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NEW QUESTION # 49
Nestle gave away records of "Rockin' Shoes" or a voucher to people who sent in three wrappers from Nestle's 6d. milk chocolate bars as well as 1s 6d. Which of the following were the consideration of Nestle's customer? Select TWO that apply
- A. Milk chocolate bar
- B. The voucher
- C. "Rockin' Shoes" record
- D. 1s 6d
- E. Three wrappers
Answer: D,E
Explanation:
Consideration is one thing given in exchange for another.
In this case, considerations of customers are three wrappers and 1s6d. Consideration of Nestle is Rockin' Shoes record or a voucher.
Reference:
LO 1, AC 1.2
NEW QUESTION # 50
Which of the following is an agreement between service provider and user that quantifies the minimum quality of service?
- A. Service standard
- B. Service charter
- C. Service guarantee
- D. SLA
Answer: D
Explanation:
A service-level agreement (SLA) is a commitment between a service provider and a client. Particular aspects of the service - quality, availability, responsibilities - are agreed between the service provider and the service user. The most common component of an SLA is that the services should be provided to the customer as agreed upon in the contract.
A customer service charter is a document that outlines how an organization promises to work with its customers along with providing insights into how an organization operates.
A service guarantee is a marketing tool service firms have increasingly been using to reduce consumer risk perceptions, signal quality, differentiate a service offering, and to institutionalize and professionalize their internal management of customer complaint and service recovery.
Reference:
LO 2, AC 2.2
NEW QUESTION # 51
Which of the following statements is true about model form of contract?
- A. Only the publishers of model forms of contract can edit the clauses of these forms
- B. When model contracts are employed, there are no requirements for legal advice and input
- C. Model contract form's standard clauses often contain correct legal terminology without recourse to third party experts.
- D. The standard clauses of model contract forms give the offeror legal advantages over the offeree
Answer: C
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:
LO 3, AC 3.1
NEW QUESTION # 52
Standard terms and conditions should become the governing terms for which group of items?
- A. Leverage items
- B. Bottleneck items
- C. Routine items
- D. Strategic items
Answer: C
Explanation:
Standard terms and conditions are set of terms that is prepared by an organisation. These terms can become the governing terms in low-value, low-risk transactions (or Routine items according to Kraljic's portfolio model). They can be a reference when negotiating for more important contract.
Reference:
LO 3, AC 3.1
NEW QUESTION # 53
Which of the following will always give rise to a claim of misrepresentation?
1. Silence
2. False thought
3. Statement of fact
4. Representation by conduct
- A. 3 and 4 only
- B. 2 and 4 only
- C. 1 and 2 only
- D. 1 and 3 only
Answer: A
Explanation:
A misrepresentation is a false statement of fact or law which induces the representee to enter a contract. Where a statement made during the course of negotiations is classed as a representation rather than a term an action for misrepresentation may be available where the statement turns out to be untrue.
For a party to claim for misrepresentation, there must be a false statement of fact or law as oppose to opinion or estimate of future events. It does not matter whether the incorrect information is given by words or takes the form of misleading conduct.
Silence will not generally amount to a misrepresentation. However, it can become a misrepresentation in some exceptional circumstances.
In the L4M3 study guide, the author states that "A statement of law is not misrepresentation". This is untrue in both common law and civil law systems. In the UK, false statement of law will now amount to an actionable misrepresentation (see Pankhania v Hackney [2002] EWHC 2441).
Reference:
- Misrepresentation
- L4M3 study guide page 53-55
LO 1, AC 1.2
NEW QUESTION # 54
The pricing arrangement in which markup is added into cost base to calculate the final price is known as...?
- A. Cost plus pricing
- B. Price indices
- C. Market based approach
- D. Fixed Price approach
Answer: A
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:
LO 3, AC 3.3
NEW QUESTION # 55
Which of the following is the type of insurance that cover the liabilities of service provider such as legal advice, accountancy, technical designs, etc?
- A. Employer's liability
- B. Product liability
- C. Public liability
- D. PII
Answer: D
Explanation:
The most usual forms of insurance cover are as below:
- Employer's liability: Employers' liability insurance, sometimes known as employment practices liability insurance (EPLI), protects employers from financial loss if a worker has a job-related injury or illness not covered by workers' compensation. Employers' liability insurance can be packaged with workers' compensation insurance to further protect companies against the costs associated with workplace injuries, illnesses, and deaths. Employers' liability insurance is also called "part 2" of a workers' compensation policy.
- Public/product liability: Public liability insurance covers you against any claims made against your business - for example if you were held legally liable for personal injury, or for damage done to property. The insurance will also cover you for any legal costs associated with defending claims against your business.
- Professional indemnity insurance (PII): Professional indemnity or liability insurance offers such coverage to professional advice or service providing individuals and companies ensuring protection against any legal costs and damages awarded as a result of claims relating to negligence. Whereas more general forms of liability insurance focus on direct forms of harm such as sustaining injuries, professional indemnity insurance provides a far more detailed and comprehensive form of coverage. The cover protects a firm or individual's liability relating to any financial loss caused by errors or omissions in the service provided as well as any alleged failure to perform on behalf of a client.
- Goods in transit coverage: Goods in transit insurance, sometimes referred to as GIT, covers goods against loss or damage while being moved from one place to another. These goods can be being carried by individuals in their own vehicle, self employed drivers or contractors or by third party carriers. The insurance can cover both domestic and international trips, with specific add-ons available for insurance within Europe.
Reference:
LO 3, AC 3.2
NEW QUESTION # 56
Under hire purchase agreement, when will the ownership of asset legally belong to the purchaser?
- A. When the agreement is signed
- B. When the down payment is made
- C. When the purchaser takes possession of the asset
- D. When the final instalment is paid
Answer: D
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
NEW QUESTION # 57
A construction company is undertaking a housing development project. They need lots of bricks and other building materials, but the construction site doesn't have large area for storage of materials. Therefore, the company's suppliers must deliver the building materials with fixed quantity and at fixed time intervals. What type of contract is used between the construction company and its suppliers?
- A. Framework agreement
- B. One off contract
- C. Call off contract
- D. Spot transaction
Answer: C
Explanation:
In the scenario, the contract between the company and its suppliers is continuous rather than one-off. So it cannot be one-off contract or spot purchase. The quantity and time is well known and fixed, this type of contract is known as call-off contract or blanket order.
Reference:
LO 1, AC 1.3
NEW QUESTION # 58
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. Unfair Contract Act 1977
- C. Rules of interpretation
- D. Rules of contract formation
Answer: C
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
NEW QUESTION # 59
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 has been written.
- B. When the letter of acceptance is received by the offeror.
- C. When the letter of acceptance is opened and its contents read by the offeree.
- D. When the letter of acceptance has been correctly addressed, its postage paid, and posted.
Answer: D
Explanation:
When parties do not negotiate face-to-face, a key Question: 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
NEW QUESTION # 60
Which of the following is most likely to reduce ITT preparation time while maintaining the clarity of tendering documents?
- A. Standardising documentation whenever possible
- B. Eliminating pre-qualification stage from all tendering processes
- C. Monitoring usage
- D. Using request for quotation
Answer: A
Explanation:
One of the major disadvantages of tendering process is that it is lengthy, bureaucratic and slow. To reduce the preparation time, buying organisation can:
- Plan forward
- Standardise tendering documents (such as notices, terms and conditions,...) whenever possible
- Train procurement staff
- Write down policies for tender-waiver
Buying organisation should not eliminate the pre-qualification stage from all tendering processes. This stage is used as a filter to select the most competent suppliers for next stage in restricted tendering. To save time in this process, you can design a model questionnaire.
Reference:
LO 1, AC 1.1
NEW QUESTION # 61
You are to do the KPIs and targets for international supplier and the following was done
1. Delivery in an hour
2. 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. Yes, the higher the targets are, the better the outcomes will be
- C. No, the local suppliers are always the best choice
- D. No, because the KPIs are not a realistic and justified
Answer: D
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
NEW QUESTION # 62
Which of the following should be applied when measuring frequency of on-time deliveries during a contract period?
- A. Numerical measure
- B. Subjective measure
- C. Qualitative assessment
- D. Binary measure
Answer: A
Explanation:
Number of on-time deliveries can be quantified, then numerical measures can be applied.
Frequency of on-time deliveries is measured as on-time deliveries as a percentage of total no. of deliveries for period.
LO 2, AC 2.2
NEW QUESTION # 63
Which of the following documents are likely to have legal standing? Select TWO that apply:
- A. Tender
- B. Request for information
- C. Requisition
- D. Estimate
- E. Quotation
Answer: A,E
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
NEW QUESTION # 64
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. Initial impossibility
- C. Fraudulent misrepresentation
- D. Threat
Answer: B
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
NEW QUESTION # 65
Express terms in a contract are stated in which of the following? Select TWO that apply
- A. Orality
- B. Trade customs
- C. Idea
- D. Writing form
- E. Statutes
Answer: 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
NEW QUESTION # 66
XYZ Ltd is negotiating a long-term supply contract of important parts with a supplier. Dave, procurement manager teams up with Alla, legal manager to construct a service level agreement. Dave is concerned that poor performance of supplier may cause damages to the operations of the organisation. Which of the following can be used in conjunction with SLA to compensate the buying organisation in case of supplier's poor performance?
1. Warranties
2. Force majeure clauses
3. Penalty clauses
4. Service credits
- A. 3 and 4 only
- B. 1 and 2 only
- C. 1 and 3 only
- D. 4 and 2 only
Answer: A
Explanation:
Service level agreement often sets out the minimum quality standards of the services provided, remedies if that standards are not met, consequences if the targets are exceeded. Penalty clauses and service credits are remedies that are often used in conjunction with service level agreement to ensure the performance and to compensate the purchaser if targets are not met.
Reference:
LO 2, AC 2.2
NEW QUESTION # 67
Rochdale Ltd is looking for a new IT system to automate some of its operations. In designing the specification, procurement manager supposes that it should be done solely by the IT department who have deep expertise on this matter. Is procurement manager's opinion appropriate?
- A. Yes, because procurement professional has no expertise in IT sector
- B. No, because challenging the user's demand is the role of procurement
- C. Yes, because designing complex specification would waste procurement manager's time
- D. No, because designing complex specification could only be outsourced
Answer: B
Explanation:
Procurement professionals have a role in challenging specifications. Technical experts can get things wrong and asking naive questions can be useful in bringing these to light. The challenging may include:
- Does the organisation really need these features/functions?
- With this specification, are there many available suppliers in the market?
- How many does the organisation really need?
etc
Reference:
LO 1, AC 1.1
NEW QUESTION # 68
Under general legal principles of contract formation, which of the following will always automatically result in the termination of an offer?
1. Negotiation
2. Rejection
3. Failure conditionality
4. Non-disclosure
- A. 1 and 4 only
- B. 3 and 4 only
- C. 1 and 2 only
- D. 2 and 3 only
Answer: 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:
1. Revocation
2. Rejection
3. Lapse of time
4. Conditional Offer (or Failure of Conditionality)
5. Operation of law
6. Death
7. Acceptance
8. Illegality
Reference:
- How Is an Offer Terminated?
- CIPS study guide page 31-32
LO 1, AC 1.2
NEW QUESTION # 69
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