Commercial Contracting

Question 1

One advantage of tendering could be
a. It encourages close relationships
b. It encourages competition.
c. It can involve a range of stakeholders.
d. It discourages competition.

Answer 1

b. It encourages competition.

Question 2

A criticism of the tendering process is
a. It encourages fraud.
b. It concentrates on value for money rather than cost.
c. It cannot be used for services.
d. It can be complex and time consuming.

Answer 2

d. It can be complex and time consuming.

Question 3

A Buyer is concerned about prompt delivery and has insisted that the requirement for on time delivery is inserted in to the contract as an express term – was this the right thing to do?
a. No. Because on time delivery should be an implied term.
b. No. Because implied terms are more important than express terms.
c. Yes. Because express terms generally take precedence over implied terms.
d. Yes. Because otherwise any delivery requirement would not be part of the contract.

Answer 3

c. Yes. Because express terms generally take precedence over implied terms.

Question 4

To be valid, acceptance must be
a. Made by a senior manager
b. In writing.
c. Made whilst the offer is open.
d. If sent by letter must be physically received

Answer 4

c. Made whilst the offer is open.

Question 5

Which of the following best describes a ‘counter-offer’?
a. The seller agreeing to all of the buyer’s contract terms.
b. The buyer sending a purchase order after seeing a seller’s advertisement.
c. The buyer agreeing to a seller’s quote subject to a revised price.
d. The seller agreeing to negotiate contractual terms with the buyer.

Answer 5

c. The buyer agreeing to a seller’s quote subject to a revised price.

Question 6

A Buyer wishes to obtain prices for the supply of a specific item. Which of the following approaches would be most useful?
a. RFQ.
b. RFP.
c. RFI.
d. RFX.

Answer 6

a. RFQ.

Question 7

If a counter offer is made what happens to the original offer?
a. It is still valid.
b. It is changed.
c. It is destroyed.
d. The original offer is deemed to be accepted

Answer 7

c. It is destroyed.

Question 8

Acceptance must be
a. Unconditional.
b. Conditional.
c. In writing.
d. Verbal.

Answer 8

a. Unconditional.

Question 9

For which of the following purchases is it more likely that a performance specification rather than a conformance specification will be required?
a. Computer software.
b. Branded products.
c. Ready mixed Concrete.
d. Cotton Fabric.

Answer 9

a. Computer software.

Question 10

Can consideration given in the past act as future consideration
a. It can if the new contract is linked.
b. It can if the same two parties are contracting.
c. Past consideration cannot act as future consideration.
d. Past consideration cannot act as future consideration unless sufficient.

Answer 10

c. Past consideration cannot act as future consideration.

Question 11

Which of the following approaches to developing a specification will provide a buyer with the least amount of choice in the marketplace:
a. Performance.
b. Technical.
c. Use of standards.
d. Brands.

Answer 11

d. Brands.

Question 12

Technical or conformance specifications more likely to be used in which of the following circumstances
a. We require the part to fit with an existing product.
b. We know little about the product.
c. The performance of the product is more important than the inputs.
d. We wish to encourage supplier innovation.

Answer 12

a. We require the part to fit with an existing product.

Question 13

Performance or output specifications are most appropriate for which of the following:
a. Branded Products.
b. Catering services.
c. Blended Chemicals.
d. A part to fit into an existing machine.

Answer 13

b. Catering services.

Question 14

Which of these is an attribute of a service
a. They can be stored.
b. They are tangible.
c. They can be owned.
d. They are intangible.

Answer 14

d. They are intangible.

Question 15

In which of the following situation would specifying by brand be most appropriate
a. When the end user specifies it.
b. When they are perceived as better quality.
c. When the warranty specifies it.
d. When they meet the technical specification.

Answer 15

c. When the warranty specifies it.

Question 16

Which of these is considered to have legal Capacity
a. Drunk People
b. Company officials
c. Minors
d. The insane

Answer 16

b. Company officials

Question 17

Which Three Ways can an offer come to an end
a. Death.
b. Acceptance.
c. Deposition.
d. Failure of Conditionality.

Answer 17

a. Death.
b. Acceptance.
d. Failure of Conditionality.

Question 18

What term is given for specifications where the buyer outlines what they expect the part or material to be able to achieve?
a. Input specification.
b. Performance specification.
c. Conformance specification.
d. Technical specification.

Answer 18

b. Performance specification.

Question 19

The Vienna convention is a voluntary agreement covering
a. Goods Only.
b. Goods and Services.
c. Goods, Services and Works.
d. Goods, Services, Works and Software.

Answer 19

a. Goods Only.

Question 20

Model forms of contracts are developed by
a. Governments.
b. Suppliers.
c. Trade associations.
d. Buyers.

Answer 20

c. Trade associations.

Question 21

What are the benefits of using Standard Terms? (2 apply)
a. It removes the need for expensive legal advice each time they are used.
b. It gives basic contractual protection at low cost.
c. It mitigates the issue of battle of the forms.
d. It gives basic contract protection at high cost.

Answer 21

a. It removes the need for expensive legal advice each time they are used.
b. It gives basic contractual protection at low cost.

Question 22

The battle of the forms occurs when
a. In every transaction.
b. In transactions where the terms have not been pre agreed.
c. Where standard terms and conditions do not apply.
d. Only when agreed by the buyer and the seller.

Answer 22

b. In transactions where the terms have not been pre agreed.

Question 23

A Buyer wishes to control sub contracting in a particular contract – which clause could the insert to cover this?
a. Payment clause.
b. Transition clause.
c. Indemnity clause.
d. Assignment clause.

Answer 23

d. Assignment clause.

Question 24

A Supplier publishes a catalogue on an biannual basis. If a buyer wished to purchase from the catalogue when would the contract come into existence?
a. When the supplier publishes the catalogue.
b. When the buyer sends the PO to the supplier.
c. When the order is acknowledged by the supplier.
d. When delivery is made.

Answer 24

c. When the order is acknowledged by the supplier.

Question 25

An organisation has decided to include an NDA in a contract with a supplier for the design and development of some new equipment was this the right thing to do? a. No – NDA’s have no legal basis. b. No- NDA’s cannot be used between organisations only individuals. c. Yes- An NDA will ensure the supplier keeps all information confidential including that in the public domain. d. Yes – Providing it specifies the information to be kept confidential and the duration.

Answer 25

d. Yes – Providing it specifies the information to be kept confidential and the duration.

Question 26

Which of the following is a key section of a contract? a. Articles. b. Warranties. c. List of stakeholders. d. Glossary.

Answer 26

a. Articles.

Question 27

A Contract for hire covers which of the following: a. It transfers title and possession to the hirer. b. It transfers title and temporary possession to the hirer. c. It transfers temporary possession to the hirer but not the title. d. It doesn’t deal with the issues of title or possession.

Answer 27

c. It transfers temporary possession to the hirer but not the title.

Question 28

A comprehensive quotation provided by the supplier to the buyer can be regarded as which of the following a. An Invitation to treat. b. A Formal offer. c. A Formal acceptance. d. A Conditional offer.

Answer 28

b. A Formal offer.

Question 29

Which of the following is a remedy for Misrepresentation? a. Restitution. b. Rescission. c. Repudiation. d. Remediation

Answer 29

b. Rescission.

Question 30

A Buyer has an arrangement with a local bakery for the provision of catering for meetings on a fixed price per head basis. The supplier can end the arrangement at any time. This is an example of which of the following: a. Spot Contract. b. Term Contract. c. Standing Offer. d. Call Off Contract.

Answer 30

c. Standing Offer.

Question 31

The element of a contract requiring each party to give up something of value is called? a. Capitalisation. b. Condition. c. Consolidation. d. Consideration.

Answer 31

d. Consideration.

Question 32

Which of the following are types of Misrepresentation? a. Fraudulent, Conflicting, Rescission. b. Fraudulent, Negligent, Innocent. c. Negligent, Innocent, Guilty. d. Innocent, Guilty, Fraudulent

Answer 32

b. Fraudulent, Negligent, Innocent.

Question 33

A KPI that sets a target for customer satisfaction is concerned with: a. Cost performance. b. Quality performance. c. Sufficiency of resources d. Delivery performance.

Answer 33

b. Quality performance.

Question 34

Customer Opinion Surveys are examples of what type of KPI? a. Qualify. b. Qualitative. c. Quantitative. d. Quantity.

Answer 34

b. Qualitative.

Question 35

An organisation has procured a cleaning service and wishes to communicate to stakeholder the minimum level of performance expected. They have decided to use an SLA – is this the right move? a. No- SLA’s only describe the services provided not the expected performance. b. No – SLA’s only describe the maximum performance levels not the minimum. c. Yes- It is a legal requirement to provide an SLA for any services procured. d. Yes- SLA’s do cover the minimum level of performance expected.

Answer 35

d. Yes- SLA’s do cover the minimum level of performance expected.

Question 36

Which of the following would be considered when defining KPIs. a. How often should performance be measured. b. Does the individual setting the measures have contractual authority. c. Is the KPI contractually binding. d. Qualitative measures would not be relevant as they need to be numerical.

Answer 36

a. How often should performance be measured.

Question 37

In order to ensure a SLA is effective it must (3 apply) a. Have the same force as any other part of the contract. b. Be legally binding. c. Define the consequences for breach. d. Include a pre-determined and realistic financial penalty.

Answer 37

a. Have the same force as any other part of the contract. b. Be legally binding. c. Define the consequences for breach.

Question 38

One starting point for finding information when developing a specification is to use a. A standard form. b. A sample version. c. A tender. d. A model form.

Answer 38

b. A sample version.

Question 39

Which of the following best describes the legal interpretation of the term ‘damages’? a. The supplier being forced by the court to reimburse the buyer for costs Incurred due to unsatisfactory performance of a contract by the supplier. b. The buyer invoking a contract clause that enables them to buy the goods from another supplier in the event of late delivery by the original supplier. c. A supplier being forced by the buyer to replace goods that are found, upon receipt, to be faulty. d. A supplier being forced by a court to perform a contract in the manner and time stipulated by the buyer.

Answer 39

a. The supplier being forced by the court to reimburse the buyer for costs Incurred due to unsatisfactory performance of a contract by the supplier.

Question 40

Which of the following best describes one of the main advantages for the buyer of the ‘Fixed price’ method of contract pricing? a. Prices are monitored by reference to independently-published indices. b. It is particularly useful for contracts for goods whose prices fluctuate over time. c. It can be used when the exact nature of the work to be done is not known at the outset. d. The supplier would bear any risk of the contract being under-priced.

Answer 40

d. The supplier would bear any risk of the contract being under-priced.

Question 41

Which of the following contracts would be best suited to a ‘indexation pricing 'method? a. A contract for the supply of 100 printing machines to be delivered next month. b. A contract for window cleaning during the next three months. c. A contract for the supply of lubricating oil for immediate delivery. d. A contract for road building estimated to take five years to complete.

Answer 41

d. A contract for road building estimated to take five years to complete.

Question 42

Which of the following best describes ‘price indices’ that might be used in a contract price adjustment formula? a. A measure of cost movements of a range of materials published independently of both buyer and seller. b. Records kept by the buyer of price increases requested by the seller over time. c. Records kept by the buyer of many suppliers’ price increases over a period of time. d. A statement by the government indicating that the prices of goods such as oil have increased.

Answer 42

a. A measure of cost movements of a range of materials published independently of both buyer and seller.

Question 43

Which of the following best describes the legal significance of an initial written enquiry sent by the purchaser to a potential supplier? a. An invitation to treat. b. Acceptance. c. An offer. d. Consideration.

Answer 43

a. An invitation to treat.

Question 44

Which of the following best describes a potential benefit for the buyer of negotiating a ‘prompt payment’ clause? a. It is likely to improve the buying organisation’s cash-flow. b. It is likely to improve the supplier’s cash-flow. c. It is likely that the supplier will negotiate extra discount with the buyer. d. It is likely that the buyer will not need to verify the invoice before payment.

Answer 44

c. It is likely that the supplier will negotiate extra discount with the buyer.

Question 45

Which of the following would most likely be regarded as a disadvantage to a buyer of the fixed pricing method within a contract? a. The purchaser knows its financial commitment to the contract from the outset. b. The price of the contract will reflect the supplier’s risk. c. Any risk of under-pricing is loaded onto the seller, which should ensure that its costing is sound. d. It can be used for products or services where the supplier can accurately estimate the resources required to fulfil the contract.

Answer 45

b. The price of the contract will reflect the supplier’s risk.

Question 46

Quotations requested from several potential suppliers with the aim of getting better prices are commonly known as which of the following? a. Counter offer. b. Competitive bids. c. Marginal costings. d. Independent expert estimate

Answer 46

b. Competitive bids.

Question 47

What is a Force Majeure term in a contract a. A term implied into the contract to give it business efficacy. b. An exclusion of liability for events outside the control of either party. c. An exclusion of liability term for events caused by negligence. d. A term that highlights the major contractual obligations of the parties.

Answer 47

b. An exclusion of liability for events outside the control of either party.

Question 48

Which of these is NOT normally a requirement of a good specification: a. It should be of the correct type. b. It should be accurate. c. It should be clear. d. It should specify the quantity required.

Answer 48

d. It should specify the quantity required.

Question 49

Should you include an insurance clause in major contracts? a. Yes, to ensure supplier maintains correct level of financial protection. b. Yes, to ensure that all liabilities are limited. c. No, because the contract is for goods only. d. No, as warranties and conditions will cover all eventualities.

Answer 49

a. Yes, to ensure supplier maintains correct level of financial protection.

Question 50

Which of the following would generally use stage payments? a. A Spot purchase. b. A Long-term contract. c. A Framework agreement. d. A Call-off contract.

Answer 50

b. A Long-term contract.

Question 51

Which contractual clause allows for an immediate right to compensation without the need for a lengthy dispute? a. Payment. b. Indemnity. c. Assignment. d. Transition.

Answer 51

b. Indemnity.

Question 52

Which of the following best describes liquidated damages? a. Formal written assurance of quality conditions. b. Pre-determined amount payable on breach. c. A court decision on losses which have been liquidated d. Damages where a company has gone out of business during the contract.

Answer 52

b. Pre-determined amount payable on breach.

Question 53

Labour standards cover which of the following: a. Employment and procurement procedures. b. Employment of sub-contractors only. c. Employment of the workforce. d. Employment of buyers staff only.

Answer 53

c. Employment of the workforce.

Question 54

Which statement is true in relation to contractual responsibility? a. Liability is being legally responsible for something. b. Indemnity is being legally responsible for something. c. Warranty is being legally responsible for something. d. Damages is being legally responsible for something.

Answer 54

a. Liability is being legally responsible for something.

Question 55

Which of the following is a standard covered by the ILO? a. Unfair discrimination on the basis of marital status. b. Unfair discrimination of the basis of appearance. c. Unfair discrimination on the basis of class. d. Unfair discrimination on the basis of gender identity.

Answer 55

d. Unfair discrimination on the basis of gender identity.

Question 56

Why would a buyer use a target pricing arrangement? a. In order to incentivise suppliers. b. In order to place all the risks on to the buyer. c. In order to comply with legislation. d. In order to use a model form contract.

Answer 56

a. In order to incentivise suppliers.

Question 57

In order to be valid Consideration has to be a. Sufficient. b. Adequate. c. Complete. d. Financial.

Answer 57

a. Sufficient.

Question 58

A buyer has let a construction contract (for which they have a limited budget) for a new head office for their organisation on a cost plus basis – was this the right thing to do? a. Yes. Because otherwise the buyer would be unsure of having the project completed on time. b. Yes. Because it provides cost certainty for the buyer. c. No. Because the supplier will have no motivation to control costs. d. No. Because cost plus is unsuitable for large construction projects.

Answer 58

c. No. Because the supplier will have no motivation to control costs.

Question 59

In large high risk contracts such as construction it is usual for the Buyer to hold back a proportion of the payment for a specific time in case of defects- this is know as what: a. Retention sum. b. Repudiation sum. c. Defect Sum. d. Deposit Sum.

Answer 59

a. Retention sum.

Question 60

Whose terms generally prevail in the Battle of the Forms: a. It is always the buyers. b. It is always the sellers. c. It is who fired the last shot. d. It is hard to determine.

Answer 60

c. It is who fired the last shot.

Question 61

Which remedy for breach of contract involves one party paying the other for the value of the work performed so far? a. Force Majeure. b. Quantum Meruit. c. Rescission. d. Liquidated Damages.

Answer 61

b. Quantum Meruit.

Question 62

Which is the legal phase used in situations where the buyer had the opportunity to read the contract terms and conditions but chose not to. a. Caveat Emptor. b. Frustration c. Force Majeure. d. Duress.

Answer 62

a. Caveat Emptor.

Question 63

Which are the Remedies for breach of contract – 4 apply a. Specific Performance. b. Impeachment. c. Damages. d. Quantum Meruit. e. Injunction. f. Imprisonment.

Answer 63

a. Specific Performance. c. Damages. d. Quantum Meruit. e. Injunction.

Question 64

Which are the 5 ways a contract can be declared void or voidable a. Illegality. b. Breach. c. Duress and Undue influence. d. Misrepresentation. e. Failure to perform. f. Mistake.

Answer 64

a. Illegality. c. Duress and Undue influence. d. Misrepresentation. e. Failure to perform. f. Mistake.

Question 65

A minor term in a contract would is known as a. A condition. b. A penalty clause. c. A warranty. d. Innominate.

Answer 65

c. A warranty.

Question 66

A clause considered to be a major term in a contract is known as what a. A penalty clause. b. A condition. c. A warranty. d. Innominate.

Answer 66

b. A condition.

Question 67

What is the correct legal name for the situation where one party voluntary forgoes its legal rights in a contract? a. Lien. b. Surrender. c. Waiver. d. Let.

Answer 67

c. Waiver.

Question 68

Which ONE of the following is a provision in a contract under which one party commits to compensate the other for any harm or loss arising out of the contract? a. Indemnity b. Intellectual property c. Exclusion clause d. Warranty

Answer 68

a. Indemnity

Question 69

Which of the following are likely to feature within a request for quotation (RFQ)? 1. Delivery terms are fixed 2. Suppliers are not pre-qualified 3. Suppliers have been pre-qualified 4. Quality must be assessed a. 1 and 2 only b. 2 and 3 only c. 1 and 3 only d. 2 and 4 only

Answer 69

c. 1 and 3 only

Question 70

A procurement manager has negotiated a firm fixed price throughout a contract with a duration of two years. Was this the right thing to do? a. No, because even with these contracts the pricing can change b. No, because this is an unfair term and therefore it is not legally binding c. Yes, because this has provided certainty and so it is an aid to budgeting d. Yes, because this type of pricing will always be better than a spot price

Answer 70

c. Yes, because this has provided certainty and so it is an aid to budgeting

Question 71

Ace Group is seeking to encourage one of its key suppliers to improve its contract delivery performance. Ace Group wants to encourage the supplier to identify cost savings and ways to enhance quality. Which of the following would help? a. Gainshare b. Using industry indices c. Penalty clauses d. Service credits

Answer 71

a. Gainshare

Question 72

When is the best time for the buyer's express terms to be provided to a supplier in a competitive bidding process with negotiation? a. At the contract commencement meeting b. When the negotiation is nearing completion c. With the contract award notification d. As part of the invitation to tender

Answer 72

d. As part of the invitation to tender

Question 73

Which ONE of the following is often used with service level agreements (SLAs), as part of performance management, to encourage a supplier to meet a buyer's requirements? a. Service guarantees b. Service credits c. Service warranties d. Service penalties

Answer 73

b. Service credits

Question 74

A public sector organisation maintains a large and diverse property estate comprising of more than 100 buildings in multiple locations around the country. To maintain this property estate, which of the following will be the most effective arrangement between the organisation and its suppliers? a. Framework agreements b. One-off purchases c. Spot transactions d. Purchase orders

Answer 74

a. Framework agreements

Question 75

A large manufacturing group is going through a period of investment under which a number of its facilities will close on a short-term basis for re-fit and for upgrade works to be undertaken. The chief procurement officer (CPO) is concerned about the impact on the organisation's ability to meet customer orders should any of the work carried out by suppliers overrun. In respect of this particular concern, the CPO should consider using which of the following contractual terms with these suppliers? a. Insurance b. Force majeure c. Liquidated damages d. Jurisdiction

Answer 75

c. Liquidated damages

Question 76

Which of the following will typically be included with an invitation to tender (ITT)? Select the THREE that apply. a. Specification b. Purchase order c. Terms and conditions d. Requisition e. Performance measures f. Mandate

Answer 76

a. Specification c. Terms and conditions e. Performance measures

Question 77

Under general legal principles of contract formation, which of the following will always automatically result in the termination of an offer? Select the TWO that apply. a. Acceptance b. Negotiation c. Clarification d. Non-disclosure e. Revocation

Answer 77

a. Acceptance e. Revocation

Question 78

Which of the following enables bidders to present solutions that the buyer might not have considered when responding to an invitation to tender (ITT)? a. Technical specification b. Input specification c. Performance specification d. Conformance specification

Answer 78

c. Performance specification

Question 79

The concept of the 'battle of the forms' relates mostly to which of the following? a. The buyer's specification b. Terms and conditions that apply c. The invitation to tender d. Key performance indicators

Answer 79

b. Terms and conditions that apply

Question 80

Westhire Authority (WA) is a large public sector organisation. It covers a vast geographic area and has a considerable property estate. It uses a number of suppliers to carry out routine and, on occasions, emergency repairs and other maintenance on both the grounds and the buildings of its property estate. Which type of arrangement would WA have in place for these requirements? a. Framework agreement b. Sole supply agreement c. Dual-sourcing agreement d. Contingency agreement

Answer 80

a. Framework agreement

Question 81

Global Energy Efficiency Group (GEEG) is a major manufacturing organisation. It has committed to invest significantly in new turbines but is unsure about which products are available and how these might change in the future due to new technology advances. What should GEEG do as a priority to help draft a specification? a. Arrange a meeting with Finance b. Talk to its incumbent supplier c. Use recognised international standards d. Undertake market engagement

Answer 81

d. Undertake market engagement

Question 82

Which of the following are examples of key performance indicators (KPIs) that can be used to measure the performance of a supplier of raw materials? 1. The percentage of orders delivered on time and in full 2. The number of visitors to an organisation’s website 3. A supplier’s staff retention rate 4. The percentage of items with defects a. 1 and 2 only b. 2 and 3 only c. 3 and 4 only d. 1 and 4 only

Answer 82

d. 1 and 4 only

Question 83

Which of the following are characteristics of liquidated damages within a contract? 1. Apply excessive penalties for all breaches 2. Explain the process for dispute management 3. Set out the circumstances and when they apply 4. State the financial implications for the supplier a. 1 and 2 only b. 2 and 3 only c. 3 and 4 only d. 1 and 3 only

Answer 83

c. 3 and 4 only

Question 84

Express terms apply in all contracts through the buyer's and supplier's statutory rights. Is this statement TRUE? a. Yes, in most contracts statutory rights are expressly stated b. No, express terms are specifically agreed between the parties c. Yes, all terms must be expressly stated in the contract to be legally binding d. No, if it is a verbal agreement, no terms will apply at all

Answer 84

b. No, express terms are specifically agreed between the parties

Question 85

Model form contracts are popular because they offer additional protections to suppliers. Is this statement correct? a. Yes, in industries that use model contracts they protect a buyer from all supplier conditions b. No, they are popular because it is a legal requirement to use them if available in that industry sector c. Yes, in those industries that use them model contracts considerably limit supplier liability d. No, they are popular because they are widely accepted and understood in industries that use them

Answer 85

d. No, they are popular because they are widely accepted and understood in industries that use them

Question 86

Which of the following arrangements permit the supplier to charge more, in certain circumstances, over the term of the contract? Select the TWO that apply. a. Pricing schedules b. Fixed priced c. Bills of quantity d. Indexation e. Price adjustment formula

Answer 86

d. Indexation e. Price adjustment formula

Question 87

Which of the following are necessary conditions for misrepresentation within a commercial agreement? Select the THREE that apply. a. The statement must be made after the contract is created b. The statement must relate to fact c. The statement must be false d. The statement must be made by a contracting party e. The statement must be made in public f. The statement must be fraudulent

Answer 87

b. The statement must relate to fact c. The statement must be false d. The statement must be made by a contracting party