upon to interpret a statute due to disputes over the meaning of a word or phrase contained within a statute. These disputes may arise through a variety of reasons. It has long been held that words are an imperfect means of communication. Omissions may have occurred at the drafting stage, word or phraseology ambiguity, etymological change through time, oversight on specific points, or a failure to adapt legislation to new developments. This may result in the judiciary providing a role in statutory interpretation. Statutory interpretation in its broadest sense is the process of determining the true meaning of a written document. In UK, the Interpretation Act 1978 provides limited scope to assist judges with statutory interpretation in that it only provides standard definitions to common provisions such as a rebuttable presumption that terminology in the masculine gender also include the feminine, and that the singular includes plural.
An order of precedence clause sets out the order in which the contract documents take precedence in the event of an inconsistency.
The Unfair Contract Terms Act 1977 (c 50) is an Act of Parliament of the United Kingdom which regulates contracts by restricting the operation and legality of some contract terms. It extends to nearly all forms of contract and one of its most important functions is limiting the applicability of disclaimers of liability. The terms extend to both actual contract terms and notices that are seen to constitute a contractual obligation.
Reference:
– Rules of Statutory Interpretation
– CIPS study guide page 43-46
LO 1, AC 1.2
Question #54
Which of the following should be specially noticed in market dialogue with suppliers in specification development?
- A . Both parties must respect confidentiality
- B . The buying organisation must avoid social media at all cost
- C . Market dialogue is banned in the public sector
- D . Market dialogue should only be conducted with well-known supplier
Correct Answer: A
A
Explanation:
Being clear on your objectives helps you to design the best approach to the dialogue.
There are some notices in developing dialogue with suppliers:
– All meetings should be documented
– Respect commercial confidentiality. Although insights gained from one conversation lead to questions in another, you must be very careful not to allow this to happen in a way that breaches the confidentiality of the first conversation.
Reference: CIPS study guide page 84-85
LO 2, AC 2.1
A
Explanation:
Being clear on your objectives helps you to design the best approach to the dialogue.
There are some notices in developing dialogue with suppliers:
– All meetings should be documented
– Respect commercial confidentiality. Although insights gained from one conversation lead to questions in another, you must be very careful not to allow this to happen in a way that breaches the confidentiality of the first conversation.
Reference: CIPS study guide page 84-85
LO 2, AC 2.1
Question #55
According to mailbox rule in some common law countries, at which point the offeree’s acceptance will be effective?
- A . When the letter of acceptance is opened and its contents read by the offeree.
- B . When the letter of acceptance is received by the offeror.
- C . When the letter of acceptance has been written.
- D . When the letter of acceptance has been correctly addressed, its postage paid, and posted.
Correct Answer: D
D
Explanation:
When parties do not negotiate face-to-face, a key QUESTION NO: becomes when things like acceptances, rejections and revocations take effect. The general rule is that acceptances are effective on dispatch (when they are mailed). Everything else becomes effective when the offeror actually receives them. This idea is codified by the “mailbox rule” which states that acceptance is effective on dispatch, even before the offeror has received it. (The one minor exception to this rule involves option contracts for which acceptances are not effective until they are received by the offeror.)
Reference:
– The Mailbox Rule
– CIPS study guide page 34
D
Explanation:
When parties do not negotiate face-to-face, a key QUESTION NO: becomes when things like acceptances, rejections and revocations take effect. The general rule is that acceptances are effective on dispatch (when they are mailed). Everything else becomes effective when the offeror actually receives them. This idea is codified by the “mailbox rule” which states that acceptance is effective on dispatch, even before the offeror has received it. (The one minor exception to this rule involves option contracts for which acceptances are not effective until they are received by the offeror.)
Reference:
– The Mailbox Rule
– CIPS study guide page 34
Question #56
Which of the following is always an advantage of using fixed price arrangement in a contract for buying organisation?
- A . Buyer can allocate budget with certainty
- B . Buyer can harness falling market price
- C . Supplier always receives a fixed margin
- D . Suitable for contracts that last 5 years or more
Correct Answer: A
A
Explanation:
Advantages of using fixed pricing arrangement are as below:
– Budget/income certainty – prices are fixed up front and should not change
– The impact of changes to the supplier’s cost base is not fed through to the purchaser. If costs diminish, the supplier will benefit from this, and if costs rise, the purchaser will benefit
Reference: CIPS study guide page 172-176
LO 3, AC 3.3
A
Explanation:
Advantages of using fixed pricing arrangement are as below:
– Budget/income certainty – prices are fixed up front and should not change
– The impact of changes to the supplier’s cost base is not fed through to the purchaser. If costs diminish, the supplier will benefit from this, and if costs rise, the purchaser will benefit
Reference: CIPS study guide page 172-176
LO 3, AC 3.3
Question #57
Which of the following should be taken to avoid the conflicts between orally negotiated terms before the conclusion of contract and the final written contract?
- A . Finding signs of misrepresentation of the other contracting party
- B . Prevailing orally negotiated terms over the final written contract
- C . Embedding a term excluding all prior oral discussions that are not mentioned in the final written contract
- D . Avoiding long negotiation
Correct Answer: C
C
Explanation:
When a written contract is based on oral negotiation, to avoid the conflicts between orally negotiated terms and final written contract, the contract should include an express term that specifically excludes all prior oral discussion. However, orally negotiated terms can be used to interpret the final contract.
This practice (excluding prior discussion) is so common in international commercial contract that UNIDROIT Principles of International Commercial Contracts have an article (2.1.17) dealing with this.
Reference: CIPS study guide page 130
LO 3, AC 3.1
C
Explanation:
When a written contract is based on oral negotiation, to avoid the conflicts between orally negotiated terms and final written contract, the contract should include an express term that specifically excludes all prior oral discussion. However, orally negotiated terms can be used to interpret the final contract.
This practice (excluding prior discussion) is so common in international commercial contract that UNIDROIT Principles of International Commercial Contracts have an article (2.1.17) dealing with this.
Reference: CIPS study guide page 130
LO 3, AC 3.1
Question #57
Which of the following should be taken to avoid the conflicts between orally negotiated terms before the conclusion of contract and the final written contract?
- A . Finding signs of misrepresentation of the other contracting party
- B . Prevailing orally negotiated terms over the final written contract
- C . Embedding a term excluding all prior oral discussions that are not mentioned in the final written contract
- D . Avoiding long negotiation
Correct Answer: C
C
Explanation:
When a written contract is based on oral negotiation, to avoid the conflicts between orally negotiated terms and final written contract, the contract should include an express term that specifically excludes all prior oral discussion. However, orally negotiated terms can be used to interpret the final contract.
This practice (excluding prior discussion) is so common in international commercial contract that UNIDROIT Principles of International Commercial Contracts have an article (2.1.17) dealing with this.
Reference: CIPS study guide page 130
LO 3, AC 3.1
C
Explanation:
When a written contract is based on oral negotiation, to avoid the conflicts between orally negotiated terms and final written contract, the contract should include an express term that specifically excludes all prior oral discussion. However, orally negotiated terms can be used to interpret the final contract.
This practice (excluding prior discussion) is so common in international commercial contract that UNIDROIT Principles of International Commercial Contracts have an article (2.1.17) dealing with this.
Reference: CIPS study guide page 130
LO 3, AC 3.1
Question #57
Which of the following should be taken to avoid the conflicts between orally negotiated terms before the conclusion of contract and the final written contract?
- A . Finding signs of misrepresentation of the other contracting party
- B . Prevailing orally negotiated terms over the final written contract
- C . Embedding a term excluding all prior oral discussions that are not mentioned in the final written contract
- D . Avoiding long negotiation
Correct Answer: C
C
Explanation:
When a written contract is based on oral negotiation, to avoid the conflicts between orally negotiated terms and final written contract, the contract should include an express term that specifically excludes all prior oral discussion. However, orally negotiated terms can be used to interpret the final contract.
This practice (excluding prior discussion) is so common in international commercial contract that UNIDROIT Principles of International Commercial Contracts have an article (2.1.17) dealing with this.
Reference: CIPS study guide page 130
LO 3, AC 3.1
C
Explanation:
When a written contract is based on oral negotiation, to avoid the conflicts between orally negotiated terms and final written contract, the contract should include an express term that specifically excludes all prior oral discussion. However, orally negotiated terms can be used to interpret the final contract.
This practice (excluding prior discussion) is so common in international commercial contract that UNIDROIT Principles of International Commercial Contracts have an article (2.1.17) dealing with this.
Reference: CIPS study guide page 130
LO 3, AC 3.1
Question #57
Which of the following should be taken to avoid the conflicts between orally negotiated terms before the conclusion of contract and the final written contract?
- A . Finding signs of misrepresentation of the other contracting party
- B . Prevailing orally negotiated terms over the final written contract
- C . Embedding a term excluding all prior oral discussions that are not mentioned in the final written contract
- D . Avoiding long negotiation
Correct Answer: C
C
Explanation:
When a written contract is based on oral negotiation, to avoid the conflicts between orally negotiated terms and final written contract, the contract should include an express term that specifically excludes all prior oral discussion. However, orally negotiated terms can be used to interpret the final contract.
This practice (excluding prior discussion) is so common in international commercial contract that UNIDROIT Principles of International Commercial Contracts have an article (2.1.17) dealing with this.
Reference: CIPS study guide page 130
LO 3, AC 3.1
C
Explanation:
When a written contract is based on oral negotiation, to avoid the conflicts between orally negotiated terms and final written contract, the contract should include an express term that specifically excludes all prior oral discussion. However, orally negotiated terms can be used to interpret the final contract.
This practice (excluding prior discussion) is so common in international commercial contract that UNIDROIT Principles of International Commercial Contracts have an article (2.1.17) dealing with this.
Reference: CIPS study guide page 130
LO 3, AC 3.1
Question #57
Which of the following should be taken to avoid the conflicts between orally negotiated terms before the conclusion of contract and the final written contract?
- A . Finding signs of misrepresentation of the other contracting party
- B . Prevailing orally negotiated terms over the final written contract
- C . Embedding a term excluding all prior oral discussions that are not mentioned in the final written contract
- D . Avoiding long negotiation
Correct Answer: C
C
Explanation:
When a written contract is based on oral negotiation, to avoid the conflicts between orally negotiated terms and final written contract, the contract should include an express term that specifically excludes all prior oral discussion. However, orally negotiated terms can be used to interpret the final contract.
This practice (excluding prior discussion) is so common in international commercial contract that UNIDROIT Principles of International Commercial Contracts have an article (2.1.17) dealing with this.
Reference: CIPS study guide page 130
LO 3, AC 3.1
C
Explanation:
When a written contract is based on oral negotiation, to avoid the conflicts between orally negotiated terms and final written contract, the contract should include an express term that specifically excludes all prior oral discussion. However, orally negotiated terms can be used to interpret the final contract.
This practice (excluding prior discussion) is so common in international commercial contract that UNIDROIT Principles of International Commercial Contracts have an article (2.1.17) dealing with this.
Reference: CIPS study guide page 130
LO 3, AC 3.1
Question #62
Governance
- A . 2 and 3 only
- B . 1 and 2 only
- C . 1 and 4 only
- D . 3 and 4 only
Correct Answer: A
A
Explanation:
Information Assurance (IA)
Information Assurance (IA) is the practice of managing information-related risks and the steps involved to protect information systems such as computer and network systems. The IA transformation is a partnership that stretches across the Department of Defense (DoD), Office of National Intelligence, Committee on National Security Systems, National Institute of Science and Technology (NIST), and the Office of Management and Budget.
The US Government’s definition of information assurance is:
“measures that protect and defend information and information systems by ensuring their availability, integrity, authentication, confidentiality, and non-repudiation. These measures include providing for restoration of information systems by incorporating protection, detection, and reaction capabilities.”
Information Assurance (IA) is essentially protecting information systems, and is often associated with the following five pillars:
– Integrity
– Availability
– Authentication
– Confidentiality
– Nonrepudiation
The following pillars can be applied in a variety of ways, depending on the sensitivity of the information, or information systems within your organization. Currently, these five pillars are used at the heart of the US Governments ability to conduct safe and secure operations in a global environment.
A
Explanation:
Information Assurance (IA)
Information Assurance (IA) is the practice of managing information-related risks and the steps involved to protect information systems such as computer and network systems. The IA transformation is a partnership that stretches across the Department of Defense (DoD), Office of National Intelligence, Committee on National Security Systems, National Institute of Science and Technology (NIST), and the Office of Management and Budget.
The US Government’s definition of information assurance is:
“measures that protect and defend information and information systems by ensuring their availability, integrity, authentication, confidentiality, and non-repudiation. These measures include providing for restoration of information systems by incorporating protection, detection, and reaction capabilities.”
Information Assurance (IA) is essentially protecting information systems, and is often associated with the following five pillars:
– Integrity
– Availability
– Authentication
– Confidentiality
– Nonrepudiation
The following pillars can be applied in a variety of ways, depending on the sensitivity of the information, or information systems within your organization. Currently, these five pillars are used at the heart of the US Governments ability to conduct safe and secure operations in a global environment.
Question #62
Governance
- A . 2 and 3 only
- B . 1 and 2 only
- C . 1 and 4 only
- D . 3 and 4 only
Correct Answer: A
A
Explanation:
Information Assurance (IA)
Information Assurance (IA) is the practice of managing information-related risks and the steps involved to protect information systems such as computer and network systems. The IA transformation is a partnership that stretches across the Department of Defense (DoD), Office of National Intelligence, Committee on National Security Systems, National Institute of Science and Technology (NIST), and the Office of Management and Budget.
The US Government’s definition of information assurance is:
“measures that protect and defend information and information systems by ensuring their availability, integrity, authentication, confidentiality, and non-repudiation. These measures include providing for restoration of information systems by incorporating protection, detection, and reaction capabilities.”
Information Assurance (IA) is essentially protecting information systems, and is often associated with the following five pillars:
– Integrity
– Availability
– Authentication
– Confidentiality
– Nonrepudiation
The following pillars can be applied in a variety of ways, depending on the sensitivity of the information, or information systems within your organization. Currently, these five pillars are used at the heart of the US Governments ability to conduct safe and secure operations in a global environment.
A
Explanation:
Information Assurance (IA)
Information Assurance (IA) is the practice of managing information-related risks and the steps involved to protect information systems such as computer and network systems. The IA transformation is a partnership that stretches across the Department of Defense (DoD), Office of National Intelligence, Committee on National Security Systems, National Institute of Science and Technology (NIST), and the Office of Management and Budget.
The US Government’s definition of information assurance is:
“measures that protect and defend information and information systems by ensuring their availability, integrity, authentication, confidentiality, and non-repudiation. These measures include providing for restoration of information systems by incorporating protection, detection, and reaction capabilities.”
Information Assurance (IA) is essentially protecting information systems, and is often associated with the following five pillars:
– Integrity
– Availability
– Authentication
– Confidentiality
– Nonrepudiation
The following pillars can be applied in a variety of ways, depending on the sensitivity of the information, or information systems within your organization. Currently, these five pillars are used at the heart of the US Governments ability to conduct safe and secure operations in a global environment.
Question #62
Governance
- A . 2 and 3 only
- B . 1 and 2 only
- C . 1 and 4 only
- D . 3 and 4 only
Correct Answer: A
A
Explanation:
Information Assurance (IA)
Information Assurance (IA) is the practice of managing information-related risks and the steps involved to protect information systems such as computer and network systems. The IA transformation is a partnership that stretches across the Department of Defense (DoD), Office of National Intelligence, Committee on National Security Systems, National Institute of Science and Technology (NIST), and the Office of Management and Budget.
The US Government’s definition of information assurance is:
“measures that protect and defend information and information systems by ensuring their availability, integrity, authentication, confidentiality, and non-repudiation. These measures include providing for restoration of information systems by incorporating protection, detection, and reaction capabilities.”
Information Assurance (IA) is essentially protecting information systems, and is often associated with the following five pillars:
– Integrity
– Availability
– Authentication
– Confidentiality
– Nonrepudiation
The following pillars can be applied in a variety of ways, depending on the sensitivity of the information, or information systems within your organization. Currently, these five pillars are used at the heart of the US Governments ability to conduct safe and secure operations in a global environment.
A
Explanation:
Information Assurance (IA)
Information Assurance (IA) is the practice of managing information-related risks and the steps involved to protect information systems such as computer and network systems. The IA transformation is a partnership that stretches across the Department of Defense (DoD), Office of National Intelligence, Committee on National Security Systems, National Institute of Science and Technology (NIST), and the Office of Management and Budget.
The US Government’s definition of information assurance is:
“measures that protect and defend information and information systems by ensuring their availability, integrity, authentication, confidentiality, and non-repudiation. These measures include providing for restoration of information systems by incorporating protection, detection, and reaction capabilities.”
Information Assurance (IA) is essentially protecting information systems, and is often associated with the following five pillars:
– Integrity
– Availability
– Authentication
– Confidentiality
– Nonrepudiation
The following pillars can be applied in a variety of ways, depending on the sensitivity of the information, or information systems within your organization. Currently, these five pillars are used at the heart of the US Governments ability to conduct safe and secure operations in a global environment.
Question #62
Governance
- A . 2 and 3 only
- B . 1 and 2 only
- C . 1 and 4 only
- D . 3 and 4 only
Correct Answer: A
A
Explanation:
Information Assurance (IA)
Information Assurance (IA) is the practice of managing information-related risks and the steps involved to protect information systems such as computer and network systems. The IA transformation is a partnership that stretches across the Department of Defense (DoD), Office of National Intelligence, Committee on National Security Systems, National Institute of Science and Technology (NIST), and the Office of Management and Budget.
The US Government’s definition of information assurance is:
“measures that protect and defend information and information systems by ensuring their availability, integrity, authentication, confidentiality, and non-repudiation. These measures include providing for restoration of information systems by incorporating protection, detection, and reaction capabilities.”
Information Assurance (IA) is essentially protecting information systems, and is often associated with the following five pillars:
– Integrity
– Availability
– Authentication
– Confidentiality
– Nonrepudiation
The following pillars can be applied in a variety of ways, depending on the sensitivity of the information, or information systems within your organization. Currently, these five pillars are used at the heart of the US Governments ability to conduct safe and secure operations in a global environment.
A
Explanation:
Information Assurance (IA)
Information Assurance (IA) is the practice of managing information-related risks and the steps involved to protect information systems such as computer and network systems. The IA transformation is a partnership that stretches across the Department of Defense (DoD), Office of National Intelligence, Committee on National Security Systems, National Institute of Science and Technology (NIST), and the Office of Management and Budget.
The US Government’s definition of information assurance is:
“measures that protect and defend information and information systems by ensuring their availability, integrity, authentication, confidentiality, and non-repudiation. These measures include providing for restoration of information systems by incorporating protection, detection, and reaction capabilities.”
Information Assurance (IA) is essentially protecting information systems, and is often associated with the following five pillars:
– Integrity
– Availability
– Authentication
– Confidentiality
– Nonrepudiation
The following pillars can be applied in a variety of ways, depending on the sensitivity of the information, or information systems within your organization. Currently, these five pillars are used at the heart of the US Governments ability to conduct safe and secure operations in a global environment.
Question #62
Governance
- A . 2 and 3 only
- B . 1 and 2 only
- C . 1 and 4 only
- D . 3 and 4 only
Correct Answer: A
A
Explanation:
Information Assurance (IA)
Information Assurance (IA) is the practice of managing information-related risks and the steps involved to protect information systems such as computer and network systems. The IA transformation is a partnership that stretches across the Department of Defense (DoD), Office of National Intelligence, Committee on National Security Systems, National Institute of Science and Technology (NIST), and the Office of Management and Budget.
The US Government’s definition of information assurance is:
“measures that protect and defend information and information systems by ensuring their availability, integrity, authentication, confidentiality, and non-repudiation. These measures include providing for restoration of information systems by incorporating protection, detection, and reaction capabilities.”
Information Assurance (IA) is essentially protecting information systems, and is often associated with the following five pillars:
– Integrity
– Availability
– Authentication
– Confidentiality
– Nonrepudiation
The following pillars can be applied in a variety of ways, depending on the sensitivity of the information, or information systems within your organization. Currently, these five pillars are used at the heart of the US Governments ability to conduct safe and secure operations in a global environment.
A
Explanation:
Information Assurance (IA)
Information Assurance (IA) is the practice of managing information-related risks and the steps involved to protect information systems such as computer and network systems. The IA transformation is a partnership that stretches across the Department of Defense (DoD), Office of National Intelligence, Committee on National Security Systems, National Institute of Science and Technology (NIST), and the Office of Management and Budget.
The US Government’s definition of information assurance is:
“measures that protect and defend information and information systems by ensuring their availability, integrity, authentication, confidentiality, and non-repudiation. These measures include providing for restoration of information systems by incorporating protection, detection, and reaction capabilities.”
Information Assurance (IA) is essentially protecting information systems, and is often associated with the following five pillars:
– Integrity
– Availability
– Authentication
– Confidentiality
– Nonrepudiation
The following pillars can be applied in a variety of ways, depending on the sensitivity of the information, or information systems within your organization. Currently, these five pillars are used at the heart of the US Governments ability to conduct safe and secure operations in a global environment.
Question #62
Governance
- A . 2 and 3 only
- B . 1 and 2 only
- C . 1 and 4 only
- D . 3 and 4 only
Correct Answer: A
A
Explanation:
Information Assurance (IA)
Information Assurance (IA) is the practice of managing information-related risks and the steps involved to protect information systems such as computer and network systems. The IA transformation is a partnership that stretches across the Department of Defense (DoD), Office of National Intelligence, Committee on National Security Systems, National Institute of Science and Technology (NIST), and the Office of Management and Budget.
The US Government’s definition of information assurance is:
“measures that protect and defend information and information systems by ensuring their availability, integrity, authentication, confidentiality, and non-repudiation. These measures include providing for restoration of information systems by incorporating protection, detection, and reaction capabilities.”
Information Assurance (IA) is essentially protecting information systems, and is often associated with the following five pillars:
– Integrity
– Availability
– Authentication
– Confidentiality
– Nonrepudiation
The following pillars can be applied in a variety of ways, depending on the sensitivity of the information, or information systems within your organization. Currently, these five pillars are used at the heart of the US Governments ability to conduct safe and secure operations in a global environment.
A
Explanation:
Information Assurance (IA)
Information Assurance (IA) is the practice of managing information-related risks and the steps involved to protect information systems such as computer and network systems. The IA transformation is a partnership that stretches across the Department of Defense (DoD), Office of National Intelligence, Committee on National Security Systems, National Institute of Science and Technology (NIST), and the Office of Management and Budget.
The US Government’s definition of information assurance is:
“measures that protect and defend information and information systems by ensuring their availability, integrity, authentication, confidentiality, and non-repudiation. These measures include providing for restoration of information systems by incorporating protection, detection, and reaction capabilities.”
Information Assurance (IA) is essentially protecting information systems, and is often associated with the following five pillars:
– Integrity
– Availability
– Authentication
– Confidentiality
– Nonrepudiation
The following pillars can be applied in a variety of ways, depending on the sensitivity of the information, or information systems within your organization. Currently, these five pillars are used at the heart of the US Governments ability to conduct safe and secure operations in a global environment.
Question #68
Which of the following is the model form of contract for construction which is recommended by World Bank?
- A . ITC
- B . JCT
- C . CIPS
- D . FIDIC
Correct Answer: D
D
Explanation:
FIDIC is the International Federation of Consulting Engineers (or Fédération Internationale des Ingénieurs Conseils in French). FIDIC has produced many publications, including the model form contracts, best practice guidances, research on sustainability, integrity and risk management. FIDIC model form contracts have been developed by this organisation since 1999, now they consist of several different books which are marked by colours. Thus, FIDIC model contracts also have the nickname "Rainbow suite of contracts".
Basically, the "Rainbow Suite" include the following books:
* Yellow book: Plant and Design-Build Contract (2 editions: 1999 and 2017)
* Silver book: EPC/Turnkey Contract (2 editions: 1999 and 2017)
* Red book: Construction Contracts (2 editions: 1999 and 2017)
* Emerald book: Conditions of Contract for Underground Works (1st Ed 2019)
* Blue-Green book: Dredgers Contract (2 editions: 2006 and 2016)
* Gold book: Design, Build and Operate Contract Guide
* Pink book: Construction Contract Multilateral Development Bank Harmonised Ed (2 editions: 2005 and 2010)
This type of model contract is commonly used around the world because its author, International Federation of Consulting Engineers, collaborates closely with development banks such as World Bank, Africa Development Bank, Asia Development Bank, etc. Every construction project that is financed by these institutions must adopt the FIDIC contracts. The Joint Contracts Tribunal, also known as the JCT, produces standard forms of contract for construction, guidance notes and other standard documentation for use in the construction industry in the United Kingdom. From its establishment in 1931, JCT has
expanded the number of contributing organisations.
ITC (International Trade Centre) produces contracts specifically designed for small companies doing international business, covering the sale of goods, distribution, services and joint ventures. Many small companies are now engaged in international trade, but don’t have access to the necessary contract forms to protect themselves. ITC and leading legal experts developed eight generic contract templates that incorporate internationally recognized standards and laws for most small business situations.
CIPS has several model forms of contract designed specifically for IT buying and servicing.
Reference: CIPS study guide page 142
LO 3, AC 3.1
D
Explanation:
FIDIC is the International Federation of Consulting Engineers (or Fédération Internationale des Ingénieurs Conseils in French). FIDIC has produced many publications, including the model form contracts, best practice guidances, research on sustainability, integrity and risk management. FIDIC model form contracts have been developed by this organisation since 1999, now they consist of several different books which are marked by colours. Thus, FIDIC model contracts also have the nickname "Rainbow suite of contracts".
Basically, the "Rainbow Suite" include the following books:
* Yellow book: Plant and Design-Build Contract (2 editions: 1999 and 2017)
* Silver book: EPC/Turnkey Contract (2 editions: 1999 and 2017)
* Red book: Construction Contracts (2 editions: 1999 and 2017)
* Emerald book: Conditions of Contract for Underground Works (1st Ed 2019)
* Blue-Green book: Dredgers Contract (2 editions: 2006 and 2016)
* Gold book: Design, Build and Operate Contract Guide
* Pink book: Construction Contract Multilateral Development Bank Harmonised Ed (2 editions: 2005 and 2010)
This type of model contract is commonly used around the world because its author, International Federation of Consulting Engineers, collaborates closely with development banks such as World Bank, Africa Development Bank, Asia Development Bank, etc. Every construction project that is financed by these institutions must adopt the FIDIC contracts. The Joint Contracts Tribunal, also known as the JCT, produces standard forms of contract for construction, guidance notes and other standard documentation for use in the construction industry in the United Kingdom. From its establishment in 1931, JCT has
expanded the number of contributing organisations.
ITC (International Trade Centre) produces contracts specifically designed for small companies doing international business, covering the sale of goods, distribution, services and joint ventures. Many small companies are now engaged in international trade, but don’t have access to the necessary contract forms to protect themselves. ITC and leading legal experts developed eight generic contract templates that incorporate internationally recognized standards and laws for most small business situations.
CIPS has several model forms of contract designed specifically for IT buying and servicing.
Reference: CIPS study guide page 142
LO 3, AC 3.1
Question #69
The pricing arrangement in which markup is added into cost base to calculate the final price is known as…?
- A . Fixed Price approach
- B . Market based approach
- C . Price indices
- D . Cost plus pricing
Correct Answer: D
D
Explanation:
The market approach is a method of determining the value of an asset based on the selling price of similar assets.
A fixed-price strategy means you set a price and keep it constant for an extended period of time.
Cost-plus pricing is also known as markup pricing. It’s a pricing method where a fixed percentage is added on top of the cost to produce
A price index (PI) is a measure of how prices change over a period of time, or in other words, it is a way to measure inflation. There are multiple methods on how to calculate inflation (or deflation).
Reference: CIPS study guide page 176-179
LO 3, AC 3.3
D
Explanation:
The market approach is a method of determining the value of an asset based on the selling price of similar assets.
A fixed-price strategy means you set a price and keep it constant for an extended period of time.
Cost-plus pricing is also known as markup pricing. It’s a pricing method where a fixed percentage is added on top of the cost to produce
A price index (PI) is a measure of how prices change over a period of time, or in other words, it is a way to measure inflation. There are multiple methods on how to calculate inflation (or deflation).
Reference: CIPS study guide page 176-179
LO 3, AC 3.3
Question #70
Which of the following will be always automatically deemed as a consideration?
- A . Promise to perform over and above an existing obligation
- B . Promise given to a third party
- C . Implied consideration
- D . Past consideration
Correct Answer: A
A
Explanation:
Consideration only appears in common law countries. Below are some examples of what is and what is not consideration:
– Past consideration is something that has already been done or given. This cannot act as consideration
– Implied consideration: if the detail of a promise to pay is expressed after the provision of goods or services, but there is an implication that such promise would be forthcoming, this may (depending on the facts) be valid consideration.
– A promise given to a third party: this is not normally consideration, and is based on a concept known as privity of contract. Anyone who is not a party to the contract, even if they are beneficiary of it, cannot sue if the terms of the contract are breached.
– A promise to perform over and above an existing obligation: This is always consideration
Reference:
– Consideration & Promissory Estoppel
– CIPS study guide page 36-40
LO 1, AC 1.2
A
Explanation:
Consideration only appears in common law countries. Below are some examples of what is and what is not consideration:
– Past consideration is something that has already been done or given. This cannot act as consideration
– Implied consideration: if the detail of a promise to pay is expressed after the provision of goods or services, but there is an implication that such promise would be forthcoming, this may (depending on the facts) be valid consideration.
– A promise given to a third party: this is not normally consideration, and is based on a concept known as privity of contract. Anyone who is not a party to the contract, even if they are beneficiary of it, cannot sue if the terms of the contract are breached.
– A promise to perform over and above an existing obligation: This is always consideration
Reference:
– Consideration & Promissory Estoppel
– CIPS study guide page 36-40
LO 1, AC 1.2
Question #70
Which of the following will be always automatically deemed as a consideration?
- A . Promise to perform over and above an existing obligation
- B . Promise given to a third party
- C . Implied consideration
- D . Past consideration
Correct Answer: A
A
Explanation:
Consideration only appears in common law countries. Below are some examples of what is and what is not consideration:
– Past consideration is something that has already been done or given. This cannot act as consideration
– Implied consideration: if the detail of a promise to pay is expressed after the provision of goods or services, but there is an implication that such promise would be forthcoming, this may (depending on the facts) be valid consideration.
– A promise given to a third party: this is not normally consideration, and is based on a concept known as privity of contract. Anyone who is not a party to the contract, even if they are beneficiary of it, cannot sue if the terms of the contract are breached.
– A promise to perform over and above an existing obligation: This is always consideration
Reference:
– Consideration & Promissory Estoppel
– CIPS study guide page 36-40
LO 1, AC 1.2
A
Explanation:
Consideration only appears in common law countries. Below are some examples of what is and what is not consideration:
– Past consideration is something that has already been done or given. This cannot act as consideration
– Implied consideration: if the detail of a promise to pay is expressed after the provision of goods or services, but there is an implication that such promise would be forthcoming, this may (depending on the facts) be valid consideration.
– A promise given to a third party: this is not normally consideration, and is based on a concept known as privity of contract. Anyone who is not a party to the contract, even if they are beneficiary of it, cannot sue if the terms of the contract are breached.
– A promise to perform over and above an existing obligation: This is always consideration
Reference:
– Consideration & Promissory Estoppel
– CIPS study guide page 36-40
LO 1, AC 1.2
Question #70
Which of the following will be always automatically deemed as a consideration?
- A . Promise to perform over and above an existing obligation
- B . Promise given to a third party
- C . Implied consideration
- D . Past consideration
Correct Answer: A
A
Explanation:
Consideration only appears in common law countries. Below are some examples of what is and what is not consideration:
– Past consideration is something that has already been done or given. This cannot act as consideration
– Implied consideration: if the detail of a promise to pay is expressed after the provision of goods or services, but there is an implication that such promise would be forthcoming, this may (depending on the facts) be valid consideration.
– A promise given to a third party: this is not normally consideration, and is based on a concept known as privity of contract. Anyone who is not a party to the contract, even if they are beneficiary of it, cannot sue if the terms of the contract are breached.
– A promise to perform over and above an existing obligation: This is always consideration
Reference:
– Consideration & Promissory Estoppel
– CIPS study guide page 36-40
LO 1, AC 1.2
A
Explanation:
Consideration only appears in common law countries. Below are some examples of what is and what is not consideration:
– Past consideration is something that has already been done or given. This cannot act as consideration
– Implied consideration: if the detail of a promise to pay is expressed after the provision of goods or services, but there is an implication that such promise would be forthcoming, this may (depending on the facts) be valid consideration.
– A promise given to a third party: this is not normally consideration, and is based on a concept known as privity of contract. Anyone who is not a party to the contract, even if they are beneficiary of it, cannot sue if the terms of the contract are breached.
– A promise to perform over and above an existing obligation: This is always consideration
Reference:
– Consideration & Promissory Estoppel
– CIPS study guide page 36-40
LO 1, AC 1.2
Question #70
Which of the following will be always automatically deemed as a consideration?
- A . Promise to perform over and above an existing obligation
- B . Promise given to a third party
- C . Implied consideration
- D . Past consideration
Correct Answer: A
A
Explanation:
Consideration only appears in common law countries. Below are some examples of what is and what is not consideration:
– Past consideration is something that has already been done or given. This cannot act as consideration
– Implied consideration: if the detail of a promise to pay is expressed after the provision of goods or services, but there is an implication that such promise would be forthcoming, this may (depending on the facts) be valid consideration.
– A promise given to a third party: this is not normally consideration, and is based on a concept known as privity of contract. Anyone who is not a party to the contract, even if they are beneficiary of it, cannot sue if the terms of the contract are breached.
– A promise to perform over and above an existing obligation: This is always consideration
Reference:
– Consideration & Promissory Estoppel
– CIPS study guide page 36-40
LO 1, AC 1.2
A
Explanation:
Consideration only appears in common law countries. Below are some examples of what is and what is not consideration:
– Past consideration is something that has already been done or given. This cannot act as consideration
– Implied consideration: if the detail of a promise to pay is expressed after the provision of goods or services, but there is an implication that such promise would be forthcoming, this may (depending on the facts) be valid consideration.
– A promise given to a third party: this is not normally consideration, and is based on a concept known as privity of contract. Anyone who is not a party to the contract, even if they are beneficiary of it, cannot sue if the terms of the contract are breached.
– A promise to perform over and above an existing obligation: This is always consideration
Reference:
– Consideration & Promissory Estoppel
– CIPS study guide page 36-40
LO 1, AC 1.2
Question #70
Which of the following will be always automatically deemed as a consideration?
- A . Promise to perform over and above an existing obligation
- B . Promise given to a third party
- C . Implied consideration
- D . Past consideration
Correct Answer: A
A
Explanation:
Consideration only appears in common law countries. Below are some examples of what is and what is not consideration:
– Past consideration is something that has already been done or given. This cannot act as consideration
– Implied consideration: if the detail of a promise to pay is expressed after the provision of goods or services, but there is an implication that such promise would be forthcoming, this may (depending on the facts) be valid consideration.
– A promise given to a third party: this is not normally consideration, and is based on a concept known as privity of contract. Anyone who is not a party to the contract, even if they are beneficiary of it, cannot sue if the terms of the contract are breached.
– A promise to perform over and above an existing obligation: This is always consideration
Reference:
– Consideration & Promissory Estoppel
– CIPS study guide page 36-40
LO 1, AC 1.2
A
Explanation:
Consideration only appears in common law countries. Below are some examples of what is and what is not consideration:
– Past consideration is something that has already been done or given. This cannot act as consideration
– Implied consideration: if the detail of a promise to pay is expressed after the provision of goods or services, but there is an implication that such promise would be forthcoming, this may (depending on the facts) be valid consideration.
– A promise given to a third party: this is not normally consideration, and is based on a concept known as privity of contract. Anyone who is not a party to the contract, even if they are beneficiary of it, cannot sue if the terms of the contract are breached.
– A promise to perform over and above an existing obligation: This is always consideration
Reference:
– Consideration & Promissory Estoppel
– CIPS study guide page 36-40
LO 1, AC 1.2
Question #70
Which of the following will be always automatically deemed as a consideration?
- A . Promise to perform over and above an existing obligation
- B . Promise given to a third party
- C . Implied consideration
- D . Past consideration
Correct Answer: A
A
Explanation:
Consideration only appears in common law countries. Below are some examples of what is and what is not consideration:
– Past consideration is something that has already been done or given. This cannot act as consideration
– Implied consideration: if the detail of a promise to pay is expressed after the provision of goods or services, but there is an implication that such promise would be forthcoming, this may (depending on the facts) be valid consideration.
– A promise given to a third party: this is not normally consideration, and is based on a concept known as privity of contract. Anyone who is not a party to the contract, even if they are beneficiary of it, cannot sue if the terms of the contract are breached.
– A promise to perform over and above an existing obligation: This is always consideration
Reference:
– Consideration & Promissory Estoppel
– CIPS study guide page 36-40
LO 1, AC 1.2
A
Explanation:
Consideration only appears in common law countries. Below are some examples of what is and what is not consideration:
– Past consideration is something that has already been done or given. This cannot act as consideration
– Implied consideration: if the detail of a promise to pay is expressed after the provision of goods or services, but there is an implication that such promise would be forthcoming, this may (depending on the facts) be valid consideration.
– A promise given to a third party: this is not normally consideration, and is based on a concept known as privity of contract. Anyone who is not a party to the contract, even if they are beneficiary of it, cannot sue if the terms of the contract are breached.
– A promise to perform over and above an existing obligation: This is always consideration
Reference:
– Consideration & Promissory Estoppel
– CIPS study guide page 36-40
LO 1, AC 1.2
Question #76
OTIF deliveries
- A . 2 and 5 only
- B . 1 and 3 only
- C . 2 and 3 only
- D . 1 and 4 only
Correct Answer: B
B
Explanation:
Qualitative KPIs are based on pure opinions about how well or otherwise the goods are performing or the service is being delivered. Most often, these will be linked to, or converted into, a numerical measure. However, such satisfaction surveys often also include free fields for respondents to explain why they feel the way they do, and what they might have liked to have been different.
On the other hand, quantitative KPIs are based on numerical measure with either definite number (e.g., actual number of orders incomplete or otherwise inaccurate during the time period) or as a percentage (e.g. number of inaccurate orders as a percentage of the total number of orders).
Openness and co-operation means that supplier is open and co-operative in its relationship with purchaser, e.g., in terms of joint problem solving. This KPI is qualitative since it is measured by individual judgement.
Responsiveness of supplier means the supplier responds rapidly to requests for information and support without having to be chased. It is measured by the number of times requests chased as a percentage of number of requests. It is a quantitative KPI. Customer satisfactory ratings means the level of customer’s satisfaction. This KPI is measured by periodic survey and it is a qualitative KPI.
Cost management is another quantitative KPI. It can be measured by comparing between the actual costs and the contractual costs.
OTIF (one-time in-full) deliveries is a quantitative KPI. It can be measured by counting the inaccurate deliveries in the period or inaccurate deliveries as a percentage of total number of deliveries for period.
Reference: CIPS study guide page 117-122
LO 2, AC 2.2
B
Explanation:
Qualitative KPIs are based on pure opinions about how well or otherwise the goods are performing or the service is being delivered. Most often, these will be linked to, or converted into, a numerical measure. However, such satisfaction surveys often also include free fields for respondents to explain why they feel the way they do, and what they might have liked to have been different.
On the other hand, quantitative KPIs are based on numerical measure with either definite number (e.g., actual number of orders incomplete or otherwise inaccurate during the time period) or as a percentage (e.g. number of inaccurate orders as a percentage of the total number of orders).
Openness and co-operation means that supplier is open and co-operative in its relationship with purchaser, e.g., in terms of joint problem solving. This KPI is qualitative since it is measured by individual judgement.
Responsiveness of supplier means the supplier responds rapidly to requests for information and support without having to be chased. It is measured by the number of times requests chased as a percentage of number of requests. It is a quantitative KPI. Customer satisfactory ratings means the level of customer’s satisfaction. This KPI is measured by periodic survey and it is a qualitative KPI.
Cost management is another quantitative KPI. It can be measured by comparing between the actual costs and the contractual costs.
OTIF (one-time in-full) deliveries is a quantitative KPI. It can be measured by counting the inaccurate deliveries in the period or inaccurate deliveries as a percentage of total number of deliveries for period.
Reference: CIPS study guide page 117-122
LO 2, AC 2.2
Question #77
Which of the following is the best definition of consideration in contract law?
- A . Full statement about something to provide
- B . The act of thinking carefully about one thing
- C . One thing given in exchange
- D . Formal discussion between people who are trying to reach an agreement
Correct Answer: C
C
Explanation:
A simple definition of consideration is as follows C an exchange between the parties which results in a benefit to one party, and a detriment to the other. The case of Currie v Misa (1874) LR 10 Ex 153 provides an apt description of this:
“A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other.”
A practical example of this can be found by examining a simple contract. Party A offers £500 to Party B, who in exchange will fit his car with a new engine. Party A receives the benefit of his car being fixed, whilst Party B incurs the detriment of having to take time, effort, and perhaps expenses to fix the car.
Reference:
– Consideration & Promissory Estoppel
– CIPS study guide page 36-40
LO 1, AC 1.2
C
Explanation:
A simple definition of consideration is as follows C an exchange between the parties which results in a benefit to one party, and a detriment to the other. The case of Currie v Misa (1874) LR 10 Ex 153 provides an apt description of this:
“A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other.”
A practical example of this can be found by examining a simple contract. Party A offers £500 to Party B, who in exchange will fit his car with a new engine. Party A receives the benefit of his car being fixed, whilst Party B incurs the detriment of having to take time, effort, and perhaps expenses to fix the car.
Reference:
– Consideration & Promissory Estoppel
– CIPS study guide page 36-40
LO 1, AC 1.2
Question #78
The pricing arrangement in which markup is added into cost base to calculate the final price is known as…?
- A . Fixed Price approach
- B . Market based approach
- C . Price indices
- D . Cost plus pricing
Correct Answer: D
D
Explanation:
The market approach is a method of determining the value of an asset based on the selling price of similar assets.
A fixed-price strategy means you set a price and keep it constant for an extended period of time.
Cost-plus pricing is also known as markup pricing. It’s a pricing method where a fixed percentage is added on top of the cost to produce
A price index (PI) is a measure of how prices change over a period of time, or in other words, it is a way to measure inflation. There are multiple methods on how to calculate inflation (or deflation).
Reference: CIPS study guide page 176-179
LO 3, AC 3.3
D
Explanation:
The market approach is a method of determining the value of an asset based on the selling price of similar assets.
A fixed-price strategy means you set a price and keep it constant for an extended period of time.
Cost-plus pricing is also known as markup pricing. It’s a pricing method where a fixed percentage is added on top of the cost to produce
A price index (PI) is a measure of how prices change over a period of time, or in other words, it is a way to measure inflation. There are multiple methods on how to calculate inflation (or deflation).
Reference: CIPS study guide page 176-179
LO 3, AC 3.3
Question #79
Which of the following statements is true about model form of contract?
- A . When model contracts are employed, there are no requirements for legal advice and input
- B . Model contract form’s standard clauses often contain correct legal terminology without recourse to third party experts.
- C . The standard clauses of model contract forms give the offeror legal advantages over the offeree
- D . Only the publishers of model forms of contract can edit the clauses of these forms
Correct Answer: B
B
Explanation:
Model forms of contract are published by some industry or professional organisations such as FIDIC, ITC, CIPS,… These forms are often carefully prepared by legal professionals, with correct legal terminology. The standard clauses within these forms are based on fair and balanced risk/reward allocation between the contracting parties. The model contract forms also include standard clauses to be selected or deleted on an as required basis. Despite being standardised to be used in any jurisdiction, legal advice may be required if the users decide to make variations to the forms.
The correct answer should be "Model contract form’s standard clauses often contain correct legal terminology without recourse to third party experts."
Reference: CIPS study guide page 144-147
LO 3, AC 3.1
B
Explanation:
Model forms of contract are published by some industry or professional organisations such as FIDIC, ITC, CIPS,… These forms are often carefully prepared by legal professionals, with correct legal terminology. The standard clauses within these forms are based on fair and balanced risk/reward allocation between the contracting parties. The model contract forms also include standard clauses to be selected or deleted on an as required basis. Despite being standardised to be used in any jurisdiction, legal advice may be required if the users decide to make variations to the forms.
The correct answer should be "Model contract form’s standard clauses often contain correct legal terminology without recourse to third party experts."
Reference: CIPS study guide page 144-147
LO 3, AC 3.1
Question #80
Which of the following regulates barriers to the trade of goods between Member States of WTO?
- A . NAFTA
- B . GATT
- C . CISG
- D . TRIPS
Correct Answer: B
B
Explanation:
– The General Agreement on Tariffs and Trade (GATT) is a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. According to its preamble, its purpose was the "substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis."
– CISG is the Vienna Convention on Contracts for the International Sale of Goods. This is a voluntary treaty under United Nations Commission on International Trade Law (UNCITRAL). The purpose of the Vienna Convention is to set out a framework for international transactions based on a uniform approach. It establishes substantive rules that regulate the duties and obligations of both parties, including the delivery of goods, contract formation, and remedies for breach of contract.
– The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is an international legal agreement between all the member nations of the World Trade Organization (WTO). It sets down minimum standards for the regulation by national governments of many forms of intellectual property (IP) as applied to nationals of other WTO member nations.
– The North American Free Trade Agreement (NAFTA; Spanish: Tratado de Libre Comercio de América del Norte, TLCAN; French: Accord de libre-échange nord-américain, ALÉNA) is an agreement signed by Canada, Mexico, and the United States, creating a
trilateral trade bloc in North America.
Reference: CIPS study guide page 65-67
LO 1, AC 1.3
B
Explanation:
– The General Agreement on Tariffs and Trade (GATT) is a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas. According to its preamble, its purpose was the "substantial reduction of tariffs and other trade barriers and the elimination of preferences, on a reciprocal and mutually advantageous basis."
– CISG is the Vienna Convention on Contracts for the International Sale of Goods. This is a voluntary treaty under United Nations Commission on International Trade Law (UNCITRAL). The purpose of the Vienna Convention is to set out a framework for international transactions based on a uniform approach. It establishes substantive rules that regulate the duties and obligations of both parties, including the delivery of goods, contract formation, and remedies for breach of contract.
– The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is an international legal agreement between all the member nations of the World Trade Organization (WTO). It sets down minimum standards for the regulation by national governments of many forms of intellectual property (IP) as applied to nationals of other WTO member nations.
– The North American Free Trade Agreement (NAFTA; Spanish: Tratado de Libre Comercio de América del Norte, TLCAN; French: Accord de libre-échange nord-américain, ALÉNA) is an agreement signed by Canada, Mexico, and the United States, creating a
trilateral trade bloc in North America.
Reference: CIPS study guide page 65-67
LO 1, AC 1.3
Question #81
Which of the following is set down in statute as a liability that exists without any need to prove fault?
- A . Strict liability
- B . Current liability
- C . Contingent liability
- D . Non-current liability
Correct Answer: A
A
Explanation:
– Strict liability, sometimes called absolute liability, is the legal responsibility for damages, or injury, even if the person found strictly liable was not at fault or negligent. Strict liability has been applied to certain activities in tort, such as holding an employer absolutely liable for the torts of her employees, but today it is most commonly associated with defectively manufactured products. In addition, for reasons of public policy, certain activities may be conducted only if the person conducting them is willing to insure others against the harm that results from the risks the activities create.
– Current liabilities are a company’s short-term financial obligations that are due within one year or within a normal operating cycle.
– Non-current liabilities, also called long-term liabilities or long-term debts, are long-term financial obligations listed on a company’s balance sheet
– Contingent liability is a potential liability that may occur, depending on the outcome of an
uncertain future event.
Reference: CIPS study guide page 148
LO 3, AC 3.2
A
Explanation:
– Strict liability, sometimes called absolute liability, is the legal responsibility for damages, or injury, even if the person found strictly liable was not at fault or negligent. Strict liability has been applied to certain activities in tort, such as holding an employer absolutely liable for the torts of her employees, but today it is most commonly associated with defectively manufactured products. In addition, for reasons of public policy, certain activities may be conducted only if the person conducting them is willing to insure others against the harm that results from the risks the activities create.
– Current liabilities are a company’s short-term financial obligations that are due within one year or within a normal operating cycle.
– Non-current liabilities, also called long-term liabilities or long-term debts, are long-term financial obligations listed on a company’s balance sheet
– Contingent liability is a potential liability that may occur, depending on the outcome of an
uncertain future event.
Reference: CIPS study guide page 148
LO 3, AC 3.2
Question #82
Royal Naval Hospital at Rockstown, Anyport manages a fleet of nine ambulance vehicles. During busy periods, it becomes very difficult to keep track of the location of each ambulance (and the nature of their journey). Continual problems lead to the proposal for a new control system (ERNS).
For this ERNS project, the procurement department has drafted a specification in which only a bullet point list of basic requirements was written down. The procurement manager understands that the specification should be developed more specifically but a cross functional team from the Hospital could not do that. A senior buyer suggests that some of Hospital’s pre-qualified suppliers could support them in developing the specification.
Which of the following should be a priority approach of procurement department in developing dialogue with those suppliers about specification development?
- A . Internal discussion
- B . General networking
- C . One-to-one meeting with the suppliers
- D . Request for quotation from the suppliers
Correct Answer: C
C
Explanation:
The procurement team has drafted basic requirements in the specification. They will need
to develop it further and more specific. Developing market dialogue with supplier is a good solution.
There are number of approaches which can be taken to engage with suppliers:
– General meetings: buyer meets supplier at a networking event (such as trade show) or social media. These discussions are unlikely to deliver very specific information.
– One-to-one meetings: This will be most likely to deliver direct input into specification development and supplier-specific product development information.
– Group visits
– Meet-the-buyer events
– Formal negotiations or competitive
The answer for this QUESTION should be One-to-one meeting.
Reference: CIPS study guide page 83-84
LO 2, AC 2.1
C
Explanation:
The procurement team has drafted basic requirements in the specification. They will need
to develop it further and more specific. Developing market dialogue with supplier is a good solution.
There are number of approaches which can be taken to engage with suppliers:
– General meetings: buyer meets supplier at a networking event (such as trade show) or social media. These discussions are unlikely to deliver very specific information.
– One-to-one meetings: This will be most likely to deliver direct input into specification development and supplier-specific product development information.
– Group visits
– Meet-the-buyer events
– Formal negotiations or competitive
The answer for this QUESTION should be One-to-one meeting.
Reference: CIPS study guide page 83-84
LO 2, AC 2.1
Question #83
Bethy sees a coat on shop window with a $100 price tag. She comes and asks the shop owner to buy it. The owner states that the price has not been updated and the current price for the coat is $120. Bethy says the owner should honour the quoted price on window shop. Is Bethy correct?
- A . Yes, the owner has made an offer by showing his product on the shop window and he must honour that offer
- B . Yes, $120 for a coat is extremely unreasonable and the owner’s later offer therefore void
- C . No, the display on shop window is just an invitation to treat and the owner may change the price at his will
- D . No, the owner is revoking his initial offer to sell at $100 and he is proposing new offer to Bethy
Correct Answer: C
C
Explanation:
Based on two famous precedents, Fisher v. Bell (1961) and Pharmaceutical Society of Great Britain v. Boots Cash Chemists (1953), the display on shop window is considered as an invitation to treat. The shop owner can change the price when his customer asks to buy.
Reference: CIPS study guide page 29
LO 1, AC 1.2
C
Explanation:
Based on two famous precedents, Fisher v. Bell (1961) and Pharmaceutical Society of Great Britain v. Boots Cash Chemists (1953), the display on shop window is considered as an invitation to treat. The shop owner can change the price when his customer asks to buy.
Reference: CIPS study guide page 29
LO 1, AC 1.2
Question #84
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
Correct Answer: D
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
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 #85
In which of the following conditions, request for quotation produces the best results?
- A . With an ambiguous specification
- B . Under framework agreements
- C . Under a complex process
- D . With strategic items
Correct Answer: B
B
Explanation:
Request for quotation has valuable function when its use is properly controlled. It works the best under framework agreements where the contract terms are already fixed.
Reference: CIPS study guide page 3
LO 1, AC 1.1
B
Explanation:
Request for quotation has valuable function when its use is properly controlled. It works the best under framework agreements where the contract terms are already fixed.
Reference: CIPS study guide page 3
LO 1, AC 1.1
Question #86
When a contract has been agreed on the basis of a fraudulent misrepresentation, which of the following remedies are available?
- A . Damages only
- B . Rescission only
- C . An injunction only
- D . Both damages and rescission
Correct Answer: C
C
Explanation:
An untrue statement of fact or law made by Party A (or its agent) to Party B, which induces Party B to enter a contract with Party A thereby causing Party B loss. An action for misrepresentation can be brought in respect of a misrepresentation of fact or law. There are three types of misrepresentation:
– Fraudulent misrepresentation: where a false representation has been made knowingly, or without belief in its truth, or recklessly as to its truth.
– Negligent misrepresentation: a representation made carelessly and in breach of duty owed by Party A to Party B to take reasonable care that the representation is accurate. If no "special relationship" exists, there may be a misrepresentation under section 2(1) of the Misrepresentation Act 1967 where a statement is made carelessly or without reasonable grounds for believing its truth.
– Innocent misrepresentation: a representation that is neither fraudulent nor negligent. The remedies for misrepresentation are rescission and/or damages. For fraudulent and negligent misrepresentation, the claimant may claim rescission and damages. For innocent
misrepresentation, the court has a discretion to award damages in lieu of rescission; the court cannot award both (see section 2(2) of the Misrepresentation Act 1967). For more information, see Practice note, Misrepresentation.
Reference:
– Misrepresentation
– CIPS study guide page 55 LO 1, AC 1.2
C
Explanation:
An untrue statement of fact or law made by Party A (or its agent) to Party B, which induces Party B to enter a contract with Party A thereby causing Party B loss. An action for misrepresentation can be brought in respect of a misrepresentation of fact or law. There are three types of misrepresentation:
– Fraudulent misrepresentation: where a false representation has been made knowingly, or without belief in its truth, or recklessly as to its truth.
– Negligent misrepresentation: a representation made carelessly and in breach of duty owed by Party A to Party B to take reasonable care that the representation is accurate. If no "special relationship" exists, there may be a misrepresentation under section 2(1) of the Misrepresentation Act 1967 where a statement is made carelessly or without reasonable grounds for believing its truth.
– Innocent misrepresentation: a representation that is neither fraudulent nor negligent. The remedies for misrepresentation are rescission and/or damages. For fraudulent and negligent misrepresentation, the claimant may claim rescission and damages. For innocent
misrepresentation, the court has a discretion to award damages in lieu of rescission; the court cannot award both (see section 2(2) of the Misrepresentation Act 1967). For more information, see Practice note, Misrepresentation.
Reference:
– Misrepresentation
– CIPS study guide page 55 LO 1, AC 1.2
Question #87
Southwark is negotiating a contract with Orchard to provide software and IT services. Orchard will manufacture and install the products which are contractually supplied by IBM. Southwark’s procurement manager is worried that during the contract there would be some problems that they would not able to claim for damages from Orchard.
Which of the following should be included in the head contract so that Southward can sue IBM, should the need arise?
- A . Negligence
- B . Indemnity
- C . Collateral warranty deed
- D . Insurance
Correct Answer: C
C
Explanation:
A Collateral Warranty is a contract under which a consultant, a building contractor or a sub-contractor warrants to a third party that is has fulfilled its obligations under its professional appointment, building contract or sub-contract. The purpose of a Collateral Warranty is to give a third party, who is not a party to the original contract, rights to enforce that original contract.
In this case, IBM is the subcontractor, then purchaser can use collateral warranty deed to bind them.
Reference:
– Collateral Warranties C an Overview
– CIPS study guide page 39-40
LO 1, AC 1.2
C
Explanation:
A Collateral Warranty is a contract under which a consultant, a building contractor or a sub-contractor warrants to a third party that is has fulfilled its obligations under its professional appointment, building contract or sub-contract. The purpose of a Collateral Warranty is to give a third party, who is not a party to the original contract, rights to enforce that original contract.
In this case, IBM is the subcontractor, then purchaser can use collateral warranty deed to bind them.
Reference:
– Collateral Warranties C an Overview
– CIPS study guide page 39-40
LO 1, AC 1.2
Question #88
According to rule of contract formation, which of the following is a valid acceptance?
- A . The person orally agrees to pay the offered price
- B . The person states that she is able to pay the offered price
- C . The person asks for a lower price
- D . The person says that she will think about it overnight
Correct Answer: A
A
Explanation:
Once a valid acceptance takes place, a binding contract is formed. It is therefore important to know what constitutes a valid acceptance in order to establish if the parties are bound by the agreement. There are three main rules relating to acceptance:
A
Explanation:
Once a valid acceptance takes place, a binding contract is formed. It is therefore important to know what constitutes a valid acceptance in order to establish if the parties are bound by the agreement. There are three main rules relating to acceptance:
Question #88
According to rule of contract formation, which of the following is a valid acceptance?
- A . The person orally agrees to pay the offered price
- B . The person states that she is able to pay the offered price
- C . The person asks for a lower price
- D . The person says that she will think about it overnight
Correct Answer: A
A
Explanation:
Once a valid acceptance takes place, a binding contract is formed. It is therefore important to know what constitutes a valid acceptance in order to establish if the parties are bound by the agreement. There are three main rules relating to acceptance:
A
Explanation:
Once a valid acceptance takes place, a binding contract is formed. It is therefore important to know what constitutes a valid acceptance in order to establish if the parties are bound by the agreement. There are three main rules relating to acceptance:
Question #88
According to rule of contract formation, which of the following is a valid acceptance?
- A . The person orally agrees to pay the offered price
- B . The person states that she is able to pay the offered price
- C . The person asks for a lower price
- D . The person says that she will think about it overnight
Correct Answer: A
A
Explanation:
Once a valid acceptance takes place, a binding contract is formed. It is therefore important to know what constitutes a valid acceptance in order to establish if the parties are bound by the agreement. There are three main rules relating to acceptance:
A
Explanation:
Once a valid acceptance takes place, a binding contract is formed. It is therefore important to know what constitutes a valid acceptance in order to establish if the parties are bound by the agreement. There are three main rules relating to acceptance:
Question #88
According to rule of contract formation, which of the following is a valid acceptance?
- A . The person orally agrees to pay the offered price
- B . The person states that she is able to pay the offered price
- C . The person asks for a lower price
- D . The person says that she will think about it overnight
Correct Answer: A
A
Explanation:
Once a valid acceptance takes place, a binding contract is formed. It is therefore important to know what constitutes a valid acceptance in order to establish if the parties are bound by the agreement. There are three main rules relating to acceptance:
A
Explanation:
Once a valid acceptance takes place, a binding contract is formed. It is therefore important to know what constitutes a valid acceptance in order to establish if the parties are bound by the agreement. There are three main rules relating to acceptance:
Question #92
Which of the following is used to detail the complex matter that may be verbiage to the main document?
- A . Contract variation
- B . Schedule
- C . Subcontracting
- D . Standard terms and conditions
Correct Answer: B
B
Explanation:
Without further explanation, a schedule may be deemed to form an integral part of the obligations of either or both parties. Obviously, the scope or binding nature of such schedule depends on the way it is referred to in the obligatory language of the main agreement. Accordingly, merely attaching the general terms and conditions of sale without explaining to which part of the sale they apply or which provisions apply does not subject a sale pursuant to the body text of the agreement to those general terms and conditions. Subcontracting is the practice of assigning, or outsourcing, part of the obligations and tasks under a contract to another party known as a subcontractor.
Reference:
– Schedules, annexes and exhibits
– CIPS study guide page 22-26 LO 1, AC 1.1
B
Explanation:
Without further explanation, a schedule may be deemed to form an integral part of the obligations of either or both parties. Obviously, the scope or binding nature of such schedule depends on the way it is referred to in the obligatory language of the main agreement. Accordingly, merely attaching the general terms and conditions of sale without explaining to which part of the sale they apply or which provisions apply does not subject a sale pursuant to the body text of the agreement to those general terms and conditions. Subcontracting is the practice of assigning, or outsourcing, part of the obligations and tasks under a contract to another party known as a subcontractor.
Reference:
– Schedules, annexes and exhibits
– CIPS study guide page 22-26 LO 1, AC 1.1
Question #93
Which of the following is a key feature of liquidated damage clauses?
- A . The amount of damage is predetermined
- B . Liquidated damage is a penalty
- C . The amount of liquidated damages must be exceptionally larger than the actual damages incurred
- D . The liquidated damages are non-negotiable
Correct Answer: A
A
Explanation:
Liquidated damages are presented in certain legal contracts as an estimate of otherwise intangible or hard-to-define losses to one of the parties. It is a provision that allows for the payment of a specified sum should one of the parties be in breach of contract. Understanding Liquidated Damages
Liquidated damages are meant as a fair representation of losses in situations where actual damages are difficult to ascertain. In general, liquidated damages are meant to be fair, rather than punitive.
Liquidated damages may be referred to in a specific contract clause to cover circumstances where a party faces a loss from assets that do not have a direct monetary correlation. For example, if a party in a contract were to leak supply chain pricing information that is vital to a business, this could fall under liquidated damages.
A common example is a design phase for a new product that may involve consultation with outside suppliers and consultants in addition to a company’s employees. The underlying plans or designs for a product might not have a set market value. This may be true even if the subsequent product is crucial to the progress and growth of a company. These plans may be deemed to be trade secrets of the business and highly sensitive. If the plans were exposed by a disgruntled employee or supplier, it could greatly hamper the ability to generate revenue from the release of that product. A company would have to make an estimation in advance of what such losses could cost in order to include this in a liquidated damages clause of a contract.
Limitations of Liquidated Damages
It is possible that a liquidated damages clause might not be enforced by the courts. This can occur if the monetary amount of liquidated damages cited in the clause is extraordinarily disproportional to the scope of what was affected by the breached contract. Such limitations prevent a plaintiff from attempting to claim an unsubstantiated exorbitant amount from a defendant. For instance, a plaintiff might not be able to claim liquidated damages that amount to multiples of its gross revenue if the breach only affected a specific portion of its operations. The concept of liquidated damages is framed around compensation related to some harm and injury to the party rather than a fine imposed on the defendant.
The courts typically require that the parties involved make the most reasonable assessment possible for the liquidated damages clause at the time the contract is signed. This can provide a sense of understanding and reassurance of what is at stake if that aspect of the contract is breached. A liquidated damages clause can also give the parties involved a basis to negotiate from for an out-of-court settlement.
Explanation:
Reference:
– Liquidated Damages
– CIPS study guide page 158-159 LO 3, AC 3.2
A
Explanation:
Liquidated damages are presented in certain legal contracts as an estimate of otherwise intangible or hard-to-define losses to one of the parties. It is a provision that allows for the payment of a specified sum should one of the parties be in breach of contract. Understanding Liquidated Damages
Liquidated damages are meant as a fair representation of losses in situations where actual damages are difficult to ascertain. In general, liquidated damages are meant to be fair, rather than punitive.
Liquidated damages may be referred to in a specific contract clause to cover circumstances where a party faces a loss from assets that do not have a direct monetary correlation. For example, if a party in a contract were to leak supply chain pricing information that is vital to a business, this could fall under liquidated damages.
A common example is a design phase for a new product that may involve consultation with outside suppliers and consultants in addition to a company’s employees. The underlying plans or designs for a product might not have a set market value. This may be true even if the subsequent product is crucial to the progress and growth of a company. These plans may be deemed to be trade secrets of the business and highly sensitive. If the plans were exposed by a disgruntled employee or supplier, it could greatly hamper the ability to generate revenue from the release of that product. A company would have to make an estimation in advance of what such losses could cost in order to include this in a liquidated damages clause of a contract.
Limitations of Liquidated Damages
It is possible that a liquidated damages clause might not be enforced by the courts. This can occur if the monetary amount of liquidated damages cited in the clause is extraordinarily disproportional to the scope of what was affected by the breached contract. Such limitations prevent a plaintiff from attempting to claim an unsubstantiated exorbitant amount from a defendant. For instance, a plaintiff might not be able to claim liquidated damages that amount to multiples of its gross revenue if the breach only affected a specific portion of its operations. The concept of liquidated damages is framed around compensation related to some harm and injury to the party rather than a fine imposed on the defendant.
The courts typically require that the parties involved make the most reasonable assessment possible for the liquidated damages clause at the time the contract is signed. This can provide a sense of understanding and reassurance of what is at stake if that aspect of the contract is breached. A liquidated damages clause can also give the parties involved a basis to negotiate from for an out-of-court settlement.
Explanation:
Reference:
– Liquidated Damages
– CIPS study guide page 158-159 LO 3, AC 3.2
Question #94
To check whether supplier actually complies with the labour standards set out in the contract, the purchaser should have…?
- A . Right to penalise the supplier
- B . Right to terminate the contract
- C . Right of audit
- D . Right to rescind the contract
Correct Answer: C
C
Explanation:
Many firms have compliance policies for suppliers in place. To ensure that the supplier actually comply with the standards set out, the purchaser can employ the right to audit. The buyer usually obtains the right to examine records of a vendor to determine if a fraud or a violation of company policy has occurred through the following methods:
– Right-to-audit agreement The agreement can be printed on the back of a purchase order, contract, or other procurement form.
– A simple request If the right-to-audit agreement wasn’t included on the procurement form,
and the buyer suspects irregularities, he may have to beg the vendor to allow an audit to be
performed. If the buyer is a major customer of the vendor, the buyer may be able to wield a big enough stick to obtain permission to look at the records.
– Right-to-audit Pitfalls
Reference:
– CIPS study guide page 160
– Reserving the Right to Audit the Suspicious Vendor: Right-to-audit clauses in vendor contracts help control fraud and abuse by affording discovery devices in examinations.
LO 3, AC 3.2
C
Explanation:
Many firms have compliance policies for suppliers in place. To ensure that the supplier actually comply with the standards set out, the purchaser can employ the right to audit. The buyer usually obtains the right to examine records of a vendor to determine if a fraud or a violation of company policy has occurred through the following methods:
– Right-to-audit agreement The agreement can be printed on the back of a purchase order, contract, or other procurement form.
– A simple request If the right-to-audit agreement wasn’t included on the procurement form,
and the buyer suspects irregularities, he may have to beg the vendor to allow an audit to be
performed. If the buyer is a major customer of the vendor, the buyer may be able to wield a big enough stick to obtain permission to look at the records.
– Right-to-audit Pitfalls
Reference:
– CIPS study guide page 160
– Reserving the Right to Audit the Suspicious Vendor: Right-to-audit clauses in vendor contracts help control fraud and abuse by affording discovery devices in examinations.
LO 3, AC 3.2
Question #95
Which of the following is the international standard for labelling hazardous substances?
- A . GPS
- B . HSE
- C . CODEX STAN 1-1985
- D . GHS
Correct Answer: D
D
Explanation:
GHS stands for the Globally Harmonized System of Classification and Labelling of Chemicals. GHS defines and classifies the hazards of chemical products, and communicates health and safety information on labels and safety data sheets). The goal is that the same set of rules for classifying hazards, and the same format and content for labels and safety data sheets (SDS) will be adopted and used around the world. An international team of hazard communication experts developed GHS.
The Global Positioning System (GPS), originally NAVSTAR GPS, is a satellite-based radionavigation system owned by the United States government and operated by the United States Space Force. It is one of the global navigation satellite systems (GNSS) that provides geolocation and time information to a GPS receiver anywhere on or near the Earth where there is an unobstructed line of sight to four or more GPS satellites. Obstacles such as mountains and buildings block the relatively weak GPS signals.
CODEX STAN 1-1985 is general standard for the labelling of packaged goods. Environment (E), health (H) and safety (S) (together EHS) is a discipline and specialty that studies and implements practical aspects of environmental protection and safety at work. In simple terms it is what organizations must do to make sure that their activities do not cause harm to anyone.
Reference: CIPS study guide page 95
LO 2, AC 2.1
D
Explanation:
GHS stands for the Globally Harmonized System of Classification and Labelling of Chemicals. GHS defines and classifies the hazards of chemical products, and communicates health and safety information on labels and safety data sheets). The goal is that the same set of rules for classifying hazards, and the same format and content for labels and safety data sheets (SDS) will be adopted and used around the world. An international team of hazard communication experts developed GHS.
The Global Positioning System (GPS), originally NAVSTAR GPS, is a satellite-based radionavigation system owned by the United States government and operated by the United States Space Force. It is one of the global navigation satellite systems (GNSS) that provides geolocation and time information to a GPS receiver anywhere on or near the Earth where there is an unobstructed line of sight to four or more GPS satellites. Obstacles such as mountains and buildings block the relatively weak GPS signals.
CODEX STAN 1-1985 is general standard for the labelling of packaged goods. Environment (E), health (H) and safety (S) (together EHS) is a discipline and specialty that studies and implements practical aspects of environmental protection and safety at work. In simple terms it is what organizations must do to make sure that their activities do not cause harm to anyone.
Reference: CIPS study guide page 95
LO 2, AC 2.1
Question #96
Under hire purchase agreement, when will the ownership of asset legally belong to the purchaser?
- A . When the final instalment is paid
- B . When the purchaser takes possession of the asset
- C . When the down payment is made
- D . When the agreement is signed
Correct Answer: A
A
Explanation:
Hire purchase is an arrangement for buying expensive consumer goods, where the buyer makes an initial down payment and pays the balance plus interest in installments. Ownership is not transferred until the end of the agreement, hire purchase plans offer more protection to the vendor than other sales or leasing methods for unsecured items. That’s because the items can be repossessed more easily should the buyer be unable to keep up with the repayments.
The answer is ‘When the final instalment is paid’.
Reference:
– Hire Purchase Agreements
– CIPS study guide page 70 LO 1, AC 1.3
A
Explanation:
Hire purchase is an arrangement for buying expensive consumer goods, where the buyer makes an initial down payment and pays the balance plus interest in installments. Ownership is not transferred until the end of the agreement, hire purchase plans offer more protection to the vendor than other sales or leasing methods for unsecured items. That’s because the items can be repossessed more easily should the buyer be unable to keep up with the repayments.
The answer is ‘When the final instalment is paid’.
Reference:
– Hire Purchase Agreements
– CIPS study guide page 70 LO 1, AC 1.3
Question #97
Is the government only source of industrial standards within a country?
- A . No, the government can only adopt standards regarding security and defence
- B . Yes, while ISO make standards for international trade, the government standardises other facets of their country
- C . No, an organisation can also generate its own internal standards
- D . Yes, the standards must be made by legislative branch of the country
Correct Answer: C
C
Explanation:
A standard is a document that sets out requirements for a specific item, material, component, system or service, or describes in detail a particular method or procedure. Standards are established by consensus and approved by recognized standardization bodies.
There are several different types of standards. Some of the most commonly-used standards set out the requirements that a particular kind of product, service or process must fulfil, in order to establish that it is ‘fit for purpose’. Other types of standard relate to methods of testing, terminology and definitions, information requirements, or the compatibility of connections.
Standards provide individuals, businesses and all kinds of organizations with a common basis for mutual understanding. They are especially useful for communication, measurement, commerce and manufacturing.
Standards make trade easier by ensuring compatibility and interoperability of components, products and services. They bring benefits to businesses and consumers in terms of reducing costs, enhancing performance and improving safety.
Standards are voluntary, which means that businesses and other organizations are not legally obliged to apply them. However, in certain cases standards may facilitate compliance with legal requirements, such as those contained in European directives and regulations.
Standards can be made by a company, a standard organisation (such as ISO or BSI) or regulatory bodies.
Reference:
– CIPS study guide page 93-94
– Standards and your business LO 2, AC 2.1
C
Explanation:
A standard is a document that sets out requirements for a specific item, material, component, system or service, or describes in detail a particular method or procedure. Standards are established by consensus and approved by recognized standardization bodies.
There are several different types of standards. Some of the most commonly-used standards set out the requirements that a particular kind of product, service or process must fulfil, in order to establish that it is ‘fit for purpose’. Other types of standard relate to methods of testing, terminology and definitions, information requirements, or the compatibility of connections.
Standards provide individuals, businesses and all kinds of organizations with a common basis for mutual understanding. They are especially useful for communication, measurement, commerce and manufacturing.
Standards make trade easier by ensuring compatibility and interoperability of components, products and services. They bring benefits to businesses and consumers in terms of reducing costs, enhancing performance and improving safety.
Standards are voluntary, which means that businesses and other organizations are not legally obliged to apply them. However, in certain cases standards may facilitate compliance with legal requirements, such as those contained in European directives and regulations.
Standards can be made by a company, a standard organisation (such as ISO or BSI) or regulatory bodies.
Reference:
– CIPS study guide page 93-94
– Standards and your business LO 2, AC 2.1
Question #98
Which of the following are most likely to be substantive elements of the specification of a truck? Select TWO that apply:
- A . Guarantee
- B . Foreword
- C . Expected lifespan
- D . Ethics
- E . Abbreviation
Correct Answer: A,C
A,C
Explanation:
The key substantive elements to be included in a specification are:
– Characteristics of the product or service
– Time scale for delivery
– Response times for defects
– KPIs relating to performance and reliability
– Lifespan and durability expectations
– Documentary requirement for training/user manual and/or management information
– Any specific requirements regarding implementation
Reference: CIPS study guide page 90-92
LO 2, AC 2.1
A,C
Explanation:
The key substantive elements to be included in a specification are:
– Characteristics of the product or service
– Time scale for delivery
– Response times for defects
– KPIs relating to performance and reliability
– Lifespan and durability expectations
– Documentary requirement for training/user manual and/or management information
– Any specific requirements regarding implementation
Reference: CIPS study guide page 90-92
LO 2, AC 2.1
Question #99
Cleveland Insurance (Cleveland) offers a range of insurance services. The main software used in the call centre is a customer relationship management (CRM) system. Cleveland perceived an urgent need to replace the existing CRM system to deal with the increasing number of customers and services.
Urgent Digital Ltd (Digital) is one of the bidders of Cleveland’s ITT for designing, building and managing the new CRM system. Its bid team is led by Hank Irvine, its technical director. Hank realises that winning the Cleveland contract (valued at approximately £50M) will enhance his career. During discussions with Cleveland, Hank offers certain assurances regarding timescales for the project. He has not carried out any investigations into the viability of the timescales. Hank has little idea whether the timescales can be met.
Cleveland decides that Digital’s bid meets with its requirements, especially given the assurances in timescale offered by Hank, and decides to proceed with it, subject to a formal contract. Eventually, a formal contract is signed by both parties. The initial assurances given by Hank about the timing of the project are never going to be achieved and are at best grossly exaggerated.
Cleveland brought the case to the court and sought rescission of contract with Digital. Is Cleveland’s claim appropriate in this case?
- A . Yes, because Cleveland needs to seek rescission first before claiming for damages
- B . Yes, because both parties agreed with rescission of their contract
- C . No, because the work had been carried out which could not be returned
- D . No, because the contract does not include any provision on rescission
Correct Answer: C
C
Explanation:
Hank’s pre-contractual assurances may amount to misrepresentation. Remedies for misrepresentation could be rescission of contract or damages.
Rescission will be impossible in the following instance:
– Where the innocent party has affirmed the contract; that is, acted in a way confirming that they wish it to continue
– Where the claim has not been brought within a reasonable time (this is a point of general law)
– Where restitution (returning to the pre-contractual position) is impossible (e.g. because the goods have been consumed or have deteriorated)
– Where there has been intervention of innocent third-party (e.g., if the goods have been sold on)
In this case, the subject of contract is designing, building and managing the new CRM system which is impossible to be restituted. Therefore, the contract cannot be rescinded.
Reference: CIPS study guide page 53-55
LO 1, AC 1.2
C
Explanation:
Hank’s pre-contractual assurances may amount to misrepresentation. Remedies for misrepresentation could be rescission of contract or damages.
Rescission will be impossible in the following instance:
– Where the innocent party has affirmed the contract; that is, acted in a way confirming that they wish it to continue
– Where the claim has not been brought within a reasonable time (this is a point of general law)
– Where restitution (returning to the pre-contractual position) is impossible (e.g. because the goods have been consumed or have deteriorated)
– Where there has been intervention of innocent third-party (e.g., if the goods have been sold on)
In this case, the subject of contract is designing, building and managing the new CRM system which is impossible to be restituted. Therefore, the contract cannot be rescinded.
Reference: CIPS study guide page 53-55
LO 1, AC 1.2
Question #99
Cleveland Insurance (Cleveland) offers a range of insurance services. The main software used in the call centre is a customer relationship management (CRM) system. Cleveland perceived an urgent need to replace the existing CRM system to deal with the increasing number of customers and services.
Urgent Digital Ltd (Digital) is one of the bidders of Cleveland’s ITT for designing, building and managing the new CRM system. Its bid team is led by Hank Irvine, its technical director. Hank realises that winning the Cleveland contract (valued at approximately £50M) will enhance his career. During discussions with Cleveland, Hank offers certain assurances regarding timescales for the project. He has not carried out any investigations into the viability of the timescales. Hank has little idea whether the timescales can be met.
Cleveland decides that Digital’s bid meets with its requirements, especially given the assurances in timescale offered by Hank, and decides to proceed with it, subject to a formal contract. Eventually, a formal contract is signed by both parties. The initial assurances given by Hank about the timing of the project are never going to be achieved and are at best grossly exaggerated.
Cleveland brought the case to the court and sought rescission of contract with Digital. Is Cleveland’s claim appropriate in this case?
- A . Yes, because Cleveland needs to seek rescission first before claiming for damages
- B . Yes, because both parties agreed with rescission of their contract
- C . No, because the work had been carried out which could not be returned
- D . No, because the contract does not include any provision on rescission
Correct Answer: C
C
Explanation:
Hank’s pre-contractual assurances may amount to misrepresentation. Remedies for misrepresentation could be rescission of contract or damages.
Rescission will be impossible in the following instance:
– Where the innocent party has affirmed the contract; that is, acted in a way confirming that they wish it to continue
– Where the claim has not been brought within a reasonable time (this is a point of general law)
– Where restitution (returning to the pre-contractual position) is impossible (e.g. because the goods have been consumed or have deteriorated)
– Where there has been intervention of innocent third-party (e.g., if the goods have been sold on)
In this case, the subject of contract is designing, building and managing the new CRM system which is impossible to be restituted. Therefore, the contract cannot be rescinded.
Reference: CIPS study guide page 53-55
LO 1, AC 1.2
C
Explanation:
Hank’s pre-contractual assurances may amount to misrepresentation. Remedies for misrepresentation could be rescission of contract or damages.
Rescission will be impossible in the following instance:
– Where the innocent party has affirmed the contract; that is, acted in a way confirming that they wish it to continue
– Where the claim has not been brought within a reasonable time (this is a point of general law)
– Where restitution (returning to the pre-contractual position) is impossible (e.g. because the goods have been consumed or have deteriorated)
– Where there has been intervention of innocent third-party (e.g., if the goods have been sold on)
In this case, the subject of contract is designing, building and managing the new CRM system which is impossible to be restituted. Therefore, the contract cannot be rescinded.
Reference: CIPS study guide page 53-55
LO 1, AC 1.2
Question #99
Cleveland Insurance (Cleveland) offers a range of insurance services. The main software used in the call centre is a customer relationship management (CRM) system. Cleveland perceived an urgent need to replace the existing CRM system to deal with the increasing number of customers and services.
Urgent Digital Ltd (Digital) is one of the bidders of Cleveland’s ITT for designing, building and managing the new CRM system. Its bid team is led by Hank Irvine, its technical director. Hank realises that winning the Cleveland contract (valued at approximately £50M) will enhance his career. During discussions with Cleveland, Hank offers certain assurances regarding timescales for the project. He has not carried out any investigations into the viability of the timescales. Hank has little idea whether the timescales can be met.
Cleveland decides that Digital’s bid meets with its requirements, especially given the assurances in timescale offered by Hank, and decides to proceed with it, subject to a formal contract. Eventually, a formal contract is signed by both parties. The initial assurances given by Hank about the timing of the project are never going to be achieved and are at best grossly exaggerated.
Cleveland brought the case to the court and sought rescission of contract with Digital. Is Cleveland’s claim appropriate in this case?
- A . Yes, because Cleveland needs to seek rescission first before claiming for damages
- B . Yes, because both parties agreed with rescission of their contract
- C . No, because the work had been carried out which could not be returned
- D . No, because the contract does not include any provision on rescission
Correct Answer: C
C
Explanation:
Hank’s pre-contractual assurances may amount to misrepresentation. Remedies for misrepresentation could be rescission of contract or damages.
Rescission will be impossible in the following instance:
– Where the innocent party has affirmed the contract; that is, acted in a way confirming that they wish it to continue
– Where the claim has not been brought within a reasonable time (this is a point of general law)
– Where restitution (returning to the pre-contractual position) is impossible (e.g. because the goods have been consumed or have deteriorated)
– Where there has been intervention of innocent third-party (e.g., if the goods have been sold on)
In this case, the subject of contract is designing, building and managing the new CRM system which is impossible to be restituted. Therefore, the contract cannot be rescinded.
Reference: CIPS study guide page 53-55
LO 1, AC 1.2
C
Explanation:
Hank’s pre-contractual assurances may amount to misrepresentation. Remedies for misrepresentation could be rescission of contract or damages.
Rescission will be impossible in the following instance:
– Where the innocent party has affirmed the contract; that is, acted in a way confirming that they wish it to continue
– Where the claim has not been brought within a reasonable time (this is a point of general law)
– Where restitution (returning to the pre-contractual position) is impossible (e.g. because the goods have been consumed or have deteriorated)
– Where there has been intervention of innocent third-party (e.g., if the goods have been sold on)
In this case, the subject of contract is designing, building and managing the new CRM system which is impossible to be restituted. Therefore, the contract cannot be rescinded.
Reference: CIPS study guide page 53-55
LO 1, AC 1.2
Question #99
Cleveland Insurance (Cleveland) offers a range of insurance services. The main software used in the call centre is a customer relationship management (CRM) system. Cleveland perceived an urgent need to replace the existing CRM system to deal with the increasing number of customers and services.
Urgent Digital Ltd (Digital) is one of the bidders of Cleveland’s ITT for designing, building and managing the new CRM system. Its bid team is led by Hank Irvine, its technical director. Hank realises that winning the Cleveland contract (valued at approximately £50M) will enhance his career. During discussions with Cleveland, Hank offers certain assurances regarding timescales for the project. He has not carried out any investigations into the viability of the timescales. Hank has little idea whether the timescales can be met.
Cleveland decides that Digital’s bid meets with its requirements, especially given the assurances in timescale offered by Hank, and decides to proceed with it, subject to a formal contract. Eventually, a formal contract is signed by both parties. The initial assurances given by Hank about the timing of the project are never going to be achieved and are at best grossly exaggerated.
Cleveland brought the case to the court and sought rescission of contract with Digital. Is Cleveland’s claim appropriate in this case?
- A . Yes, because Cleveland needs to seek rescission first before claiming for damages
- B . Yes, because both parties agreed with rescission of their contract
- C . No, because the work had been carried out which could not be returned
- D . No, because the contract does not include any provision on rescission
Correct Answer: C
C
Explanation:
Hank’s pre-contractual assurances may amount to misrepresentation. Remedies for misrepresentation could be rescission of contract or damages.
Rescission will be impossible in the following instance:
– Where the innocent party has affirmed the contract; that is, acted in a way confirming that they wish it to continue
– Where the claim has not been brought within a reasonable time (this is a point of general law)
– Where restitution (returning to the pre-contractual position) is impossible (e.g. because the goods have been consumed or have deteriorated)
– Where there has been intervention of innocent third-party (e.g., if the goods have been sold on)
In this case, the subject of contract is designing, building and managing the new CRM system which is impossible to be restituted. Therefore, the contract cannot be rescinded.
Reference: CIPS study guide page 53-55
LO 1, AC 1.2
C
Explanation:
Hank’s pre-contractual assurances may amount to misrepresentation. Remedies for misrepresentation could be rescission of contract or damages.
Rescission will be impossible in the following instance:
– Where the innocent party has affirmed the contract; that is, acted in a way confirming that they wish it to continue
– Where the claim has not been brought within a reasonable time (this is a point of general law)
– Where restitution (returning to the pre-contractual position) is impossible (e.g. because the goods have been consumed or have deteriorated)
– Where there has been intervention of innocent third-party (e.g., if the goods have been sold on)
In this case, the subject of contract is designing, building and managing the new CRM system which is impossible to be restituted. Therefore, the contract cannot be rescinded.
Reference: CIPS study guide page 53-55
LO 1, AC 1.2
Question #99
Cleveland Insurance (Cleveland) offers a range of insurance services. The main software used in the call centre is a customer relationship management (CRM) system. Cleveland perceived an urgent need to replace the existing CRM system to deal with the increasing number of customers and services.
Urgent Digital Ltd (Digital) is one of the bidders of Cleveland’s ITT for designing, building and managing the new CRM system. Its bid team is led by Hank Irvine, its technical director. Hank realises that winning the Cleveland contract (valued at approximately £50M) will enhance his career. During discussions with Cleveland, Hank offers certain assurances regarding timescales for the project. He has not carried out any investigations into the viability of the timescales. Hank has little idea whether the timescales can be met.
Cleveland decides that Digital’s bid meets with its requirements, especially given the assurances in timescale offered by Hank, and decides to proceed with it, subject to a formal contract. Eventually, a formal contract is signed by both parties. The initial assurances given by Hank about the timing of the project are never going to be achieved and are at best grossly exaggerated.
Cleveland brought the case to the court and sought rescission of contract with Digital. Is Cleveland’s claim appropriate in this case?
- A . Yes, because Cleveland needs to seek rescission first before claiming for damages
- B . Yes, because both parties agreed with rescission of their contract
- C . No, because the work had been carried out which could not be returned
- D . No, because the contract does not include any provision on rescission
Correct Answer: C
C
Explanation:
Hank’s pre-contractual assurances may amount to misrepresentation. Remedies for misrepresentation could be rescission of contract or damages.
Rescission will be impossible in the following instance:
– Where the innocent party has affirmed the contract; that is, acted in a way confirming that they wish it to continue
– Where the claim has not been brought within a reasonable time (this is a point of general law)
– Where restitution (returning to the pre-contractual position) is impossible (e.g. because the goods have been consumed or have deteriorated)
– Where there has been intervention of innocent third-party (e.g., if the goods have been sold on)
In this case, the subject of contract is designing, building and managing the new CRM system which is impossible to be restituted. Therefore, the contract cannot be rescinded.
Reference: CIPS study guide page 53-55
LO 1, AC 1.2
C
Explanation:
Hank’s pre-contractual assurances may amount to misrepresentation. Remedies for misrepresentation could be rescission of contract or damages.
Rescission will be impossible in the following instance:
– Where the innocent party has affirmed the contract; that is, acted in a way confirming that they wish it to continue
– Where the claim has not been brought within a reasonable time (this is a point of general law)
– Where restitution (returning to the pre-contractual position) is impossible (e.g. because the goods have been consumed or have deteriorated)
– Where there has been intervention of innocent third-party (e.g., if the goods have been sold on)
In this case, the subject of contract is designing, building and managing the new CRM system which is impossible to be restituted. Therefore, the contract cannot be rescinded.
Reference: CIPS study guide page 53-55
LO 1, AC 1.2
Question #104
Offeree has not accepted the offer yet
- A . 2 and 4 only
- B . 1 and 4 only
- C . 1 and 3 only
- D . 2 and 3 only
Correct Answer: A
A
Explanation:
A revocation of offer is the withdrawal of a previous offer to engage in some sort of legally binding contract. The previous offer had to have been such that it would have immediately become legally binding if the other party had formally agreed to it.
A core ruling defining revocation of offers was established by Payne v. Cave. This case established that neither party is bound to an agreement until an offer has been made by one and formally accepted by the other.
If an offer has been made, the offering party has a right to withdraw it up to formal acceptance by the offeree. Revocation basically serves as formal, legally verifiable notice that a withdrawal was made, and it’s valid so long as it is communicated to the offeree before they accept.
The case of Byrne v. Van Tienhoven supports this by establishing that the withdrawal of an offer by telegram is only valid if the telegram is received before the offer is accepted. The case of Dickinson v. Dodds further establishes that the party making the offer can communicate the revocation through a third party.
Reference:
– What Is a Revocation of Offer?
– CIPS study guide page 31
LO 1, AC 1.2
A
Explanation:
A revocation of offer is the withdrawal of a previous offer to engage in some sort of legally binding contract. The previous offer had to have been such that it would have immediately become legally binding if the other party had formally agreed to it.
A core ruling defining revocation of offers was established by Payne v. Cave. This case established that neither party is bound to an agreement until an offer has been made by one and formally accepted by the other.
If an offer has been made, the offering party has a right to withdraw it up to formal acceptance by the offeree. Revocation basically serves as formal, legally verifiable notice that a withdrawal was made, and it’s valid so long as it is communicated to the offeree before they accept.
The case of Byrne v. Van Tienhoven supports this by establishing that the withdrawal of an offer by telegram is only valid if the telegram is received before the offer is accepted. The case of Dickinson v. Dodds further establishes that the party making the offer can communicate the revocation through a third party.
Reference:
– What Is a Revocation of Offer?
– CIPS study guide page 31
LO 1, AC 1.2
Question #105
Express terms in a contract are stated in which of the following? Select TWO that apply
- A . Orality
- B . Idea
- C . Trade customs
- D . Writing form
- E . Statutes
Correct Answer: A,D
A,D
Explanation:
Express terms are the terms of the agreement which are expressly agreed between the parties. Ideally, they will be written down in a contract between the parties but where the contract is agreed verbally, they will be the terms discussed and agreed between the parties.
Implied terms are terms implied into the contract by the courts. They are not expressly set out in the contract but are taken to be as effective as if they were and as if they had been included from day one of the contract. The express terms and any implied terms together create the legally binding obligations on the parties.
Reference:
– Contracts: Express and Implied Terms
– CIPS study guide page 126-132
LO 3, AC 3.1
A,D
Explanation:
Express terms are the terms of the agreement which are expressly agreed between the parties. Ideally, they will be written down in a contract between the parties but where the contract is agreed verbally, they will be the terms discussed and agreed between the parties.
Implied terms are terms implied into the contract by the courts. They are not expressly set out in the contract but are taken to be as effective as if they were and as if they had been included from day one of the contract. The express terms and any implied terms together create the legally binding obligations on the parties.
Reference:
– Contracts: Express and Implied Terms
– CIPS study guide page 126-132
LO 3, AC 3.1
Question #106
A procurement manager is preparing a long-term contract with a major supplier. She decides to use the variable pricing arrangement using price indices. The payment terms describe the circumstances and mechanism where the price is allowed to change. In order to successfully manage this type of contract, the buying organisation should have…?
- A . Good market knowledge
- B . Selection of base year
- C . Value for money
- D . Economy of scale
Correct Answer: A
A
Explanation:
There are several approaches to price adjustment for long-term contract. Describing circumstances and mechanism is one of them. Although this approach has some limitations, it is the best option. It relies on good market knowledge but provides the most equitable approach to satisfying the needs of the purchaser and the supplier.
Reference: CIPS study guide page 184
LO 3, AC 3.3
A
Explanation:
There are several approaches to price adjustment for long-term contract. Describing circumstances and mechanism is one of them. Although this approach has some limitations, it is the best option. It relies on good market knowledge but provides the most equitable approach to satisfying the needs of the purchaser and the supplier.
Reference: CIPS study guide page 184
LO 3, AC 3.3
Question #107
Is the government only source of industrial standards within a country?
- A . No, the government can only adopt standards regarding security and defence
- B . Yes, while ISO make standards for international trade, the government standardises other facets of their country
- C . No, an organisation can also generate its own internal standards
- D . Yes, the standards must be made by legislative branch of the country
Correct Answer: C
C
Explanation:
A standard is a document that sets out requirements for a specific item, material, component, system or service, or describes in detail a particular method or procedure. Standards are established by consensus and approved by recognized standardization bodies.
There are several different types of standards. Some of the most commonly-used standards set out the requirements that a particular kind of product, service or process must fulfil, in order to establish that it is ‘fit for purpose’. Other types of standard relate to methods of testing, terminology and definitions, information requirements, or the compatibility of connections.
Standards provide individuals, businesses and all kinds of organizations with a common basis for mutual understanding. They are especially useful for communication, measurement, commerce and manufacturing.
Standards make trade easier by ensuring compatibility and interoperability of components, products and services. They bring benefits to businesses and consumers in terms of reducing costs, enhancing performance and improving safety.
Standards are voluntary, which means that businesses and other organizations are not legally obliged to apply them. However, in certain cases standards may facilitate compliance with legal requirements, such as those contained in European directives and regulations.
Standards can be made by a company, a standard organisation (such as ISO or BSI) or regulatory bodies.
Reference:
– CIPS study guide page 93-94
– Standards and your business LO 2, AC 2.1
C
Explanation:
A standard is a document that sets out requirements for a specific item, material, component, system or service, or describes in detail a particular method or procedure. Standards are established by consensus and approved by recognized standardization bodies.
There are several different types of standards. Some of the most commonly-used standards set out the requirements that a particular kind of product, service or process must fulfil, in order to establish that it is ‘fit for purpose’. Other types of standard relate to methods of testing, terminology and definitions, information requirements, or the compatibility of connections.
Standards provide individuals, businesses and all kinds of organizations with a common basis for mutual understanding. They are especially useful for communication, measurement, commerce and manufacturing.
Standards make trade easier by ensuring compatibility and interoperability of components, products and services. They bring benefits to businesses and consumers in terms of reducing costs, enhancing performance and improving safety.
Standards are voluntary, which means that businesses and other organizations are not legally obliged to apply them. However, in certain cases standards may facilitate compliance with legal requirements, such as those contained in European directives and regulations.
Standards can be made by a company, a standard organisation (such as ISO or BSI) or regulatory bodies.
Reference:
– CIPS study guide page 93-94
– Standards and your business LO 2, AC 2.1
Question #108
Which of the following is most likely to be an one-off contract?
- A . Franchise Agreement
- B . Framework Agreement for supply of mono-crystalline silicon
- C . Contract for construction of a power plant
- D . Commercial lease agreement of an office building
Correct Answer: C
C
Explanation:
One-off contracts are used where a supplier is only needed for a single activity unlikely to be repetitive, and where the need of the buyer is concrete and finite. Among the answers, only construction for power plant is one-off since the work is non-repetitive and the need is clearly defined.
A framework agreement is an agreement between one or more businesses or organisations, "the purpose of which is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, the quantity envisaged".
A Commercial Lease Agreement is a contract used when renting business property to or from another individual or company. It gives the tenant (or renter) the right to use the property for business purposes during the term of the lease in exchange for payment to the landlord.
A franchise agreement is a legally binding document that outlines a franchisor’s terms and conditions for a franchisee. Every franchise is governed by these terms, which are generally outlined in a written agreement between both parties.
Reference: CIPS study guide page 55-58
LO 1, AC 1.3
C
Explanation:
One-off contracts are used where a supplier is only needed for a single activity unlikely to be repetitive, and where the need of the buyer is concrete and finite. Among the answers, only construction for power plant is one-off since the work is non-repetitive and the need is clearly defined.
A framework agreement is an agreement between one or more businesses or organisations, "the purpose of which is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, the quantity envisaged".
A Commercial Lease Agreement is a contract used when renting business property to or from another individual or company. It gives the tenant (or renter) the right to use the property for business purposes during the term of the lease in exchange for payment to the landlord.
A franchise agreement is a legally binding document that outlines a franchisor’s terms and conditions for a franchisee. Every franchise is governed by these terms, which are generally outlined in a written agreement between both parties.
Reference: CIPS study guide page 55-58
LO 1, AC 1.3
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
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
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
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
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
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
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
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
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
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
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
Correct Answer: D
D
Explanation:
There are 2 major types of specifications:
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
Correct Answer: D
D
Explanation:
There are 2 major types of specifications:
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
Correct Answer: D
D
Explanation:
There are 2 major types of specifications:
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
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
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
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 #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 #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
Question #131
Non-disclosure
- A . 3 and 4 only
- B . 1 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question #131
Non-disclosure
- A . 3 and 4 only
- B . 1 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question #131
Non-disclosure
- A . 3 and 4 only
- B . 1 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question #131
Non-disclosure
- A . 3 and 4 only
- B . 1 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question #131
Non-disclosure
- A . 3 and 4 only
- B . 1 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question #131
Non-disclosure
- A . 3 and 4 only
- B . 1 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question #131
Non-disclosure
- A . 3 and 4 only
- B . 1 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question #131
Non-disclosure
- A . 3 and 4 only
- B . 1 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question #131
Non-disclosure
- A . 3 and 4 only
- B . 1 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question #131
Non-disclosure
- A . 3 and 4 only
- B . 1 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question #131
Non-disclosure
- A . 3 and 4 only
- B . 1 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question #131
Non-disclosure
- A . 3 and 4 only
- B . 1 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question #131
Non-disclosure
- A . 3 and 4 only
- B . 1 and 4 only
- C . 1 and 2 only
- D . 2 and 3 only
Correct Answer: D
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
D
Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question #144
Abolition of forced labor
- A . 1, 2 and 4 only
- B . 2, 3 and 4 only
- C . 1, 3 and 4 only
- D . 1, 2 and 3 only
Correct Answer: C
C
Explanation:
ILO Declaration on Fundamental Principles and Rights at Work was adopted in 1948. The Declaration commits Member States to respect and promote principles and rights in four categories, whether or not they have ratified the relevant Conventions.
These categories are: freedom of association and the effective recognition of the right to collective bargaining, the elimination of forced or compulsory labour, the abolition of child labour and the elimination of discrimination in respect of employment and occupation.
Reference:
– ILO Declaration on Fundamental Principles and Rights at Work
– CIPS study guide page 161-163
LO 3, AC 3.2
C
Explanation:
ILO Declaration on Fundamental Principles and Rights at Work was adopted in 1948. The Declaration commits Member States to respect and promote principles and rights in four categories, whether or not they have ratified the relevant Conventions.
These categories are: freedom of association and the effective recognition of the right to collective bargaining, the elimination of forced or compulsory labour, the abolition of child labour and the elimination of discrimination in respect of employment and occupation.
Reference:
– ILO Declaration on Fundamental Principles and Rights at Work
– CIPS study guide page 161-163
LO 3, AC 3.2
Question #145
The cost in cost reimbursable contract is…?
- A . Actual cost
- B . Variable cost
- C . Fixed cost
- D . Profit
Correct Answer: A
A
Explanation:
A cost reimbursable contract (sometimes called a cost plus contract) is one in which the contractor is reimbursed the actual costs they incur in carrying out the works, plus an additional fee. Option E of the NEC3 Engineering and Construction Contract (ECC) is an example of a cost reimbursable contract.
Reference:
– CIPS study guide page 176-179
– Cost reimbursable contract
LO 3, AC 3.3
A
Explanation:
A cost reimbursable contract (sometimes called a cost plus contract) is one in which the contractor is reimbursed the actual costs they incur in carrying out the works, plus an additional fee. Option E of the NEC3 Engineering and Construction Contract (ECC) is an example of a cost reimbursable contract.
Reference:
– CIPS study guide page 176-179
– Cost reimbursable contract
LO 3, AC 3.3
Question #146
A senior procurement specialist in UK is preparing a specification in which ISO standards are used to send to global suppliers. Is this action appropriate?
- A . No, the procurement specialist must use BSI standards instead
- B . Yes, evert specification must have ISO standards
- C . Yes, ISO standards are globally recognisable
- D . No, ISO standards are unfamiliar to global suppliers
Correct Answer: C
C
Explanation:
ISO standards are internationally agreed by worldwide experts. They overcome countries’ differences and facilitate global trade. If a buying organisation is sourcing globally, they should use ISO standards within the specification.
Reference: CIPS study guide page 93-94
LO 2, AC 2.1
C
Explanation:
ISO standards are internationally agreed by worldwide experts. They overcome countries’ differences and facilitate global trade. If a buying organisation is sourcing globally, they should use ISO standards within the specification.
Reference: CIPS study guide page 93-94
LO 2, AC 2.1
Question #147
Which of the following indicates the ratio between profit and costs?
- A . Gearing
- B . Margin
- C . Mark-up
- D . Liquidity
Correct Answer: C
C
Explanation:
Mark up is the profit as a percentage of total costs.
LO 3, AC 3.3
C
Explanation:
Mark up is the profit as a percentage of total costs.
LO 3, AC 3.3
Question #147
Which of the following indicates the ratio between profit and costs?
- A . Gearing
- B . Margin
- C . Mark-up
- D . Liquidity
Correct Answer: C
C
Explanation:
Mark up is the profit as a percentage of total costs.
LO 3, AC 3.3
C
Explanation:
Mark up is the profit as a percentage of total costs.
LO 3, AC 3.3
Question #147
Which of the following indicates the ratio between profit and costs?
- A . Gearing
- B . Margin
- C . Mark-up
- D . Liquidity
Correct Answer: C
C
Explanation:
Mark up is the profit as a percentage of total costs.
LO 3, AC 3.3
C
Explanation:
Mark up is the profit as a percentage of total costs.
LO 3, AC 3.3
Question #150
Return orders in an hour Is that a good thing or not?
- A . Yes, because these targets will propel the suppliers to continuous improvement
- B . No, the local suppliers are always the best choice
- C . No, because the KPIs are not a realistic and justified
- D . Yes, the higher the targets are, the better the outcomes will be
Correct Answer: C
C
Explanation:
KPIs and the targets for supplier should be SMART:
– Specific: What exactly do you want to achieve?
– Measurable: How will you identify that you have achieved your goal?
– Achievable: Is your goal really attainable?
– Relevant: Is it relevant to you or, in other words, does it align with where you want to be?
– Time-bound (or timely): When will you deliver your goal, and what are the key milestones?
The two KPIs (Delivery in one hour, Return orders in one hour) are not realistic and achievable for international suppliers. Therefore, you should not put such high targets for
supplier.
Reference:
– What Are SMART KPIs? (Spoiler: They Don’t Really Exist!)
– CIPS study guide page 107-108
LO 2, AC 2.2
C
Explanation:
KPIs and the targets for supplier should be SMART:
– Specific: What exactly do you want to achieve?
– Measurable: How will you identify that you have achieved your goal?
– Achievable: Is your goal really attainable?
– Relevant: Is it relevant to you or, in other words, does it align with where you want to be?
– Time-bound (or timely): When will you deliver your goal, and what are the key milestones?
The two KPIs (Delivery in one hour, Return orders in one hour) are not realistic and achievable for international suppliers. Therefore, you should not put such high targets for
supplier.
Reference:
– What Are SMART KPIs? (Spoiler: They Don’t Really Exist!)
– CIPS study guide page 107-108
LO 2, AC 2.2