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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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:
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
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:
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
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:
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