CIPS L4M3 Commercial Contracting Online Training

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

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

Reveal Solution Hide Solution

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

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

Reveal Solution Hide Solution

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

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

Reveal Solution Hide Solution

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

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

Reveal Solution Hide Solution

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

Question #76

OTIF deliveries

A . 2 and 5 only
B . 1 and 3 only
C . 2 and 3 only
D . 1 and 4 only

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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

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

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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

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

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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

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

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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

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

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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