L4M3 Exam Questions and Answers | Exam-Dumps (Page: 3)

QUESTION: 11

Which of the following is the term that describes an item bought for a single and non-recurring use or purpose?

Call-off purchase
Ad-hoc purchase
Operational purchase
Stock purchase

Answer(s): B

Explanation:

Ad-hoc purchase is the item bought for a single and non-recurring use or purpose. A call-off contract, also known as a blanket order, is a purchase order which enables bulk orders over a period of time.
Operational procurement refers to the procurement of goods and services that are required to sustain an organization's day-to-day business operations.

Reference:

CIPS study guide page 58 LO 1, AC 1.3

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QUESTION: 12

The pricing arrangement in which markup is added into cost base to calculate the final price is known as...?

Fixed Price approach
Market based approach
Price indices
Cost plus pricing

Answer(s): D

Explanation:

The market approach is a method of determining the value of an asset based on the selling price of similar assets.
A fixed-price strategy means you set a price and keep it constant for an extended period of time. Cost-plus pricing is also known as markup pricing. It's a pricing method where a fixed percentage is added on top of the cost to produce
A price index (PI) is a measure of how prices change over a period of time, or in other words, it is a way to measure inflation. There are multiple methods on how to calculate inflation (or deflation).

Reference:

CIPS study guide page 176-179 LO 3, AC 3.3

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QUESTION: 13

Cleveland Insurance (Cleveland) offers a range of insurance services. The main software used in the call centre is a customer relationship management (CRM) system. Cleveland perceived an urgent need to replace the existing CRM system to deal with the increasing number of customers and services.
Urgent Digital Ltd (Digital) is one of the bidders of Cleveland's ITT for designing, building and managing the new CRM system. Its bid team is led by Hank Irvine, its technical director. Hank realises that winning the Cleveland contract (valued at approximately £50M) will enhance his career. During discussions with Cleveland, Hank offers certain assurances regarding timescales for the project. He has not carried out any investigations into the viability of the timescales. Hank has little idea whether the timescales can be met.
Cleveland decides that Digital's bid meets with its requirements, especially given the assurances in timescale offered by Hank, and decides to proceed with it, subject to a formal contract. Eventually, a formal contract is signed by both parties. The initial assurances given by Hank about the timing of the project are never going to be achieved and are at best grossly exaggerated.

Cleveland brought the case to the court and sought rescission of contract with Digital. Is Cleveland's claim appropriate in this case?

Yes, because Cleveland needs to seek rescission first before claiming for damages
Yes, because both parties agreed with rescission of their contract
No, because the work had been carried out which could not be returned
No, because the contract does not include any provision on rescission

Answer(s): C

Explanation:

Hank's pre-contractual assurances may amount to misrepresentation. Remedies for misrepresentation could be rescission of contract or damages. Rescission will be impossible in the following instance:
- Where the innocent party has affirmed the contract; that is, acted in a way confirming that they wish it to continue
- Where the claim has not been brought within a reasonable time (this is a point of general law)
- Where restitution (returning to the pre-contractual position) is impossible (e.g. because the goods have been consumed or have deteriorated)
- Where there has been intervention of innocent third-party (e.g., if the goods have been sold on) In this case, the subject of contract is designing, building and managing the new CRM system which is impossible to be restituted. Therefore, the contract cannot be rescinded.

Reference:

CIPS study guide page 53-55 LO 1, AC 1.2

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QUESTION: 14

Which of the following are examples of incentives which can be embedded in contract terms? Select THREE that apply

Gainshare
Indemnity
Contract extensions
Service credits
Liquidated damages
Faster payment

Answer(s): A,C,F

Explanation:

Gainsharing is a system of management used by a business to increase profitability by motivating suppliers to improve their performance. As their performance meets the targets, suppliers share financially in the gain (improvement). Gainshare is an incentive for cost control.
Other incentives for good performance are:
- Contract extensions: Buyer can extend the contract duration as an incentive to supplier for meeting their targets.
- Accelerated payments

Reference:

CIPS study guide page 187-188
LO 3, AC 3.3

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QUESTION: 15

Which of the following should be taken to avoid the conflicts between orally negotiated terms before the conclusion of contract and the final written contract?

Finding signs of misrepresentation of the other contracting party
Prevailing orally negotiated terms over the final written contract
Embedding a term excluding all prior oral discussions that are not mentioned in the final written contract
Avoiding long negotiation

Answer(s): C

Explanation:

When a written contract is based on oral negotiation, to avoid the conflicts between orally negotiated terms and final written contract, the contract should include an express term that specifically excludes all prior oral discussion. However, orally negotiated terms can be used to interpret the final contract.
This practice (excluding prior discussion) is so common in international commercial contract that UNIDROIT Principles of International Commercial Contracts have an article (2.1.17) dealing with this.

Reference:

CIPS study guide page 130 LO 3, AC 3.1

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CIPS L4M3 Exam (page: 3) CIPS Commercial Contracting Updated on: 25-Dec-2025

QUESTION: 11

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QUESTION: 12

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QUESTION: 13

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QUESTION: 14

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QUESTION: 15

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CIPS L4M3 Exam (page: 3)
CIPS Commercial Contracting
Updated on: 25-Dec-2025