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CIPS
CIPS Level 5 Advanced Diploma in Procurement and Supply
L5M3
Managing Contractual Risk Questions and Answers

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Viewing questions 31-40 out of questions

Questions # 31:

Which of the following will you put into box 6?

Options:

Condition

Warranty

Innominate Term

Answer

Explanation

The correct answers are as follows:

This is a warranty as it is a minor term. If the invoices aren't processed in 30 days this isn't a major breach- the supplier has said they'd be okay with it.

Questions # 32:

Lisa has a contract with an internet provider and the contract stated the need for Wi-Fi to be online 100% of the time. The Wi-Fi has only been available 97% of the time. In order for Lisa to claim compensation from her internet provider, which of the following would need to be present in the contract?

Options:

change control

liability clause

service credits

subcontracting

Answer

Explanation

This would be service credits. If this is present and the contract stated 100% online access- Lisa could claim 3% of her money back. See p.112 for information on service credits

Questions # 33:

Which of the following will you put into box 7?

Options:

Mediation

Arbitration

Litigation

Negotiation

Answer

Explanation

The correct answers are as follows:

Table Description automatically generated

Arbitration - this is a binding resolution made by a third party. This answer could be litigation, but that option has been taken by box 6 and you can only use the answers once. Mediation would not be a binding resolution and negotiation doesn't involve a third party.

Questions # 34:

GoGo Ltd has contracted Reny Manufacturing to produce a bespoke piece of equipment for them. It is an asset and costs a significant amount of money. A contract is drawn up which states that GoGo Ltd has the right to terminate the contract at any time for any reason. Halfway through production of the asset, GoGo Ltd calls Reny Manufacturing to cancel the order. Reny Manufacturing has incurred many costs already. Can GoGo Ltd cancel the order?

Options:

yes- the order has not yet been delivered meaning that GoGo Ltd can cancel- there has been no transfer of ownership

no- Reny Manufacturing will sue for damages

yes- there is a termination clause in the contract

no- the termination clause is unfair

Answer

Explanation

The correct answer is 3 - 'yes there is a termination clause in the contract'. In this scenario it would be immoral for GoGo Ltd to cancel, but it wouldn't be illegal. They have the right to use the clause that's been put into the contract. It's possible that Reny might sue for damages, but this doesn't prevent GoGo Ltd from cancelling the order (they might be okay with paying the damages). There is a very similar question to this in the exam. Termination clauses are discussed on p.134 - I recommend brushing up on this topic before the exam.

Questions # 35:

Restitution Measures are an award which seeks to return the value of a benefit which has been seen to be unfairly received. Which of the following statements about Restitution Measures is TRUE? Select TWO

Options:

restitution damages intend to return the innocent party to the position they were in be-fore the contract

restitution damages considers the position of the breaching party before the contract

restitution damages are based on how much was gained by the breaching party as a re-sult of the breach

restitution damages are not limited to pre-agreed levels stated in the contract

Answer

A, C

Explanation

The correct answers are 1 and 3. These are taken from p. 124. Option 2 is incorrect - this is the definition of reliance damages. Option 4 is also incorrect- restitution damages are limited to pre-agreed levels stated in the contract.

Questions # 36:

Which of the following will you put into box 6?