[Apr-2023] Exam Sure Pass CIPS Certification with L5M3 exam questions
Real CIPS L5M3 Exam Questions Study Guide
NEW QUESTION 53
What is a Prime Contract?
- A. A contract between a public sector organisation and the taxpayer
- B. A contract between a supplier and a subcontractor
- C. A contract between a buyer and main supplier
- D. A contract between an end customer and a company which has full responsibility for its performance
Answer: D
Explanation:
"A contract between an end customer and a company which has full responsibility for its perfor-mance" is the correct answer. This is the definition of Prime Contract given on p. 47
NEW QUESTION 54
A buyer and supplier have a contract and the supplier has committed a major breach. However, as they are the sole supplier to the buyer, the buyer has decided not to terminate the contract and instead to work with the supplier to remedy the situation. What is this called?
- A. assigning liability
- B. affirmation of the contract
- C. awarding damages
- D. conflict resolution
Answer: B
Explanation:
This is affirmation of the contract. When a breach occurs the injured party has two options; termi-nate the contract or affirm the contract. In this example they have affirmed the contract- they have chosen to continue working with the offending party. See p.60.
NEW QUESTION 55
George is a procurement manager at a manufacturing company and is reviewing a contract he has with a supplier. He notes that there are multiple appendices to the contract and there is no Precedence of Documents. What does this mean for the contract?
- A. the contract is not valid
- B. the clauses that come first in the document, take precedent
- C. all clauses are considered equal
- D. clauses in the contract take precedent over clauses in the appendices
Answer: C
Explanation:
Where there's no order of precedence, it is assumed that all documents have equal significance. This is a direct quote from the study guide p.15
NEW QUESTION 56
Which of the following would be included in a contract to assign costs and responsibilities be-tween buyer and seller when products are delivered?
- A. Liability
- B. Liquidated Damages
- C. Indemnity
- D. Incoterms
Answer: D
Explanation:
Incoterms assign costs and responsibilities about when products are delivered. See p. 37 for a full list of the different Incoterms. You don't need to know all Incoterms for the exam, but it's a good idea to know what they are and why they'd be put into a contract
NEW QUESTION 57
Which of the following will you put into box 6?
- A. Innominate Term
- B. Condition
- C. Warranty
Answer: A
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.
NEW QUESTION 58
Which of these statements about mediation is true? Select TWO
- A. mediation is expensive
- B. mediation produces legal precedents
- C. mediation can be used as a stalling tactic
- D. mediation is flexible
- E. mediation involves a third party who makes a judgement on the issue
Answer: C,D
Explanation:
The correct answers are 1 and 3. The other options are false; Mediation does not produce legal precedents- only litigation can do this. Mediation is a cheap dispute resolution option (much cheaper than arbitration or litigation) and the third party has no authority on the matter- they are there as a facilitator of dialogue, not to make a judgement. For more information on mediation see p.74
NEW QUESTION 59
Fishfingers Ltd has a contract with a supplier of cod. When the contract was set up it was not known how important specific delivery times would be for the arrival of the fish. After several months it has now become apparent that delivering the fish within 3 hours of them being caught is fundamental to the contract as delayed delivery results in poorer quality Fish Fingers. When the contract was set up what was the delivery times?
- A. an innominate term
- B. a time is of the essence clause
- C. a warranty
- D. a condition of the contract
Answer: A
Explanation:
An Innominate Term is the correct answer. At the time the contract was written, we didn't know how important the delivery time was - therefore it wasn't a condition or a warranty- it was an innominate term. An innominate term is a term that is difficult to classify at the time of drafting a contract. A time is of the essence clause would be a good thing to include in this contract now that we know how important the delivery times are. For more information on Conditions, Warranties and Innominate Terms see p. 43
NEW QUESTION 60
When drafting a liability clause in a contract, which of the following statements are TRUE? Select THREE
- A. the goal of the liability clause is to punish the contractor for poor performance
- B. liability is a legal responsibility
- C. liability cannot be excluded for injury resulting from negligence
- D. exclusions should be narrowly defined and clearly state which types of liabilities are excluded
- E. liability can only be limited where there is valid insurance
Answer: B,C,D
Explanation:
The correct answers are 1, 3 and 5: exclusions should be narrowly defined and clearly state which types of liabilities are excluded, liability is a legal responsibility and liability cannot be excluded for injury resulting from negligence. These are all explained on p. 22. Liability is never there to publish anyone (this is a red herring answer that CIPS like to put into different questions and it's usually the wrong answer - no one should look to publish anyone else). The option 'Liability can only be limited where there is valid insurance' is not true. A contract can state any limitations on liability so long as it's agreed by both parties, they're fair and don't contradict any laws. The thing about not being able to exclude liability regarding personal injury is a Law in the UK.
NEW QUESTION 61
A large financial organisation ensures that they have contracts with all of their suppliers. In which instance would indemnity not necessarily form part of the contract?
- A. A Deed of Appointment of a Consultant
- B. In assignment of intellectual property rights
- C. A software licence agreement
- D. A confidentiality agreement
Answer: D
Explanation:
Indemnity isn't usually used for confidentiality agreements - this is stated on p.21 of the study guide. This is because it's hard to indemnify against- you don't know what the consequence of a breach of confidentiality is going to be so it's hard to quantify. Unliquidated damages is more suitable. The study guide does state that indemnity is frequently used in intellectual property rights, software licence agreements and share purchase agreements. This is also written on p. 21.
NEW QUESTION 62
Which of the following will you put into box 2?
- A. anticipatory breach
- B. fundamental breach
- C. specification
- D. payment terms
Answer: D
Explanation:
The correct answers are as follows:
This is payment terms- the clues here are 'financial' and 'progress payments'
NEW QUESTION 63
Robert has a contract with Farmer Ted who provides his manufacturing firm with potatoes. There is a contract in place, signed by both parties that Ted will deliver 2 tonnes of potatoes per week. Due to changes in demand, Robert would like Ted to start providing 3 tonnes of potatoes every three weeks. What must be in place for this change to occur?
- A. a notification of change and indemnity
- B. a variation clause and a new liquidated damage fee
- C. a variation clause and a signed agreement by both parties
- D. a notification of change and adequate compensation
Answer: C
Explanation:
A variation clause and signed agreement by both parties is required to make the change. See p.16-17 for more information on contract variations. Note a 'notification of change' isn't valid unless it's accepted by the other party- so it's a good idea for both parties to sign to say they agree to the change.
NEW QUESTION 64
Which of the following statements about penalty clauses is not true?
- A. they are illegal
- B. they are used to deter the parties from breaching the contract
- C. they provide damages in excess of the true cost of a breach
- D. they can harm the working relationship
Answer: A
Explanation:
2 - penalty clauses are not illegal. However they may be judged excessive in a court of law and thrown out. Most contracts will instead opt for liquidated damages rather than a penalty clause. See p.90
NEW QUESTION 65
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?
- A. change control
- B. subcontracting
- C. liability clause
- D. service credits
Answer: D
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
NEW QUESTION 66
Which of the following is not a form of ADR (Alternative Dispute Resolution)?
- A. conciliation
- B. arbitration
- C. mediation
- D. negotiation
Answer: D
Explanation:
Negotiation isn't an alternative dispute resolution because it's supposed to be the 'default' dispute resolution- the one you automatically do when a problem occurs. Only if negotiation fails should you turn to ADR. P. 142
NEW QUESTION 67
Service Credits are a form of what?
- A. liquidated damages
- B. indemnity
- C. Consideration
- D. KPI
Answer: A
Explanation:
Service Credits are a form of Liquidated Damages - it's a financial remedy, common in the IT in-dustry, which is available to a buyer when the service level falls below an expected level. See p. 31 for more details.
NEW QUESTION 68
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