L4M3 Exam Questions and Answers | Exam-Dumps (Page: 5)

QUESTION: 21

Southwark is negotiating a contract with Orchard to provide software and IT services. Orchard will manufacture and install the products which are contractually supplied by IBM. Southwark's procurement manager is worried that during the contract there would be some problems that they would not able to claim for damages from Orchard.
Which of the following should be included in the head contract so that Southward can sue IBM, should the need arise?

Negligence
Indemnity
Collateral warranty deed
Insurance

Answer(s): C

Explanation:

A Collateral Warranty is a contract under which a consultant, a building contractor or a sub- contractor warrants to a third party that is has fulfilled its obligations under its professional appointment, building contract or sub-contract. The purpose of a Collateral Warranty is to give a third party, who is not a party to the original contract, rights to enforce that original contract. In this case, IBM is the subcontractor, then purchaser can use collateral warranty deed to bind them.

Reference:

- Collateral Warranties an Overview
- CIPS study guide page 39-40 LO 1, AC 1.2

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QUESTION: 22

In a contract, both buyer and supplier agreed the lead time is 3 days. The contract also requires that any variation must be made in writing. Then the buyer places an order by phone call and requests delivery the next day, but the supplier delivers on the third day since the order. Can buyer refuse to pay as supplier did not deliver per time?

No, the supplier delivers within a reasonable time
Yes, late delivery is a force majeure event
Yes, the supplier has breached the contract
No, supplier has shortened lead time to 1 day

Answer(s): A

Explanation:

Lead time is the amount of time that passes from the start of a process until its conclusion. In procurement, lead time can be understood as the amount of time that passes from placing an order until the delivery.
In the scenario, the contract requires the supplier to make a delivery within 3 days since the order. This contract can only be amended with written consent from both parties. Therefore, there is no ground for shortening the lead time to 1 day because the new lead time is only the request of buyer. Then the supplier still makes delivery within agreed lead time. LO 1, AC 1.1

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QUESTION: 23

Which of the following are reasons why a purchaser wants to embed a subcontracting clause into the main contract? Select TWO that apply:

To induce the conflicts between the main contractor and subcontractors
To improve supply chain transparency
To reduce the main contract complexity
To keep main contractor liable
To condemn whole liabilities to subcontractors

Answer(s): D

Explanation:

There are number of reasons why the purchaser will want to control the supplier's subcontracting:
- Supply chain transparency: Normally the purchaser has invested a lot of effort into selecting the right contractor. However, the main contractor's selection of subcontractor might not be in such careful manner, which may result in poor performance. Purchaser must know who subcontractors are. Controlling the subcontracting process can help the purchaser control the outcome.

- Contract terms: the purchaser's requirements must be reflected in the subcontracts. The subcontracting clauses may require the main contractor to do this.
- Liability: the main contractor may subcontract the whole or a part of its liabilities. Subcontracting clause may bind the contractor to be liable with the work, it cannot just blame the subcontractor for any faults.

Reference:

CIPS study guide page 154-155 LO 3, AC 3.2

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QUESTION: 24

In a sale contract, a clause requires the seller to "defend, reimburse, and hold harmless" the buyer and its personnel from and against any and all damages arising in connection with some specific circumstances. This clause is an example of...?

Insurance
Liquidated damages
Indemnity
Force Majeure

Answer(s): C

Explanation:

An indemnity is a promise by one party to compensate another for the loss suffered as a consequence of a specific event, called the ''trigger event''. The trigger event can be anything defined by the parties, including:
- A breach of contract;
- A party's fault or negligence;
- A specific action.
An indemnity operates as a transfer of risks between the parties, and changes what they would otherwise be liable for or entitled to under a normal damage claim. Force Majeure Provisions: A force majeure event refers to the occurrence of an event which is outside the reasonable control of a party and which prevents that party from performing its obligations under a contract.
Liquidated damages are presented in certain legal contracts as an estimate of otherwise intangible or hard-to-define losses to one of the parties. It is a provision that allows for the payment of a specified sum should one of the parties be in breach of contract. LO 3, AC 3.2

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QUESTION: 25

Which of the following encourages social and environmental criteria in public sector contracting in the UK?

Social Action, Responsibility and Heroism Act
The Public Services Act
Children and Social Work Act
Supply and Appropriation Act

Answer(s): B

Explanation:

Social and environmental criteria are increasingly encouraged in public sector contracting. In the UK, The Public Services (Social Value) Act 2012 encourages public organising to apply social and environmental criteria in contract.

Reference:

CIPS study guide page 98-99 LO 2, AC 2.1

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CIPS L4M3 Exam (page: 5) CIPS Commercial Contracting Updated on: 12-Feb-2026

QUESTION: 21

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QUESTION: 22

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QUESTION: 23

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QUESTION: 24

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QUESTION: 25

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Reference:

CIPS L4M3 Exam (page: 5)
CIPS Commercial Contracting
Updated on: 12-Feb-2026