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NEW QUESTION # 44
Mark is a consultant who works with building managers and advises them on how to make their buildings safer. What type of insurance should Mark have?
- A. Product Liability
- B. Property Insurance
- C. Public Liability
- D. Professional Indemnity
Answer: D
Explanation:
Mark needs professional indemnity insurance. Types of insurance is a known exam topic and the study guide does not cover this particularly well. Types of insurance is mentioned on p.25 but Pro-fessional Indemnity Insurance isn't really explained and this does come up in the exam. Professional Indemnity Insurance is needed when your job is to give advice to people (like as a Consultant). It's used for if the advice you give turns out to be bad. For example, if Mark told the building manager he should get ABC Fire Alarm installed, and actually this Fire Alarm doesn't meet the necessary Health and Safety standards, he could get sued by the building manager. He could then claim on his Professional Indemnity Insurance.
NEW QUESTION # 45
Which TWO conflict resolution methods provide certainty of resolution?
- A. mediation and litigation
- B. adjudication and mediation
- C. adjudication and litigation
- D. arbitration and conciliation
Answer: C
Explanation:
Adjudication and Litigation (and Arbitration too) all provide certainty of a resolution. The other methods don't. There's a really useful table with this information on p.87 of the study guide.
NEW QUESTION # 46
Sally is shopping and sees an advert in a travel agent's window that says that flights to Malta are 50% off. She enters the shop and begins to speak to a travel agent who informs her that the poster she'd seen is out of date. Is the travel agent obliged to give Sally the discounted flight?
- A. no- the offer has been rescinded
- B. yes- the offer is valid until another offer or counter offer is provided
- C. no - the advert is an invitation to treat
- D. yes- the offer was displayed and therefore must be honoured
Answer: C
Explanation:
Adverts are invitations to treat - not offers. Therefore the travel agent isn't bound to provide the discounted flight. See p.3 for more information on offers and ITTs
NEW QUESTION # 47
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
- A. restitution damages considers the position of the breaching party before the contract
- B. restitution damages are not limited to pre-agreed levels stated in the contract
- C. restitution damages intend to return the innocent party to the position they were in be-fore the contract
- D. restitution damages are based on how much was gained by the breaching party as a re-sult of the breach
Answer: C,D
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.
NEW QUESTION # 48
Which of the following is not a form of ADR (Alternative Dispute Resolution)?
- A. arbitration
- B. negotiation
- C. conciliation
- D. mediation
Answer: B
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 # 49
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 cannot be excluded for injury resulting from negligence
- C. liability is a legal responsibility
- D. liability can only be limited where there is valid insurance
- E. exclusions should be narrowly defined and clearly state which types of liabilities are excluded
Answer: B,C,E
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 # 50
Which of the following would not be considered a contract? Select TWO
- A. an email chain between a buyer and supplier which includes a PO and Invoice
- B. a written document in which Paul agrees to clean Freda's house for £10
- C. a domestic agreement between two parents about who will pick the kids up from school
- D. A written agreement between two robbers to rob a bank which states that the money gained would be split evenly between the two.
- E. a phone call between a supplier and buyer in which the buyer agrees to purchase 100 teddy bears from the supplier for £100.
Answer: C,D
Explanation:
The correct answers are; A written agreement between two robbers to rob a bank which states that the money gained would be split evenly between the two AND a domestic agreement between two parents about who will pick the kids up from school. There are 3 instances when a contract isn't considered a contract and these are; illegal activity (like example A), a social or domestic arrange-ment (like example B) and when something is an 'Invitation to Treat'. See p.2-3 Remember con-tracts don't have to be written - they can be verbal (example C), the exchange doesn't have to be fair (example D) and it can be implied by conduct (example E).
NEW QUESTION # 51
Which of the following processes is the most adversarial?
- A. litigation
- B. negotiation
- C. adjudication
- D. mediation
Answer: A
Explanation:
Litigation is the most adversarial. It's usually the last resort and shouldn't be used if you want to preserve the working relationship. P. 145
NEW QUESTION # 52
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. awarding damages
- B. conflict resolution
- C. affirmation of the contract
- D. assigning liability
Answer: C
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 # 53
John has signed a document with Larry that says that he will give Larry his car. Both John and Larry are over the age of 18 and are of sound mind. Larry accepts this offer and signs the document. Is this a contract?
- A. yes- both parties consent and have capacity to do so
- B. yes- it has been signed
- C. no- there is no consideration
- D. no- this document is an invitation to treat
Answer: C
Explanation:
No - There is no consideration. For a document to be considered a contract there must be consideration. This means something of value must be exchanged. In this example John gives Larry something but Larry doesn't give John anything. Therefore there is no consideration and this is not a contract. See p.12
NEW QUESTION # 54
An agreement in which an organisation is not accountable for any damages that occur during a contract is known as what?
- A. limited liability
- B. liquidated damages
- C. waiver of subrogation
- D. hold harmless agreement
Answer: D
Explanation:
This is a Hold Harmless Agreement and the definition is given on p. 26. A Waiver of Subrogation is a related term which stops an insurance firm claiming money back from someone in the contract - see p.26 for more info.
NEW QUESTION # 55
Which of the following will you put into box 5?
- A. adjudication
- B. arbitration
- C. litigation
- D. mediation
Answer: A
Explanation:
The correct answers are as follows:
This is adjudication. Adjudication is the only option which has a specified timeframe.
NEW QUESTION # 56
Which of the following statements about penalty clauses is not true?
- A. they can harm the working relationship
- B. they provide damages in excess of the true cost of a breach
- C. they are illegal
- D. they are used to deter the parties from breaching the contract
Answer: C
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 # 57
Which of the following will you put into box 6?
- A. Condition
- B. Warranty
- C. Innominate Term
Answer: C
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
A failure to perform a provision of a contract which does not affect the end performance of the contract is known as what?
- A. major breach
- B. minor breach
- C. small breach
- D. warranty breach
Answer: B
Explanation:
This is a minor breach. This is the definition as given in the study guide on p. 48
NEW QUESTION # 59
Which of the following will you put into box 4?
- A. Time is of the Essence
- B. Payment Term
- C. Specification
- D. Subcontracting
Answer: A
Explanation:
The correct answers are as follows:
Getting help from another supplier to fulfil the order is subcontracting.
NEW QUESTION # 60
A contract term which is difficult to classify at the time of drafting a contract is known as?
- A. warranty
- B. condition
- C. consideration
- D. innominate
Answer: D
Explanation:
Innominate - the conflict resolution process would determine if the clause is a condition or a war-ranty. Before there's a breach there's no way to know, so it's classed as an Innominate Term. P. 43. Types of contract terms comes up a lot in the exam. Learn these.
NEW QUESTION # 61
Which of the following will you put into box 7?
- A. litigation
- B. arbitration
- C. adjudication
- D. mediation
Answer: A
Explanation:
The correct answers are as follows:
This is litigation as it involves a legal team and it's public. Out of the 4 options only litigation is a public dispute resolution.
NEW QUESTION # 62
Sam is a factory manager and has purchased a new fixed asset on a loan purchase agreement. There is a forbearance agreement between the Factory and the provider. What does this mean?
- A. the lender agrees to give the breaching party a period of time as an extension by which to meet their obligations
- B. the lender requires the buyer to assign a guarantor in case they cannot make payments
- C. the lender is able to demand full payment of outstanding balances in case of none pay-ment
- D. the lender is able to charge interest on the purchase in line with RPI
Answer: A
Explanation:
1 is the correct answer. This is a direct quote from p. 104 of the study guide.
NEW QUESTION # 63
Which of these is NOT a stage in negotiation?
- A. bargaining
- B. adjourning
- C. agreement
- D. proposal
Answer: B
Explanation:
Adjourning is not a stage. The 6 stages of negotiation are; preparation, opening, discussion, pro-posal, bargaining and agreement. P.64
NEW QUESTION # 64
Which of the following will you put into box 6?
- A. arbitration
- B. litigation
- C. mediation
- D. adjudication
Answer: C
Explanation:
The correct answers are as follows:
This is mediation because 1) it's private and 2) there's a third party present
NEW QUESTION # 65
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