Dec-2025 Pass CIPS L4M3 Exam in First Attempt Easily
Free L4M3 Exam Files Downloaded Instantly 100% Dumps & Practice Exam
NEW QUESTION # 76
Which of the following is an example of liquidated damages clause?
1. "In the event of a delay to the Offshore Installation Completion Date as per the Contract Schedule for which Contractor is solely responsible, Contractor shall pay to Company 0.25% per day of delay, subject to a maximum of 10% of the Initial Contract Price."
2. "If Seller breaches its obligation to deliver goods in accordance with the schedule provided for in this contract, Seller shall pay Buyer $x per day for each day of delay"
3. "The Contractor shall defend and hold the Buyer, its officers, officials, employees and volunteers harmless from any and all claims, injuries, damages, losses or suits including attorney fees, arising out of or in connection with the performance of this Agreement, except for injuries and damages caused by the sole negligence of the Buyer."
4. "The contract is subjected to delay remedies. The amount will be agreed by both parties during the delivery"
- A. 1 and 2 only
- B. 2 and 4 only
- C. 1 and 3 only
- D. 3 and 4 only
Answer: A
Explanation:
Liquidated damages, also referred to as "liquidated and ascertained damages" (LADs) are damages whose amount the parties designate during the formation of a contract[2] for the injured party to collect as compensation upon a specific breach (e.g. late performance). In supply contracts and work contracts, the liquidated damages clause often take form as known damages to be paid per day delayed. Number 1 and 2 are examples of this clause.
Reference:
- Liquidated damages
- CIPS study guide 158-159
LO 3, AC 3.2
NEW QUESTION # 77
Information assurance protects information systems and...?
- A. Hard copy
- B. Inventory
- C. People
- D. Computers
Answer: D
Explanation:
Information Assurance (IA) is the practice of managing information-related risks and the steps involved to protect information systems such as computer and network systems. The IA transformation is a partnership that stretches across the Department of Defense (DoD), Office of National Intelligence, Committee on National Security Systems, National Institute of Science and Technology (NIST), and the Office of Management and Budget.
The US Government's definition of information assurance is:
"measures that protect and defend information and information systems by ensuring their availability, integrity, authentication, confidentiality, and non-repudiation. These measures include providing for restoration of information systems by incorporating protection, detection, and reaction capabilities." Reference:
- What is Information Assurance (IA)?
- CIPS study guide page 99-100
LO 2, AC 2.1
NEW QUESTION # 78
Parkers Medical Supplies is a distributor of first aid supplies to supermarkets nationwide. A new supplier has approached Parkers with an offer to supply a new and innovative product. Parkers have never dealt with this company before, so are looking to ensure that the new supplier has the necessary insurance cover as the new product could potentially cause personal injury. Which type of insurance should Parkers insist the new supplier takes out?
- A. Professional indemnity
- B. Public liability
- C. Product liability
- D. Employers' liability
Answer: C
Explanation:
Comprehensive and Detailed Explanation From Exact Extract:
In the context of commercial contracting, it's crucial for buyers to ensure that suppliers have appropriate insurance coverage to mitigate potential risks associated with the products or services provided. Product liability insurance specifically covers the supplier against claims of personal injury or property damage caused by products they have supplied. This type of insurance is essential when introducing new or innovative products to the market, as there may be unforeseen risks associated with their use.
According to the CIPS L4M3 Commercial Contracting Study Guide, product liability insurance is designed to protect against claims arising from injuries or damages caused by defective products. This insurance is particularly important when the buyer is introducing a new product from a supplier with whom they have no prior experience, as it provides a safety net against potential legal and financial repercussions.
Reference:CIPS L4M3 Commercial Contracting Study Guide, Chapter 3, Section 3.2.1 - Key terms in contracts for indemnities and liabilities, sub-contracting, insurances, guarantees, and liquidated damages.
NEW QUESTION # 79
A purchase order can become a contract between supplier and purchaser if it is...?
- A. Issued by the buyer
- B. Received by the supplier
- C. Accepted by the supplier
- D. Edited by the supplier
Answer: C
Explanation:
A purchase order is a document sent from a buyer to a seller, with a request to order a product. The purchase order often has its number, description and quantity of the goods, unit prices and total price, name of issuer, time of delivery, standard terms and conditions, etc. It is effectively an offer to supplier. The purchase order will become a formal contract if supplier accepted it by written notice or by performance (such as deliver the goods to the buyer's premise).
Reference: CIPS study guide page 33
LO 1, AC 1.2
NEW QUESTION # 80
In a contract, express terms and implied terms may contradict on the same issues. Under which of the following circumstances, implied terms will override express terms?
- A. Implied terms are created by law which prevents them to be overridden
- B. No circumstances. Express terms always take precedence over implied terms
- C. Contracting parties are silent on a matter that was not included in express terms
- D. Implied terms are created by trade customs
Answer: A
Explanation:
Express terms are the terms of the agreement which are expressly agreed between the parties. Ideally, they will be written down in a contract between the parties but where the contract is agreed verbally, they will be the terms discussed and agreed between the parties.
Implied terms are terms implied into the contract by the courts. They are not expressly set out in the contract but are taken to be as effective as if they were and as if they had been included from dayone of the contract.
The express terms and any implied terms together create the legally binding obligations on the parties.
Express terms are explicit and will normally override implied terms unless the implied term is created by statute and the law states that it cannot be overridden.
Reference:
- Contracts: Express and Implied Terms
- CIPS study guide page 126-132
LO 3, AC 3.1
NEW QUESTION # 81
Which of the following is the model form of contract for construction which is recommended by World Bank?
- A. ITC
- B. JCT
- C. FIDIC
- D. CIPS
Answer: C
Explanation:
FIDIC is the International Federation of Consulting Engineers (or Federation Internationale des Ingenieurs Conseils in French). FIDIC has produced many publications, including the model form contracts, best practice guidances, research on sustainability, integrity and risk management. FIDIC model form contracts have been developed by this organisation since 1999, now they consist of several different books which are marked by colours. Thus, FIDIC model contracts also have the nickname "Rainbow suite of contracts". Basically, the "Rainbow Suite" include the following books:
* Yellow book: Plant and Design-Build Contract (2 editions: 1999 and 2017)
* Silver book: EPC/Turnkey Contract (2 editions: 1999 and 2017)
* Red book: Construction Contracts (2 editions: 1999 and 2017)
* Emerald book: Conditions of Contract for Underground Works (1st Ed 2019)
* Blue-Green book: Dredgers Contract (2 editions: 2006 and 2016)
* Gold book: Design, Build and Operate Contract Guide
* Pink book: Construction Contract Multilateral Development Bank Harmonised Ed (2 editions: 2005 and 2010) This type of model contract is commonly used around the world because its author, International Federation of Consulting Engineers, collaborates closely with development banks such as World Bank, Africa Development Bank, Asia Development Bank, etc. Every construction project that is financed by these institutions must adopt the FIDIC contracts.
The Joint Contracts Tribunal, also known as the JCT, produces standard forms of contract for construction, guidance notes and other standard documentation for use in the construction industry in the United Kingdom. From its establishment in 1931, JCT has expanded the number of contributing organisations.
ITC (International Trade Centre) produces contracts specifically designed for small companies doing international business, covering the sale of goods, distribution, services and joint ventures. Many small companies are now engaged in international trade, but don't have access to the necessary contract forms to protect themselves. ITC and leading legal experts developed eight generic contract templates that incorporate internationally recognized standards and laws for most small business situations.
CIPS has several model forms of contract designed specifically for IT buying and servicing.
Reference:
LO 3, AC 3.1
NEW QUESTION # 82
Which of the following are always included within a framework agreement? Select TWO that apply:
- A. Exact quantity to be purchased
- B. Duration
- C. Call-off procedure
- D. Insurance
- E. Exact price to be paid
Answer: B,C
Explanation:
A framework agreement will set out the following:
- How call offs can be made - whether a mini-competition is required or a direct call off can be made
- How price is calculated
- The specification - this may have various options to cater for different needs
- The duration of the agreement
- Who can access the agreement
- Any limitations
- The main terms to be included in the contract or the form of contract to be used, where this is intended to be a standard form.
Reference:
LO 1, AC 1.3
NEW QUESTION # 83
Which of the following is most likely to be an one-off contract?
- A. Framework Agreement for supply of mono-crystalline silicon
- B. Contract for construction of a power plant
- C. Commercial lease agreement of an office building
- D. Franchise Agreement
Answer: B
Explanation:
One-off contracts are used where a supplier is only needed for a single activity unlikely to be repetitive, and where the need of the buyer is concrete and finite. Among the answers, only construction for power plant is one-off since the work is non-repetitive and the need is clearly defined.
A framework agreement is an agreement between one or more businesses or organisations, "the purpose of which is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, the quantity envisaged".
A Commercial Lease Agreement is a contract used when renting business property to or from another individual or company. It gives the tenant (or renter) the right to use the property for business purposes during the term of the lease in exchange for payment to the landlord.
A franchise agreement is a legally binding document that outlines a franchisor's terms and conditions for a franchisee. Every franchise is governed by these terms, which are generally outlined in a written agreement between both parties.
Reference: CIPS study guide page 55-58
LO 1, AC 1.3
NEW QUESTION # 84
Prior to circulating the service specification to a tendering supplier, it is good practice for the purchasing organisation to request completion of a non-disclosure agreement. Is this statement correct?
- A. Yes, because the non-disclosure agreement encourages transparent bidding
- B. Yes, because the non-disclosure agreement protects intellectual property
- C. No, because the non-disclosure agreement has no legal standing
- D. No, because the non-disclosure agreement only applies after contracting
Answer: B
Explanation:
Non-disclosure agreements (NDAs) are legally binding documents that protect confidential and proprietary information, including intellectual property, during pre-contractual discussions. NDAs ensure that sensitive data shared during early engagement or tender development is not misused.
Reference:CIPS L4M3 Commercial Contracting Study Guide, Chapter 3, Section 3.2.1 - Confidentiality agreements and intellectual property protection.
NEW QUESTION # 85
Which of the following is the most suitable model contract for car lift manufacturing?
- A. ITC
- B. FIDIC
- C. IMechE/IET
- D. CIPS
Answer: C
Explanation:
IMechE/IET: Institution of Mechanical Engineers/Institution of Engineering and Technology - two separate institutes that issue jointly agreed model forms covering the design, supply and installation of electrical, electronic and mechanical plant including special conditions for the ancillary development of software. Car lifts are mechanical products, so IMechE/IET is the most suitable model contract for this type of product.
FIDIC is a French language acronym for Federation Internationale Des Ingenieurs-Conseils, which means the international federation of consulting engineers. It was started in 1913 by the trio of France, Belgium and Switzerland. The United Kingdom joined the Federation in 1949. FIDIC is headquartered in Switzerland and now boasts of membership from over 60 different countries. FIDIC published its first contract, titled The Form of contract for works of Civil Engineering construction, in 1957. As the title indicated, this first contract was aimed at the Civil Engineering sector and it soon became known for the colour of its cover, and thus, The Red Book. It has become the tradition that FIDIC contracts are known in popular parlance by the colour of their cover. This first contract by FIDIC was undertaken jointly with the International federation of Building and Public works. FIDIC's concerted effort at achieving broad consultation and acceptance of its contract forms has seen subsequent editions of its contracts being ratified by the International Federation of Asian and Western Pacific Contractors Association, Associated General Contractors of America and the Inter-American Federation of the Construction Industry, Multilateral Development Banks among others. Because of the broad support it enjoys, FIDIC contracts are the foremost contracts in international construction.
The Chartered Institute of Procurement and Supply (CIPS) has some model contracts for IT functions including: supply and installation of computer equipment, support and maintenance of bespoke software, servicing of computer equipment,...
The International Trade Centre (ITC) produces contracts specifically designed for small companies doing international business, covering the sale of goods, distribution, services and joint ventures.
Reference:
LO 3, AC 3.1
NEW QUESTION # 86
Which of the following should include in the service level agreement that is an appendix of a contract?
1. How often the service is measured
2. Minimum qualification of supplier staffs
3. Remedies to resolve dispute
4. On time service delivery
- A. 1, 3 and 4 only
- B. 1, 2 and 3 only
- C. 2, 3 and 4 only
- D. 1, 2 and 4 only
Answer: D
Explanation:
When the SLA is a schedule or an appendix to the contract, it should clearly state the following:
1. KPIs: how they are to be measured, who measures them and how often
2. How the measurements convert into scores
3. Any other service level standards, which may be of lesser importance than the KPIs
4. Minimum acceptable standards or scores in each case
5. Range of scores both above and below the minimum acceptable
6. Any mitigating factors which might apply in the event of poor performance
7. Any time period permitted in which to remedy a situation or poor performance.
In this question, "2. Minimum qualification of supplier staffs" and "4. On time service delivery" are the KPIs, while "1. How often the service is measured" is the frequency in which the KPIs are measured.
The remedies available in the event of poor performance should be set out in the body of the contract, along with those for any other contractual breach. These clauses should be cross-referenced in the SLA.
Reference:
LO 2, AC 2.2
NEW QUESTION # 87
Which of the following contracts would be best suited to a 'variable pricing' arrangement?
- A. A contract for window cleaning during the next three months
- B. A contract for the supply of 100 printing machines to be delivered next month
- C. A contract for road building estimated to take five years to complete
- D. A contract for the supply of lubricating oil for immediate delivery
Answer: C
Explanation:
Variable pricing is suitable to situations when the cost of certain elements of the product fluctuate unpredictably. For road building, asphalt fluctuates regularly. Furthermore, 5 years are long period, then variable pricing is the most appropriate method to achieve value for money and control budget.
A contract for window cleaning during the next three months is a short-term service contract, fixed price is the most suitable method.
A contract for the supply of lubricating oil for immediate delivery is an one-off contract, only fixed price is applicable.
A contract for the supply of 100 printing machines to be delivered next month is also an one-off contract.
Reference:
LO 3, AC 3.3
NEW QUESTION # 88
A senior procurement specialist in UK is preparing a specification in which ISO standards are used to send to global suppliers. Is this action appropriate?
- A. Yes, evert specification must have ISO standards
- B. Yes, ISO standards are globally recognisable
- C. No, the procurement specialist must use BSI standards instead
- D. No, ISO standards are unfamiliar to global suppliers
Answer: B
Explanation:
ISO standards are internationally agreed by worldwide experts. They overcome countries' differences and facilitate global trade. If a buying organisation is sourcing globally, they should use ISO standards within the specification.
Reference: CIPS study guide page 93-94
LO 2, AC 2.1
NEW QUESTION # 89
Rochdale Ltd is looking for a new IT system to automate some of its operations. In designing the specification, procurement manager supposes that it should be done solely by the IT department who have deep expertise on this matter. Is procurement manager's opinion appropriate?
- A. No, because designing complex specification could only be outsourced
- B. Yes, because designing complex specification would waste procurement manager's time
- C. No, because challenging the user's demand is the role of procurement
- D. Yes, because procurement professional has no expertise in IT sector
Answer: C
Explanation:
Procurement professionals have a role in challenging specifications. Technical experts can get things wrong and asking naive questions can be useful in bringing these to light. The challenging may include:
- Does the organisation really need these features/functions?
- With this specification, are there many available suppliers in the market?
- How many does the organisation really need?
etc
Reference:
LO 1, AC 1.1
NEW QUESTION # 90
A manufacturing company signed a contract with a raw material supplier. The contract includes a clause on liquidated damages in case of late delivery. Purchaser was obliged to pay after 30 days from delivery. Eventually raw material was delivered 1 week later than initial plan due to supplier's slow production process. There is no defect in the delivered batch. Which of the following can be claimed by the manufacturing company?
- A. Right of set-off
- B. Rights to refunds or repairs
- C. Right of third party
- D. Right of extending payment
Answer: A
Explanation:
In certain circumstances, where two parties have monetary debts against each other, the right to set-off may arise. A right of set-off allows a ("Party 1") to take into account the amount owed to it by the second party ("Party 2") against any amount owed by Party 1 to Party 2, each party must be a debtor and a creditor.
Common law provides the key features that must be present for set-off to arise are;
1. mutuality of debts (each party must be the sole beneficial owner of the debt it is owed and the sole person liable for the debt it owes)
2. the claims each party has must be for non-payment of money
The common law provisions of set-off can be greatly enhanced by the inclusion of a contractual right to set-off (this is discussed further below) so that set-off is applicable in a greater range of situations. If you envisage set-off being a useful right it is not advisable to rely on the implied ability to use it (via common law or equitable set-off). Common law and equitable set-off are subject to various conditions and limitation however, a contractual right of set-off can be drafted to ensure parties are able to agree exactly how and when set-off should be applied.
In the above scenario, the supplier owes the manufacturer the payment for damages, while the manufacturer owes the supplier the payment for goods. This is mutuality of debts, which leads to right of set off.
Reference:
- Set-off on the right foot: a practical guide to set-off
- CIPS study guide page 158-159
LO 3, AC 3.2
NEW QUESTION # 91
Which of the following should be specially noticed in market dialogue with suppliers in specification development?
- A. The buying organisation must avoid social media at all cost
- B. Market dialogue is banned in the public sector
- C. Both parties must respect confidentiality
- D. Market dialogue should only be conducted with well-known supplier
Answer: C
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:
LO 2, AC 2.1
NEW QUESTION # 92
MWB operates serviced offices in central London. Rock entered a contractual licence with MWB to occupy office space in Marble Arch and had accumulated licence fees in arrears. The original licence agreement contained a 'No Oral Modification' clause that said: 'All variations to this licence must be agreed, set out in writing and signed on behalf of both parties before they take effect'.
After 6 months, Rock director re-negotiated to extend payment period over phone call and MWB credit controller agreed his proposal. Is this agreement considered as an effective variation to the original licence agreement?
- A. Yes, because parties who agree to altering the original contract orally despite a 'No Oral.
- B. No, because the mechanism for variation has been set out in the original contract
- C. Yes, because the credit controller had agreed with Rock director's proposal
- D. No, because Rock director assumed that the variation was effective and convinced credit controller to believe it
- E. Modification' clause, must have intended to dispense with the clause
Answer: B
Explanation:
The license can be amended during its lifespan. However, in this case, it already has a clause allowing for mechanism of variation which sets out who can authorise changes and prohibits any oral variation. Therefore, the agreement between Rock's director and MWB credit controller is not an effective variation to the license.
Reference:
LO 1, AC 1.1
NEW QUESTION # 93
Which of the following is the set of principles that enables courts to determine exactly what the written contract says and what that must mean, then the court will uphold that?
- A. Rules of interpretation
- B. Rules of contract formation
- C. Order of precedence
- D. Unfair Contract Act 1977
Answer: A
Explanation:
Courts may be called upon to interpret a statute due to disputes over the meaning of a word or phrase contained within a statute. These disputes may arise through a variety of reasons. It has long been held that words are an imperfect means of communication. Omissions may have occurred at the drafting stage, word or phraseology ambiguity, etymological change through time, oversight on specific points, or a failure to adapt legislation to new developments. This may result in the judiciary providing a role in statutory interpretation. Statutory interpretation in its broadest sense is the process of determining the true meaning of a written document. In UK, the Interpretation Act 1978 provides limited scope to assist judges with statutory interpretation in that it only provides standard definitions to common provisions such as a rebuttable presumption that terminology in the masculine gender also include the feminine, and that the singular includes plural.
An order of precedence clause sets out the order in which the contract documents take precedence in the event of an inconsistency.
The Unfair Contract Terms Act 1977 (c 50) is an Act of Parliament of the United Kingdom which regulates contracts by restricting the operation and legality of some contract terms. It extends to nearly all forms of contract and one of its most important functions is limiting the applicability of disclaimers of liability. The terms extend to both actual contract terms and notices that are seen to constitute a contractual obligation.
Reference:
- Rules of Statutory Interpretation
- CIPS study guide page 43-46
LO 1, AC 1.2
NEW QUESTION # 94
Which of the following are advantages of using a model form contract in negotiations between buyer and seller?
These contracts can save time in negotiations
Each contract is approved by the courts
These contracts are appropriate for all complexities
The contracts are well-known to both parties
- A. 3 and 4
- B. 1 and 4
- C. 2 and 3
- D. 1 and 2
Answer: B
Explanation:
Model contracts are pre-drafted templates commonly accepted in specific industries, helping to reduce negotiation time and increase consistency. They are often familiar to both parties, reducing misunderstandings. However, they are not court-approved by default and may not suit all complex needs without modifications.
Reference:CIPS L4M3 Commercial Contracting Study Guide, Chapter 3, Section 3.1.3 - Advantages and limitations of model form contracts.
NEW QUESTION # 95
......
CIPS L4M3 exam is a crucial assessment for procurement professionals who are looking to advance their career in commercial contracting. L4M3 exam focuses on the skills and knowledge required to successfully manage commercial contracts and ensure effective supplier performance. L4M3 exam covers a wide range of topics, including contract formation, contract administration, and contract termination.
Free Exam Updates L4M3 dumps with test Engine Practice: https://freedumps.torrentvalid.com/L4M3-valid-braindumps-torrent.html