CIPS L4M3 Commercial Contracting Online Training
CIPS L4M3 Online Training
The questions for L4M3 were last updated at Nov 23,2024.
- Exam Code: L4M3
- Exam Name: Commercial Contracting
- Certification Provider: CIPS
- Latest update: Nov 23,2024
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)
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
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)
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
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)
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
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
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:
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
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:
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
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:
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
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:
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
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:
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
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:
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
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
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