[Mar 29, 2023] L4M3 Exam Dumps - Try Best L4M3 Exam Questions - TorrentExam
Verified L4M3 exam dumps Q&As with Correct 161 Questions and Answers
CIPS L4M3 Exam Syllabus Topics:
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NEW QUESTION 42
Which of the following is the reason why liquidated damage clauses are embedded into a contract?
- A. Because compensation will be awarded immediately
- B. Because liquidated damages are the only remedy
- C. To avoid argument on correct measure of damage
- D. To penalise the supplier for their wrongdoing
Answer: C
Explanation:
Liquidated damages are an amount of money, agreed upon by the parties at the time of the contract signing, that establishes the damages that can be recovered in the event a party breaches the contract. The amount is supposed to reflect the best estimate of actual damages when the parties sign the contract. These usually apply to a specific type of breach, and in construction, it is frequently the failure to complete work on time.
Liquidated damages clauses are usually written as some sort of formula, for example:
Total Contract Price - [(X amount of $ per day) x (number of days late)] Including a liquidated damages clause can provide many benefits, the most important of which is predictability. When setting a predetermined amount of damages, it allows both parties a chance to negotiate and settle on a number they both feel is fair and reasonable.
From the owner's perspective, this acts like a cheap form of insurance against your contractors. In the event of a breach, the owner can immediately calculate the damages without going through the trouble of proving actual damages. Proving actual damages can be a complicated, lengthy, and costly process.
From a contractor perspective, this allows them to analyze the level of risk involved, and schedule appropriately. It also allows them the opportunity to limit the damage claims of the owner.
Reference:
- Construction Contract Clauses: What Is a Liquidated Damages Clause?
- CIPS study guide page 158-159
LO 3, AC 3.2
NEW QUESTION 43
Which of the following statements is true about model form of contract?
- A. When model contracts are employed, there are no requirements for legal advice and input
- B. Only the publishers of model forms of contract can edit the clauses of these forms
- C. Model contract form's standard clauses often contain correct legal terminology without recourse to third party experts.
- D. The standard clauses of model contract forms give the offeror legal advantages over the offeree
Answer: C
Explanation:
Model forms of contract are published by some industry or professional organisations such as FIDIC, ITC, CIPS,... These forms are often carefully prepared by legal professionals, with correct legal terminology. The standard clauses within these forms are based on fair and balanced risk/reward allocation between the contracting parties. The model contract forms also include standard clauses to be selected or deleted on an as required basis.
Despite being standardised to be used in any jurisdiction, legal advice may be required if the users decide to make variations to the forms.
The correct answer should be "Model contract form's standard clauses often contain correct legal terminology without recourse to third party experts." Reference:
LO 3, AC 3.1
NEW QUESTION 44
Under a price adjustment agreement, which of the following would be supplier's justification for increasing unit price?
- A. Rise in shares price
- B. Rise in economies of scale
- C. Rise in fuel price
- D. Rise in customer's satisfaction
Answer: C
Explanation:
Normally in a price adjustment agreement, the supplier is allowed to change price based on an indexation, which is published by a third party (for example, government or exchange market). The selected indices often associate with input materials of supplier. For instance, the plastics manufacturer may adjust their price based on crude oil price as oil is major input of producing plastics. Other suppliers may select different set of indices, such as Producer Perception Index.
In this question, only 'Rise in fuel price' could be a justification for supplier to increase price because:
- It may affect the input material price
- The index is checked and published by an independent third party.
Reference:
LO 3, AC 3.3
NEW QUESTION 45
XYZ Ltd is negotiating a long-term supply contract of important parts with a supplier. Dave, procurement manager teams up with Alla, legal manager to construct a service level agreement. Dave is concerned that poor performance of supplier may cause damages to the operations of the organisation. Which of the following can be used in conjunction with SLA to compensate the buying organisation in case of supplier's poor performance?
1. Warranties
2. Force majeure clauses
3. Penalty clauses
4. Service credits
- A. 4 and 2 only
- B. 1 and 3 only
- C. 1 and 2 only
- D. 3 and 4 only
Answer: C
Explanation:
Service level agreement often sets out the minimum quality standards of the services provided, remedies if that standards are not met, consequences if the targets are exceeded. Penalty clauses and service credits are remedies that are often used in conjunction with service level agreement to ensure the performance and to compensate the purchaser if targets are not met.
Reference:
LO 2, AC 2.2
NEW QUESTION 46
Which of the following KPIs is qualitative?
1. Openness and co-operation of supplier
2. Responsiveness of supplier
3. Customer satisfactory ratings
4. Cost management
5. OTIF deliveries
- A. 2 and 3 only
- B. 1 and 3 only
- C. 1 and 4 only
- D. 2 and 5 only
Answer: B
Explanation:
Qualitative KPIs are based on pure opinions about how well or otherwise the goods are performing or the service is being delivered. Most often, these will be linked to, or converted into, a numerical measure. However, such satisfaction surveys often also include free fields for respondents to explain why they feel the way they do, and what they might have liked to have been different.
On the other hand, quantitative KPIs are based on numerical measure with either definite number (e.g., actual number of orders incomplete or otherwise inaccurate during the time period) or as a percentage (e.g. number of inaccurate orders as a percentage of the total number of orders).
Openness and co-operation means that supplier is open and co-operative in its relationship with purchaser, e.g., in terms of joint problem solving. This KPI is qualitative since it is measured by individual judgement.
Responsiveness of supplier means the supplier responds rapidly to requests for information and support without having to be chased. It is measured by the number of times requests chased as a percentage of number of requests. It is a quantitative KPI.
Customer satisfactory ratings means the level of customer's satisfaction. This KPI is measured by periodic survey and it is a qualitative KPI.
Cost management is another quantitative KPI. It can be measured by comparing between the actual costs and the contractual costs.
OTIF (one-time in-full) deliveries is a quantitative KPI. It can be measured by counting the inaccurate deliveries in the period or inaccurate deliveries as a percentage of total number of deliveries for period.
Reference:
LO 2, AC 2.2
NEW QUESTION 47
Which of the following is the type of insurance that cover the liabilities of service provider such as legal advice, accountancy, technical designs, etc?
- A. PII
- B. Product liability
- C. Public liability
- D. Employer's liability
Answer: A
Explanation:
The most usual forms of insurance cover are as below:
- Employer's liability: Employers' liability insurance, sometimes known as employment practices liability insurance (EPLI), protects employers from financial loss if a worker has a job-related injury or illness not covered by workers' compensation. Employers' liability insurance can be packaged with workers' compensation insurance to further protect companies against the costs associated with workplace injuries, illnesses, and deaths. Employers' liability insurance is also called "part 2" of a workers' compensation policy.
- Public/product liability: Public liability insurance covers you against any claims made against your business - for example if you were held legally liable for personal injury, or for damage done to property. The insurance will also cover you for any legal costs associated with defending claims against your business.
- Professional indemnity insurance (PII): Professional indemnity or liability insurance offers such coverage to professional advice or service providing individuals and companies ensuring protection against any legal costs and damages awarded as a result of claims relating to negligence. Whereas more general forms of liability insurance focus on direct forms of harm such as sustaining injuries, professional indemnity insurance provides a far more detailed and comprehensive form of coverage. The cover protects a firm or individual's liability relating to any financial loss caused by errors or omissions in the service provided as well as any alleged failure to perform on behalf of a client.
- Goods in transit coverage: Goods in transit insurance, sometimes referred to as GIT, covers goods against loss or damage while being moved from one place to another. These goods can be being carried by individuals in their own vehicle, self employed drivers or contractors or by third party carriers. The insurance can cover both domestic and international trips, with specific add-ons available for insurance within Europe.
Reference:
LO 3, AC 3.2
NEW QUESTION 48
When a contract has been agreed on the basis of a fraudulent misrepresentation, which of the following remedies are available?
- A. An injunction only
- B. Rescission only
- C. Both damages and rescission
- D. Damages only
Answer: A
Explanation:
An untrue statement of fact or law made by Party A (or its agent) to Party B, which induces Party B to enter a contract with Party A thereby causing Party B loss. An action for misrepresentation can be brought in respect of a misrepresentation of fact or law.
There are three types of misrepresentation:
- Fraudulent misrepresentation: where a false representation has been made knowingly, or without belief in its truth, or recklessly as to its truth.
- Negligent misrepresentation: a representation made carelessly and in breach of duty owed by Party A to Party B to take reasonable care that the representation is accurate. If no "special relationship" exists, there may be a misrepresentation under section 2(1) of the Misrepresentation Act 1967 where a statement is made carelessly or without reasonable grounds for believing its truth.
- Innocent misrepresentation: a representation that is neither fraudulent nor negligent.
The remedies for misrepresentation are rescission and/or damages. For fraudulent and negligent misrepresentation, the claimant may claim rescission and damages. For innocent misrepresentation, the court has a discretion to award damages in lieu of rescission; the court cannot award both (see section 2(2) of the Misrepresentation Act 1967). For more information, see Practice note, Misrepresentation.
Reference:
- Misrepresentation
- CIPS study guide page 55
LO 1, AC 1.2
NEW QUESTION 49
Under English law's general legal principles of contract formation, which of the following are likely to be offers? Select TWO that apply.
- A. Purchase order
- B. Quotation
- C. Invitation to tender
- D. Advertisement
- E. Catalogue
Answer: B
Explanation:
An offer is a full statement of what the offeror is willing to provide and the terms by which they are willing to provide it.
There are some statements that are not offers:
- Invitation to treat: this states that a person or organisation is willing to enter into discussions about the possibility of a deal, but does not confirm a willingness to be bound by any terms mentioned. Catalogues, goods on display and ITTs are invitation to treat.
Civil law countries may have different perspective on this matter. Article 2:201 (3) of The Principles of European Contract Law states: 'A proposal to supply goods or services at stated prices made by a professional supplier in a public advertisement or a catalogue, or by a display of goods, is presumed to be an offer to sell or supply at that price until the stock of goods, or the supplier's capacity to supply the service, is exhausted.' Learners are advised to look at their countries' legislation for more information on offer and acceptance.
- Declaration of intention: this is defined as an aim or a plan.
- A 'mere puff' (or boast): this is anything which is not intended to be taken literally or seriously, such as many advertisement.
- Provision of information: merely provides information, but provider does not confirm willingness to be bound.
Reference:
LO 1, AC 1.2
NEW QUESTION 50
A purchase order can become a contract between supplier and purchaser if it is...?
- A. Edited by the supplier
- B. Issued by the buyer
- C. Accepted by the supplier
- D. Received 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:
LO 1, AC 1.2
NEW QUESTION 51
Sally places a purchase order to the supplier for some components that her company requires. The supplier delivers the goods as she asks, but the quality assurance team finds that these components are defective and unfit for the company's operations. Which document is the ground to decide whether the goods received are fit for purpose?
- A. CSR policies
- B. Specification
- C. Code of conduct
- D. Pre-qualification questionnaire
Answer: B
Explanation:
According to USLegal Inc, fitness for purpose refers to the standard that must be met by a seller in the course of a business. Generally, when a buyer makes known to a seller the particular purpose for which the goods are bought, there is an implied condition that the goods are reasonably fit for that purpose (customer's requirements, needs, or desires). Specification is the ground for deciding whether goods received are fit for purpose.
We already know that there are two types of specifications: conformance and performance specifications. With conformance specification, the buyer lists out technical requirements to which the goods must conform. Lacking of any requirement may be enough for the goods to be unfit. On the other hand, if performance specification is in use, the goods must be fit for specific outputs that buyer has listed in the specification.
Providing the 'fit for purpose' goods is one of the fundamental obligations of seller in sale contract. Unfulfilling this obligation would lead to legal consequences. If the goods are unfit for purpose, seller may have to:
- replace the non-conforming goods
- pay the damages to the buyer
Reference:
- Why you should keep attention to the specification when contracting with suppliers
- CIPS study guide page 137
LO 3, AC 3.1
NEW QUESTION 52
Company A based in Canada signed a commercial contract with Company B in Egypt. Both countries are Contracting States to Vienna Convention on Contracts for the International Sale of Goods. The contract states that "The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of Canada". Which of the following set of rules will be applied if dispute between contracting parties occurs?
- A. Canada's legal system
- B. WTO rules
- C. CISG
- D. Egypt's legal system
Answer: A
Explanation:
Where the sale of goods is between two businesses in different Contracting States, then it is international and the CISG rules of law automatically apply unless they have been excluded. A contract clause stating that the contract is subject to the legal systems and courts of a particular country overrides or excludes the CISG rules, since the local rules of that country would apply instead.
So the answer should be Canada's legal system.
Reference:
LO 1, AC 1.2
NEW QUESTION 53
Which of the following is an invitation to treat?
- A. Purchase order
- B. Invoice
- C. Price list
- D. Tender bid
Answer: C
Explanation:
An invitation to treat is an action inviting other parties to make an offer to form a contract. These actions may sometimes appear to be offers themselves, and the difference can sometimes be difficult to determine. The distinction is important because accepting an offer creates a binding contract while "accepting" an invitation to treat is actually making an offer.
One simple test to distinguish an offer and an invitation to treat is to ask what this statement will become when it is accepted. Now we apply this test to four options:
- Tender bid: Tender bid is submitted by a supplier to an invitation to tender from the buyer. It states the specific quantity, price and other elements. If buyer accepts the bid, there will be a contract between them. Therefore, a tender bid is an offer.
- Purchase order: Purchase order which is sent by a buyer will state the items, the quantity, the price and terms and conditions. If supplier accepts the purchase order, there will also be a contract between two parties. It is also an offer.
- Price list: Price list is prepared by a supplier. The price list often states the items and unit price. If a buyer accepts it, the contract has not yet been formed since the contract scope has not yet been decided. It is an invitation to treat.
- Invoice: Invoice is often sent after a contract is formed. It is in fact a request for payment, neither offer nor invitation to treat.
Reference:
- CIPS study guide page 29-32
- What Is an Invitation to Treat?
LO 1, AC 1.1
NEW QUESTION 54
CISG will be most likely to apply to which of the following transactions?
- A. Sale of iron ores
- B. Sale of electricity
- C. Sale of a ship
- D. Sale of a property
Answer: A
Explanation:
Article 2 of CISG states that:
This Convention does not apply to sales:
(a) of goods bought for personal, family or household use, unless the seller, at any time before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for any such use; (b) by auction; (c) on execution or otherwise by authority of law; (d) of stocks, shares, investment securities, negotiable instruments or money; (e) of ships, vessels, hovercraft or aircraft; (f) of electricity.
LO 1, AC 1.2
NEW QUESTION 55
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, 2 and 3 only
- B. 2, 3 and 4 only
- C. 1, 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 56
XYZ Ltd and Engineer Corp signed a long-term supply contract in which both parties had agreed on performance targets. Recently, due to increased customer demands, XYZ Ltd realises that they should make changes to the contract with Engineer Corp with regards to performance management. These changes are approved and signed by both the buyer and seller. The changes to the contract are known as...?
- A. An amendment to the prime contract
- B. An appendix to the prime contract
- C. A stand-alone subcontract to the prime contract
- D. A separate counter-offer to the supplier
Answer: A
Explanation:
The changes are made to the prime contract. They are also signed and approved by both parties. These changes are known as amendment (variation) to the contract. A contract amendment allows the parties to make a mutually agreed-upon change to an existing contract. An amendment can add to an existing contract, delete from it, or change parts of it. The original contract remains in place, only with some terms altered by way of the amendment.
Reference:
- Modify an Existing Contract with a Contract Amendment
- CIPS study guide page 26-28
LO 1, AC 1.1
NEW QUESTION 57
GPP, the employer, and Prosolia UK, the contractor, entered into five EPC contracts for the development of five different solar power generation plants in the United Kingdom. Four out of the five developments failed to be commissioned by the relevant due dates, with the delays ranging from 44 to 285 days.
Among other claims, GPP, acting through its two investment vehicles, claimed liquidated damages of £500 per day in all four contracts for Prosolia UK's failure to achieve completion of the plants by the due date. The liquidated damages claimed amounted to £1,804,221 across the four delayed contracts.
Prosolia, alongside various other defences, raised the defence that the liquidated damages provision in each contract was a penalty, and therefore unenforceable against it. Is Prosolia contractually obliged to make the payment to the plaintiff?
- A. No, the clause must be treated as a penalty clause which is unenforceable in UK
- B. Yes, the amount is a reward to the employer as they have supervised and monitored the projects
- C. No, the amount claimed is too excessive and it may put Prosolia into insolvency. The clause must be void
- D. Yes, the clause is a genuine estimate of possible losses that GPP may have suffered and therefore, it is enforceable.
Answer: D
Explanation:
A liquidated damages clause specifies a predetermined amount of money that must be paid as damages for failure to perform under a contract. The amount of the liquidated damages is supposed to be the parties' best estimate at the time they sign the contract of the damages that would be caused by a breach. If a breach occurs and the liquidated damages clause is enforceable, the parties do not calculate the actual damages (i.e., how much money a party actually lost as a result of the breach). Instead, the breaching party pays the predetermined sum provided by the liquidated damages provision.
To be enforceable, a liquidated damages clause should meet the following criteria.
Damages are difficult to estimate. A court will be more likely to enforce a liquidated damages provision if the damages that will be incurred as a result of a breach of the contract are difficult to estimate when the contract is entered into. In certain situations, injuries are easy to prove. For example, if a breach will result in the loss of sales, it is easy to determine the actual damages by calculating lost profits. Others are more difficult, like the harm caused by breach of a confidentiality agreement or theft of trade secrets. To be enforceable, the damages should be either uncertain or difficult to quantify at the time the contract is entered into.
The amount is reasonable and not a penalty. If the amount of the liquidated damages is grossly disproportionate to the actual harm incurred, a court will likely find it is a penalty or punishment and will not enforce the provision. When making this analysis, courts usually consider what was reasonable at the time the contract was entered into as opposed to when the breach occurred. There have been cases, however, where courts will decide the reasonableness of the damage estimate based on the actual harm at the time of the breach.
The scenario is excerpted and edited based on a real world case law. In that case, the court held that GPP was entitled to liquidated damages under all four of the EPC contracts, ruling that the provisions did not amount to unenforceable penalties in each of the contracts.
Reference:
- CIPS study guide page 158-159
- Liquidated damages in energy projects
- What Is a Liquidated Damages Provision?
LO 3, AC 3.2
NEW QUESTION 58
A company needs to source a product from overse
a. It wants to overcome technical barrier to cross-border trade by using standards in the specification. Which of the following is most likely to be incorporated into that specification?
- A. National standards
- B. International standards
- C. Company standards
- D. Brands
Answer: B
Explanation:
Exporting enterprises must sometimes incur additional costs as they adapt their production to the changing legal requirements of the recipient country. Such requirements can thus create technical barriers to trade. Discrepancies between product rules adopted by different countries can involve numerous aspects: weight, size, packaging, ingredients, mandatory labeling, shelf-life conditions, testing and certification procedures etc.
One way to overcome these barriers is to adopt international standards. Overseas companies may be more familiar with international standards without looking at specific regulations of importing countries.
Reference:
- What is a technical barrier to trade?
- CIPS study guide page 88-89
LO 2, AC 2.1
NEW QUESTION 59
A procurement professional is preparing a sale & purchase contract of a machinery. Which of the following clauses should be added to the contract? Select TWO that apply
- A. Insurance requirements
- B. Supplier selection mechanism
- C. Period of hire
- D. Guarantees
- E. Ratio decidendi
Answer: A,D
Explanation:
The complexity of the contract will reflect the complexity of the purchase. For simple, low-value purchases, standard terms and conditions may be all that is required, but do not assume that just because the purchase is one-off, the contract will be simple. It may still need to cover the following areas:
- Warranties and guarantees if the one-off purchase has a considerable life-span and is business-critical (e.g., a back-up generator for the office which houses the national computer servers).
- Insurance requirements: including professional indemnity, public/products liability, employer's liability, and cover for any specific risks such as pollution or working at height.
- Specification requirements on quality, timing and delivery
- Minimum quality standards on the business operation (e.g., a catering provider might only be providing sandwiches for a team meeting lunch, but you still need to know its hygiene practices).
- Built-in change process for any goods or services that are beyond very simple (e.g., works contracts always have variations procedures because of the unpredictable nature of such projects).
- Ability to extend the scope of the contract should be minimal or none, and restrained to the single requirement.
- Ability to extend the duration of the contract should be limited to the ability to accommodate unexpected time overruns (which itself should be subject to a damages/penalty provision where they are attributable to the supplier, and an extension to overheads costs where they are attributable to the purchaser).
- Data security protocols need to be considered if personal data is being shared.
Reference:
LO 1, AC 1.3
NEW QUESTION 60
Which of the following are likely to be advantages of using invitation to tender? Select TWO that apply:
- A. Reducing risks of bribery and corruption
- B. Driving forward planning culture
- C. Lower administration costs
- D. Quick implementation
- E. Short turnaround times
Answer: A,B
Explanation:
Advantages of using invitation to tender may be as below:
No Nepotism: Tenders or bids are evaluated on the basis of certain predetermined criteria, such as price, quality and value for money. In other words, the firm offering the highest quality product or service at the lowest price point would win the contract. As most tender documents are opened and evaluated in a public process, I think that there remains little room for nepotism or favoritism of any kind.
Value for Money: From the perspective of the client, tenders offer the greatest value for the amount of money spent. This is due to the fact that the client can choose from a wide pool of potential suppliers to select the ones that can produce the highest quality product or service at the lowest price point. This allows the company, establishment or organization to save money without having to compromise on quality. Therefore, despite being quite time consuming, tendering is, in my opinion, a profitable long-term process from an organization's point of view.
Encourages Competition: The process of tendering helps promote a competitive market. This is because a number of potential contractors, firms or suppliers get a chance to bid for every project. And because selection depends on quality and price, every bidder tries to reduce operational inefficiencies and redundancies as much as possible in order to lower expenses and improve quality. This entire process encourages healthy competition in the market and prevents complacency and laziness, which in turn provides a boost to innovation and new ideas.
Easier Entry: The system of tendering makes it easier and simpler for new firms to enter the market or even a particular industry. This is due to the fact that contracts under this system are awarded on the basis of predetermined, objective criteria. As a result, even a firm that is a new entrant to the market, having no connections or contacts in the industry, can win a prestigious and lucrative contract by providing the highest value for the client's money. This process therefore helps new firms to quickly get a foothold in the market or industry, thus significantly lowering the traditional barriers to entry.
Reference:
- Characteristics and Benefits of the Tendering Process
- CIPS study guide page 6-8
LO 1, AC 1.1
NEW QUESTION 61
XYZ Ltd is negotiating a long-term supply contract of important parts with a supplier. Dave, procurement manager teams up with Alla, legal manager to construct a service level agreement. Dave is concerned that poor performance of supplier may cause damages to the operations of the organisation. Which of the following can be used in conjunction with SLA to compensate the buying organisation in case of supplier's poor performance?
1. Warranties
2. Force majeure clauses
3. Penalty clauses
4. Service credits
- A. 4 and 2 only
- B. 1 and 3 only
- C. 3 and 4 only
- D. 1 and 2 only
Answer: C
Explanation:
Service level agreement often sets out the minimum quality standards of the services provided, remedies if that standards are not met, consequences if the targets are exceeded. Penalty clauses and service credits are remedies that are often used in conjunction with service level agreement to ensure the performance and to compensate the purchaser if targets are not met.
Reference:
LO 2, AC 2.2
NEW QUESTION 62
Which of the following should be specially noticed in market dialogue with suppliers in specification development?
- A. Both parties must respect confidentiality
- B. Market dialogue is banned in the public sector
- C. The buying organisation must avoid social media at all cost
- D. Market dialogue should only be conducted with well-known supplier
Answer: A
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 63
A supermarket purchases a new batch of house cleaner from new supplier. The supermarket is concerned about possible damage that the house cleaner may cause to consumers' floor. What type of insurance must they cover?
- A. Fire and explosion insurance
- B. Public liability insurance
- C. Product liability insurance
- D. Professional indemnity insurance
Answer: C
Explanation:
Product Liability Insurance is a form of general liability insurance meant to protect a business from financial and legal consequences as a result of bodily injury or property damage due to the use of the business's sold goods or products. Situations that are typically covered by Product Liability Insurance may include:
- A customer harms herself because of the faulty packaging on one of your products
- A drapery set that a customer purchased from your business was highly flammable and caught on fire, eventually damaging her entire kitchen
- A customer with a severe allergy finds trace amounts of tree nuts in your homemade gourmet muffins
- A homemade house cleaner that you sell damaged one of your customer's entire hardwood floor
- A customer becomes sick with food poisoning after eating old shellfish at your restaurant, goes to the hospital, and incurs medical costs caused by your contaminated food products
- A customer's pet becomes ill from ingesting some lining in a pet toy product that you sell In the scenario above, the supermarket is purchasing and reselling house cleaner, which can be covered by product liability insurance.
Public liability insurance is a type of business insurance that covers the cost of claims made by the public that happen in connection with the business activities.
Professional indemnity (PI) insurance is a commercial policy designed to protect business owners, freelancers and the self-employed if clients claim a service is inadequate.
Reference:
LO 3, AC 3.2
NEW QUESTION 64
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