CIPS Commercial Contracting (L4M3) Free Practice Test

Question 1

Company A based in Canada signed a commercial contract with Company B in Egypt. Both countries are Contracting States to Vienna Convention on Contracts for the International Sale of Goods. The contract states that "The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of Canada". Which of the following set of rules will be applied if dispute between contracting parties occurs?

A. Canada's legal system

B. Egypt's legal system

C. WTO rules

D. CISG

Correct Answer: A

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Question 2

Which of the following are most likely to be liabilities of suppliers under a guarantee clause?(SelectAny Two)

A. Decommissioning

B. Upgrading

C. TWO that apply

D. Repair

E. Replacement

F. Installation

Correct Answer: D,E

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Question 3

What are disadvantages of a buyer contracting on the supplier's terms? Select TWO that apply.

A. The buyer would not be subject to any indemnity clause obligations

B. Prices may increase without notification to the buyer

C. Goods received late will incur penalties for the supplier

D. Materials will not be changed without the buyer's consent

E. Title to goods may remain with the supplier until payment is received

Correct Answer: B,C,D,E

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Question 4

The pricing arrangement in which markup is added into cost base to calculate the final price is known as...?

A. Cost plus pricing

B. Fixed Price approach

C. Price indices

D. Market based approach

Correct Answer: A

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Question 5

Which of the following is the reason why liquidated damage clauses are embedded into a contract?

A. To avoid argument on correct measure of damage

B. Because compensation will be awarded immediately

C. Because liquidated damages are the only remedy

D. To penalise the supplier for their wrongdoing

Correct Answer: A

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Question 6

Which of the following is used to detail the complex matter that may be verbiage to the main document?

A. Schedule

B. Subcontracting

C. Contract variation

D. Standard terms and conditions

Correct Answer: A

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Question 7

Which of the following is set down in statute as a liability that exists without any need to prove fault?

A. Non-current liability

B. Current liability

C. Contingent liability

D. Strict liability

Correct Answer: D

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Question 8

As part of a long-term contract, a buyer may wish to use separate service level agreements (SLAs). If the targets are not met, which of the following options would compensate the purchaser?

A. Service schedules

B. Service guarantees

C. Service standards

D. Service credits

Correct Answer: D

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Question 9

Maximum Score: 1
Buyer O has placed an order for the supply and installation of six new servers for a total amount of £600,000 from Supplier A. Which of the following could potentially be treated as examples of a liquidated damages clause within the contract for the supply of the servers?
* If the supplier delivers any of the servers late, £1,000 per server will be deducted from the order per day
* This contract is subject to delay remedies of £X - the amount to be agreed by both parties during delivery
* The sum for breach of the completion date for the order is £40,000 per day up to a maximum of 50% of the contract price
* If the performance of any of the servers degrades within five years, a full refund of £600,000 will be provided

A. 2 and 4 only

B. 1 and 2 only

C. 1 and 3 only

D. 3 and 4 only

Correct Answer: C

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Question 10

Which of the following are always included within a framework agreement? Select TWO that apply:

A. Duration

B. Exact price to be paid

C. Call-off procedure

D. Exact quantity to be purchased

E. Insurance

Correct Answer: A,C

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Question 11

A large company supplies a lot of products. Their shipments are often delayed and customers are not satisfied.
Which of the following KPIs is most likely to be applied to this situation?

A. OTIF delivery

B. Delay damages

C. Consignment stock availability

D. Technical support

Correct Answer: A

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Question 12

Carillion Ltd is a major construction contractor in the UK. The company commits to continuous improvement and sets out a performance management program that is integrated across the organisational, individual, and supplier levels. To ensure that the suppliers acknowledge the program, every time negotiating the contract terms with suppliers, the procurement team of Carillion appends a performance management framework to the draft document as a schedule. Is the action of procurement team appropriate?

A. No, because the framework will increase the complexity of the contract

B. Yes, because Carillion wants to implement early supplier involvement

C. No, because the performance management should be solely developed by suppliers

D. Yes, because the framework should have legal standing as a part of contract

Correct Answer: D

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Question 13

Misrepresentation can be defined as a false statement of material fact made by one of the contracting parties which was intended to (and did) induce the other party to make the contract. What remedies are available in this instance to the innocent party?

A. Contract is not voidable but damages can still be claimed

B. Contract is voidable and must be amended and performed

C. Contract is voidable and damages can be claimed

D. Contract is not voidable and it is too late to take any action

Correct Answer: C

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CIPS Commercial Contracting (L4M3) Free Practice Test