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NEW QUESTION # 122
The nature of the "Battle of the forms" is when both buyer and supplier are attempting to ...
- A. create a collaborative relationship
- B. create a performance specification
- C. secure their own terms and conditions
- D. form a joint contract
Answer: C
Explanation:
The battle of the forms occurs when:
* Both buyer and supplier exchange documents (RFQ, PO, acknowledgements) containing their own standard terms and conditions,
* Each party is trying to ensure their own terms govern the contract.
It is literally a battle to secure their own terms and conditions (A).
Reference: CIPS L4M3 Commercial Contracting - Battle of the forms and incorporation of terms.
NEW QUESTION # 123
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. WTO rules
- B. Canada's legal system
- C. Egypt's legal system
- D. CISG
Answer: B
Explanation:
Where the sale of goods is between two businesses in different Contracting States, then it is international and the CISG rules of law automatically apply unless they have been excluded. A contract clause stating that the contract is subject to the legal systems and courts of a particular country overrides or excludes the CISG rules, since the local rules of that country would apply instead.
So the answer should be Canada's legal system.
Reference:
LO 1, AC 1.2
NEW QUESTION # 124
Which of the following is the procedure that makes no further competition under a framework agreement?
- A. Closed system
- B. Direct call-off
- C. Standing offer
- D. Blanket order
Answer: B
Explanation:
Direct call off is the act of placing an order under a framework agreement without having further competition.
Standing offer is an available offer.
Blanket order is another name of framework agreement
Closed system is a requirement of framework agreement. It is a system or process that, once started, does not allow new entrants.
Reference:
LO 1, AC 1.3
NEW QUESTION # 125
Consequences and actions that arise from certain KPI scores must be...? Select TWO that apply.
- A. Documented
- B. Terminated
- C. Unilaterally imposed by the purchaser
- D. Deliberately omitted
- E. Mutually agreed
Answer: A,E
Explanation:
Supplier performance management and monitoring is a fundamental part of contract management. It starts with setting KPIs, targets and consequences or actions that arise from KPI scores. The measures, objectives and targets used in the monitoring of the supplier's performance must reflect those that were agreed when the contract was let. That is why it is important to specify a commitment to continuous improvement at the outset. It would be unfair to the supplier to suddenly introduce a range of measures after the contract had begun - however if such an introduction mid-term through the contract is unavoidable then it should be negotiated and agreed in a professional manner and not merely imposed on the supplier.
In conclusion, the details of how KPIs will be monitored and the actions or consequences resulting from scores achieved must be documented and agreed between the parties. This details may be embedded in the specification or the main body of the contract or it may be set out in a SLA.
Reference:
- Performance Monitoring of Suppliers - CIPS Knowledge summary
- CIPS study guide page 101-109
LO 2, AC 2.2
NEW QUESTION # 126
What does quantum meruit mean?
- A. As much as is earned
- B. An implied promise
- C. A non-graduations promise
- D. As much as is paid
Answer: A
Explanation:
Quantum meruit means "the amount he deserves" or "as much as he has earned". In most cases it denotes a claim for a reasonable sum in respect of services or goods supplied to the defendant.
An action in quantum meruit is available to recover money for services or goods supplied to a defendant in circumstances where the claimant is not recompensed by performing his obligations or supplying the goods. The claimant must usually show that the defendant expressly or impliedly requested or freely accepted the services or goods in question. Depending on the facts, the claimant might find it difficult to prove how much the claimant is entitled to receive under the principle of quantum meruit.
A claim for quantum meruit cannot arise if the parties have a contract to pay an agreed sum. In such circumstances, the parties' relationship is governed by the law of contract. However, a claim for quantum meruit may arise where the parties:
- Have not agreed a contract, or there is a so-called quasi-contract. For example, the parties may have agreed some of the contractual terms, but may have failed to reach an agreement on an essential term, such as price.
- Have not fixed a price for the services or goods supplied.
- Have an agreement to pay a reasonable sum for the services or goods supplied.
- Have agreed a scope of work under the original contract and the work carried out falls outside that scope.
Reference:
LO 3, AC 3.1
NEW QUESTION # 127
Is the government only source of industrial standards within a country?
- A. Yes, while ISO make standards for international trade, the government standardises other facets of their country
- B. No, an organisation can also generate its own internal standards
- C. No, the government can only adopt standards regarding security and defence
- D. Yes, the standards must be made by legislative branch of the country
Answer: B
Explanation:
A standard is a document that sets out requirements for a specific item, material, component, system or service, or describes in detail a particular method or procedure. Standards are established by consensus and approved by recognized standardization bodies.
There are several different types of standards. Some of the most commonly-used standards set out the requirements that a particular kind of product, service or process must fulfil, in order to establish that it is 'fit for purpose'. Other types of standard relate to methods of testing, terminology and definitions, information requirements, or the compatibility of connections.
Standards provide individuals, businesses and all kinds of organizations with a common basis for mutual understanding. They are especially useful for communication, measurement, commerce and manufacturing.
Standards make trade easier by ensuring compatibility and interoperability of components, products and services. They bring benefits to businesses and consumers in terms of reducing costs, enhancing performance and improving safety.
Standards are voluntary, which means that businesses and other organizations are not legally obliged to apply them. However, in certain cases standards may facilitate compliance with legal requirements, such as those contained in European directives and regulations.
Standards can be made by a company, a standard organisation (such as ISO or BSI) or regulatory bodies.
Reference:
- CIPS study guide page 93-94
- Standards and your business
LO 2, AC 2.1
NEW QUESTION # 128
Which of the following is an agreement between service provider and user that quantifies the minimum quality of service?
- A. SLA
- B. Service guarantee
- C. Service standard
- D. Service charter
Answer: A
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: CIPS study guide page 110
LO 2, AC 2.2
NEW QUESTION # 129
Company A buys a lorry from Company B on hire purchase. During the contractual period, Company A makes default in paying the instalment. Company B has...?
- A. The right to take repossession of the lorry
- B. No right to take repossession
- C. The option to repossess the lorry
- D. Company B has to approach the court
Answer: A
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 that Company B has the right to take repossession of the lorry.
Reference:
- Hire Purchase Agreements
- CIPS study guide page 70
LO 1, AC 1.3
NEW QUESTION # 130
Which of the following should be specially noticed in market dialogue with suppliers in specification development?
- A. Both parties must respect confidentiality
- B. Market dialogue should only be conducted with well-known supplier
- C. Market dialogue is banned in the public sector
- D. The buying organisation must avoid social media at all cost
Answer: A
Explanation:
Being clear on your objectives helps you to design the best approach to the dialogue. There are some notices in developing dialogue with suppliers:
- All meetings should be documented
- Respect commercial confidentiality. Although insights gained from one conversation lead to questions in another, you must be very careful not to allow this to happen in a way that breaches the confidentiality of the first conversation.
Reference: CIPS study guide page 84-85
LO 2, AC 2.1
NEW QUESTION # 131
Which of the following are benefits of using model form contracts? Select TWO that apply.
Liability is greatly reduced for suppliers
Suppliers can renegotiate terms more easily
They improve contract consistency
They are widely accepted in certain industries
- A. 1 and 3
- B. 1 and 2
- C. 2 and 4
- D. 3 and 4
Answer: D
Explanation:
Model form contracts are pre-standardised agreements used across industries to bring consistency, clarity, and fairness to commercial relationships. They are particularly beneficial in complex sectorslike construction and engineering where industry-accepted templates like NEC, JCT, or FIDIC are widely used.
Reference:CIPS L4M3 Commercial Contracting Study Guide, Chapter 3, Section 3.1.3 - Use and benefits of model form contracts.
NEW QUESTION # 132
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. Yes, because the framework should have legal standing as a part of contract
- B. No, because the performance management should be solely developed by suppliers
- C. Yes, because Carillion wants to implement early supplier involvement
- D. No, because the framework will increase the complexity of the contract
Answer: A
Explanation:
Performance management framework often consists of KPIs, targets and consequences that arise from achieved scores. To ensure that the framework has binding effect on contracting parties, it should be developed, appended to the main contract document and agreed by both parties. So the answer should be "Yes, because the framework should have legal standing as a part of contract".
Reference:
LO 1, AC 1.1
NEW QUESTION # 133
Maximum Score: 1
Where a supplier is incentivised to deliver improvements that create added value for the buyer, this is described as what type of outcome?
- A. Lose-win
- B. Win-lose
- C. Lose-lose
- D. Win-win
Answer: D
Explanation:
Incentive mechanisms that reward suppliers for delivering improvements (such as cost reductions, quality enhancements, or innovation) create mutual benefit:
* The buyer gets better value or reduced costs.
* The supplier receives rewards such as bonuses, gain-share, or stronger relationships.
This is the definition of a win-win outcome (D).
Reference: CIPS L4M3 Commercial Contracting - Incentive contracts and win-win supplier relationships.
NEW QUESTION # 134
Maximum Score: 1
Which of the following are examples of implied terms in a contract? Select TWO that apply.
- A. Force Majeure
- B. Fit for purpose
- C. Contract definitions
- D. The delivery schedule
- E. Reasonable care and skill
Answer: B,E
Explanation:
Implied terms are inserted by law into contracts:
* Fit for purpose (B) - common implied term for goods.
* Reasonable care and skill (C) - implied for services.
Force majeure, contract definitions, and delivery schedules are express terms that must be written into the contract.
Reference: CIPS L4M3 Commercial Contracting - Implied terms under sale of goods and supply of services legislation.
NEW QUESTION # 135
Under which of the following scenarios an RFQ is most likely to be used?
- A. When the buying organisation does not know the requirements in details and needs the input from suppliers
- B. Purchase of complex machinery
- C. Purchase of a small number of standardised products under a framework agreement
- D. Design of a unique and complex software code
Answer: C
Explanation:
The request for quotations is a procurement method that is used for small value procurements of readily available off-the-shelf goods, small value construction works, or small value services procurements. Request for quotations works best under a framework agreement This procurement method is also known as invitation to quote and shopping, and it does not require the preparation of tender documents to the same extent as open tendering, request for proposals or two-stage tendering.
Among 4 options:
- "Purchase of a small number of standardised products under a framework agreement": the products are standardised and there is a framework agreement in place, so RFQ is the best solution.
- "Purchase of complex machinery": Complex machinery is often a large purchase. Furthermore, suppliers' quality may vary. So RFQ is not suitable, instead, depending on the situation, buyer may opt ITT or RFP to purchase this type of machinery.
- "Design of a unique and complex software code": Unique and complex software is not off-the-shelf, thus RFQ is not suitable.
- "When the buying organisation does not know the requirements in details and needs the input from suppliers": When the detailed requirements are unknown, the best solution is request for proposal or developing dialogue with suppliers.
Reference:
- Request for Quotations
- CIPS study guide page 3-4
LO 1, AC 1.1
NEW QUESTION # 136
A construction company often subcontracts approximately 50% of the project works because of unpredictable customer's demand. Although larger corporate customers require quick response to RFQ, the time lapse between tender bid submission and contract commencement is usually long. Which of the following arrangement would benefit both the contractor and customer?
- A. Collateral contract
- B. Indemnity agreement
- C. Framework agreement
- D. Bilateral contract
Answer: C
Explanation:
According to the scenario, customers' demand changes regularly but the construction project commencement often delays. If the contractor and the customer mutually sign a legally binding contract too soon long before the commencement, the contractor may suffer poor cash flow (it must buy the materials first but has to wait for long time to be paid). A framework agreement may help both parties.
A framework agreement is a formal agreement between two organisations that is intended to become legally binding in the event that a contract is created.
A framework agreement could benefit the both parties in the following ways:
- At the time of signing, the framework agreement has not yet become a legally binding contract. The contractor and client only agree on the principles of future contracts (such as whether the work can be subcontracted or how payment will be proceeded). A well structured framework agreement will allow both parties to apply changes before contract commencement, especially regarding price and quality.
- The framework agreement assures a certainty between the contractor and client.
- The administrative works is reduced under a framework agreement.
Reference:
- CIPS study guide page 60-62
- Framework Agreements: Practice and Pitfalls
LO 1, AC 1.3
NEW QUESTION # 137
Social and environmental criteria are often incorporated into which of the following type of specification?
- A. Conformance specification
- B. Output specification
- C. Design specification
- D. Technical specification
Answer: B
Explanation:
Developing and using generic specifications is as import in the sustainable procurement process as it is in the traditional procurement process. During this stage, human/labour rights and environmental performance criteria should be translated into specifications that meet specific requirements of the specified outcome, desired by the procurement action.
The specification stage is key to all types of contract. Building in environmental and social considerations at this early stage, provides a clear indication to suppliers that sustainability is important to the UN organization. Consider available alternatives which are less environmentally and socially damaging. Consider all the phases of a product's life cycle (e.g. production, transportation, maintenance, disposal, etc) when determining its cost and environmental impact. Assess the overall environmental and social integrity of suppliers by looking at their policies and practices.
Specifications which are output-based rather than input-based can increase supplier innovation, reduce waste and minimise harmful social and environmental impacts.
Reference:
- Sustainable Procurement
- CIPS study guide page 95-99
LO 2, AC 2.1
NEW QUESTION # 138
What is the pricing method that incentivises the supplier to control their costs?
- A. Penetration pricing
- B. Skimming pricing
- C. Target Costing
- D. Cost-plus pricing
Answer: C
Explanation:
Penetration pricing is a marketing strategy used by businesses to attract customers to a new product or service by offering a lower price during its initial offering. The lower price helps a new product or service penetrate the market and attract customers away from competitors.
Price skimming is a product pricing strategy by which a firm charges the highest initial price that customers will pay and then lowers it over time. As the demand of the first customers is satisfied and competition enters the market, the firm lowers the price to attract another, more price-sensitive segment of the population. The skimming strategy gets its name from "skimming" successive layers of cream, or customer segments, as prices are lowered over time.
Incentive contracts allow sharing of the risks between the contractor and the client. The contractor is reimbursed all its justifiable costs in addition to a calculated fee. Target costing is an element of incentive contracts.
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 Reference: CIPS study guide page 185 LO 3, AC 3.3
NEW QUESTION # 139
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