Tested & Approved L4M3 Study Materials Download Free Updated 161 Questions [Q61-Q81]

NO.61 Which of the following is an invitation to treat?

Purchase order

Invoice

Price list

Tender bid

NO.62 Bandpro is a reseller of branded computer products to the private and public sector. The procurement team must purchase 500 items each day solely by multiple phone calls and emails to suppliers. Due to this practice, it takes a lot of time to track and collect relevant documents. Some important documents even get lost, which makes procurement audit more burdensome. Which of the following would increase the robustness of audit trails in procurement activities?

Every evidence must be recorded by paper

Adopt e-procurement

Spend less time on auditing procurement procedures

Rectify non-compliant activities

NO.63 Company A buys a lorry from Company B on hire purchase. During the contractual period, Company A makes default in paying the instalment. Company B has…?

The right to take repossession of the lorry

The option to repossess the lorry

No right to take repossession

Company B has to approach the court

NO.64 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

Supplier selection mechanism

Insurance requirements

Period of hire

Ratio decidendi

Guarantees

NO.65 According to rule of contract formation, which of the following is a valid acceptance?

The person orally agrees to pay the offered price

The person states that she is able to pay the offered price

The person asks for a lower price

The person says that she will think about it overnight

NO.66 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?

Rights to refunds or repairs

Right of set-off

Right of third party

Right of extending payment

NO.67 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?

No, because challenging the user’s demand is the role of procurement

Yes, because designing complex specification would waste procurement manager’s time

Yes, because procurement professional has no expertise in IT sector

No, because designing complex specification could only be outsourced

NO.68 Which of the following are the conditions for revocation of offer to be valid?
1. The offeree has not received the offer yet
2. Revocation of offer must be communicated with the offeree
3. Revocation of offer must be sent via email
4. Offeree has not accepted the offer yet

2 and 4 only

1 and 4 only

1 and 3 only

2 and 3 only

NO.69 CISG will be most likely to apply to which of the following transactions?

Sale of electricity

Sale of a property

Sale of iron ores

Sale of a ship

NO.70 Which of the following are true statements about RFQ process? Select TWO that apply.

Buying organisation should only send RFQ to pre-qualified suppliers

RFQ process requires the suppliers to submit their technical proposals

RFQ process creates heavier administrative burdens than tendering process

Price is often the only variable in the RFQ and quotations

RFQ process is not suitable for low value purchase

NO.71 Which of the following contracts would be best suited to a ‘variable pricing’ arrangement?

A contract for window cleaning during the next three months

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

A contract for the supply of 100 printing machines to be delivered next month

A contract for the supply of lubricating oil for immediate delivery

NO.72 What is the purpose of using key performance indicators in procurement and supply?

To validate the supplier’s bid or tender

To monitor supplier’s performance

To ease the termination process

To qualify which supplier is suitable

NO.73 A company is considering entering a new market. Which of the following are the external factors that influence the difference between cost and price of this company? Select THREE that apply

Procurement policy

Process efficiency

Business strategy

Threat of substitution

Competitiveness of the market

Relative bargaining power of supplier and purchaser

NO.74 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?

No, the amount claimed is too excessive and it may put Prosolia into insolvency. The clause must be void

No, the clause must be treated as a penalty clause which is unenforceable in UK

Yes, the amount is a reward to the employer as they have supervised and monitored the projects

Yes, the clause is a genuine estimate of possible losses that GPP may have suffered and therefore, it is enforceable.

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

NO.75 Infra Constructions receive a contract for construction of a building, and following terms were agreed upon. “The entire cost of the project will be reimbursed to Infra Constructions (estimated cost of the project being $ 25 million). The profits will be 20% of the entire cost of a project subject to a max of $ 5 million.” This arrangement is an example of…?

Incentive pricing arrangement

Gain-share/pain-share arrangment

Cost-plus pricing arrangement

Fixed-pricing arrangement

NO.76 Which of the following regulates barriers to the provision of services between countries?

CISG

GATS

ADA

Incoterms

NO.77 If service level agreement is used as a schedule that makes up the contract, it will be most likely to be a part of…?

Pricing arrangement

Performance management framework

Exclusion of liabilities

Specifications

NO.78 What is the pricing method that incentivises the supplier to control their costs?

Penetration pricing

Cost-plus pricing

Target Costing

Skimming pricing

NO.79 Under which of the following scenarios an RFQ is most likely to be used?

Purchase of a small number of standardised products under a framework agreement

Purchase of complex machinery

Design of a unique and complex software code

When the buying organisation does not know the requirements in details and needs the input from suppliers

NO.80 Streaming Ltd is a music streaming provider based in the UK. The company is looking for extending its presence in the US. To achieve this, the company needs to outsource the data centre service to a local company. To monitor the performance, the procurement manager would like to introduce a service level agreement (SLA) to the data centre service provider. Which of the following should be included in the SLA?
1. System availability
2. The mean time to recover from system failure
3. The actual number of on-time service delivery
4. Dispute resolution procedure

1, 3 and 4 only

1, 2 and 4 only

1, 2 and 3 only

2, 3 and 4 only

NO.81 Which of the following should be applied when measuring frequency of on-time deliveries during a contract period?

Qualitative assessment

Numerical measure

Binary measure

Subjective measure

Tested & Approved L4M3 Study Materials Download Free Updated 161 Questions [Q61-Q81]

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