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L4M3 Commercial Contracting Questions and Answers

Questions 4

SFO procurement manager sent a request for quotation to Vogon International in which he determined the contract terms and specification. In SFO's standard terms and conditions, it is stated that 'Goods shall be delivered and Services performed by the applicable Delivery Date. Supplier must notify Buyer 3 days prior to the Delivery Date if Supplier is likely to be unable to meet a Delivery Date.'

Vogon replied with a quotation without any amendment to SFO's terms & conditions. The SFO procurement manager found the prices were reasonable and submitted to senior management. Senior management team accepted that quotation and sent a notification to Vogon. On the Delivery Date, Vogon said they had no capacity to supply the product as the quotation due to a workers' strike. Did Vogon breach any agreement with SFO?

Options:

A.

No, because Vogon had no intention to be bound by the quotation, therefore, it didn’t constitute a contract

B.

No, because the strike is a force majeur event, so Vogon did not breach any contract with SFO

C.

Yes, because the contract was formed since Vogon had sent the quotation as an acceptance to SFO’s offer

D.

Yes, because the contract had been formed between SFO and Vogon with the quotation as an offer and the notification as an acceptance

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Questions 5

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

Options:

A.

1 and 3 only

B.

3 and 4 only

C.

1 and 2 only

D.

4 and 2 only

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Questions 6

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?

Options:

A.

Negligence

B.

Indemnity

C.

Collateral warranty deed

D.

Insurance

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Questions 7

Which of the following would be useful tools to incentivise supplier innovation over the duration of the contract?

1. Gainshare arrangement

2. Liquidated damages

3. Service credits

4. Fixed bonus payments

Options:

A.

3 and 4 only

B.

2 and 4 only

C.

1 and 4 only

D.

1 and 3 only

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Questions 8

To expand its operation, Steel Co. decides to build a new plant. Despite of excitement, the senior management is very concerned about the complexity and risks of such project. Hugo, the procurement manager, suggests that the company can adopt a model form of contract. What is the advantage of using model form of contract?

Options:

A.

It shifts the balance of power in the favour of the buyer rather than the contractor

B.

The company could avoid the need to draft a complex contract from blank

C.

Model form of contract eliminates the need for legal advice totally

D.

The company does not need to draft the drawings as well as specification anymore

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Questions 9

Bandpro is a reseller of branded computer products to the private and public sector. The procurement team must purchase 500 items each day solely by multiple phone calls and emails to suppliers. Due to this practice, it takes a lot of time to track and collect relevant documents. Some important documents even get lost, which makes procurement audit more burdensome. Which of the following would increase the robustness of audit trails in procurement activities?

Options:

A.

Every evidence must be recorded by paper

B.

Adopt e-procurement

C.

Spend less time on auditing procurement procedures

D.

Rectify non-compliant activities

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Questions 10

Is the government only source of industrial standards within a country?

Options:

A.

No, the government can only adopt standards regarding security and defence

B.

Yes, while ISO make standards for international trade, the government standardises other facets of their country

C.

No, an organisation can also generate its own internal standards

D.

Yes, the standards must be made by legislative branch of the country

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Questions 11

Since services are intangible, so KPIs for services must be qualitative in all circumstances. Is this statement correct?

Options:

A.

No, KPIs for services must always be quantitative so that they can be measured easily

B.

No, some KPIs for services are measurable by means of outcome, time and space performed

C.

Yes, quantitative KPIs are limited to timeliness of supply of goods, defective rates and in-full quantities, which are applied to monitor supplier of physical goods

D.

Yes, the only measure mattered to supply of services is end-users' satisfaction

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Questions 12

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

Options:

A.

Strict liability

B.

Current liability

C.

Contingent liability

D.

Non-current liability

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Questions 13

Which of the following are the conditions for revocation of offer to be valid?

1. The offeree has not received the offer yet

2. Revocation of offer must be communicated with the offeree

3. Revocation of offer must be sent via email

4. Offeree has not accepted the offer yet

Options:

A.

2 and 4 only

B.

1 and 4 only

C.

1 and 3 only

D.

2 and 3 only

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Questions 14

What does quantum meruit mean?

Options:

A.

As much as is earned

B.

A non-graduations promise

C.

As much as is paid

D.

An implied promise

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Questions 15

A tire manufacturer entered into a contract with a distributor. In the contract, the distributor is prohibited from selling the tire under the price list. The distributor must pay $5 for each tire sold in breach. The amount of $5 is known as...?

Options:

A.

Penalty

B.

Quantum meruit

C.

Liquidated damages

D.

Caveat Emptor

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Questions 16

In a contract, both buyer and supplier agreed the lead time is 3 days. The contract also requires that any variation must be made in writing. Then the buyer places an order by phone call and requests delivery the next day, but the supplier delivers on the third day since the order. Can buyer refuse to pay as supplier did not deliver per time?

Options:

A.

No, the supplier delivers within a reasonable time

B.

Yes, late delivery is a force majeure event

C.

Yes, the supplier has breached the contract

D.

No, supplier has shortened lead time to 1 day

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Questions 17

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

Options:

A.

1 and 3 only

B.

3 and 4 only

C.

1 and 2 only

D.

4 and 2 only

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Questions 18

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

Options:

A.

Contract variation

B.

Schedule

C.

Subcontracting

D.

Standard terms and conditions

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Questions 19

Which of the following shall help the purchaser control the selection of tier 2 suppliers?

Options:

A.

Subcontracting clause

B.

Warranty clause

C.

Guarantee clause

D.

Insurance clause

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Questions 20

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

Options:

A.

3 and 4 only

B.

1 and 4 only

C.

1 and 2 only

D.

2 and 3 only

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Questions 21

Which of the following encourages social and environmental criteria in public sector contracting in the UK?

Options:

A.

Social Action, Responsibility and Heroism Act

B.

The Public Services Act

C.

Children and Social Work Act

D.

Supply and Appropriation Act

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Questions 22

XYZ Ltd and Engineer Corp signed a long-term supply contract in which both parties had agreed on performance targets. Recently, due to increased customer demands, XYZ Ltd realises that they should make changes to the contract with Engineer Corp with regards to performance management. These changes are approved and signed by both the buyer and seller. The changes to the contract are known as...?

Options:

A.

An amendment to the prime contract

B.

A stand-alone subcontract to the prime contract

C.

An appendix to the prime contract

D.

A separate counter-offer to the supplier

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Questions 23

A procurement manager is setting KPIs measurement for user satisfaction. He also wants to encourage users to share the reason why they feel the way they do. Which of the following types of KPI should the procurement manager apply?

Options:

A.

Quantitative measure

B.

Numerical measure

C.

Binary measure

D.

Qualitative assessment

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Questions 24

If service level agreement is used as a schedule that makes up the contract, it will be most likely to be a part of...?

Options:

A.

Pricing arrangement

B.

Performance management framework

C.

Exclusion of liabilities

D.

Specifications

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Questions 25

A supermarket purchases a new batch of house cleaner from new supplier. The supermarket is concerned about possible damage that the house cleaner may cause to consumers' floor. What type of insurance must they cover?

Options:

A.

Fire and explosion insurance

B.

Product liability insurance

C.

Professional indemnity insurance

D.

Public liability insurance

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Questions 26

Standard terms and conditions should become the governing terms for which group of items?

Options:

A.

Leverage items

B.

Bottleneck items

C.

Strategic items

D.

Routine items

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Questions 27

Social and environmental criteria are often incorporated into which of the following type of specification?

Options:

A.

Design specification

B.

Technical specification

C.

Conformance specification

D.

Output specification

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Questions 28

A company is considering entering a new market. Which of the following are the external factors that influence the difference between cost and price of this company? Select THREE that apply

Options:

A.

Procurement policy

B.

Process efficiency

C.

Business strategy

D.

Threat of substitution

E.

Competitiveness of the market

F.

Relative bargaining power of supplier and purchaser

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Exam Code: L4M3
Exam Name: Commercial Contracting
Last Update: Dec 1, 2024
Questions: 190

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