Get Instant Access to L4M3 Practice Exam Questions
Reliable Study Materials & Testing Engine for L4M3 Exam Success!
CIPS L4M3 Exam Syllabus Topics:
| Topic | Details |
|---|---|
| Topic 1 |
|
| Topic 2 |
|
| Topic 3 |
|
| Topic 4 |
|
| Topic 5 |
|
| Topic 6 |
|
NEW QUESTION 46
Which of the following is most likely to be an one-off contract?
- A. Framework Agreement for supply of mono-crystalline silicon
- B. Contract for construction of a power plant
- C. Commercial lease agreement of an office building
- D. Franchise Agreement
Answer: B
Explanation:
One-off contracts are used where a supplier is only needed for a single activity unlikely to be repetitive, and where the need of the buyer is concrete and finite. Among the answers, only construction for power plant is one-off since the work is non-repetitive and the need is clearly defined.
A framework agreement is an agreement between one or more businesses or organisations, "the purpose of which is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, the quantity envisaged".
A Commercial Lease Agreement is a contract used when renting business property to or from another individual or company. It gives the tenant (or renter) the right to use the property for business purposes during the term of the lease in exchange for payment to the landlord.
A franchise agreement is a legally binding document that outlines a franchisor's terms and conditions for a franchisee. Every franchise is governed by these terms, which are generally outlined in a written agreement between both parties.
Reference:
LO 1, AC 1.3
NEW QUESTION 47
Which of the following will be always automatically deemed as a consideration?
- A. Promise given to a third party
- B. Promise to perform over and above an existing obligation
- C. Implied consideration
- D. Past consideration
Answer: B
Explanation:
Consideration only appears in common law countries. Below are some examples of what is and what is not consideration:
- Past consideration is something that has already been done or given. This cannot act as consideration
- Implied consideration: if the detail of a promise to pay is expressed after the provision of goods or services, but there is an implication that such promise would be forthcoming, this may (depending on the facts) be valid consideration.
- A promise given to a third party: this is not normally consideration, and is based on a concept known as privity of contract. Anyone who is not a party to the contract, even if they are beneficiary of it, cannot sue if the terms of the contract are breached.
- A promise to perform over and above an existing obligation: This is always consideration Reference:
- Consideration & Promissory Estoppel
- CIPS study guide page 36-40
LO 1, AC 1.2
NEW QUESTION 48
Which of the following are always considered as minimum preconditions for a contract? Select TWO that apply:
- A. Consideration
- B. Specification
- C. Omission
- D. Intention to be bound
- E. Promise
Answer: A,D
Explanation:
In order to form a contract to come into being, there are five conditions:
- Offer
- Acceptance
- Consideration
- Intention to be legally bound
- Capacity to contract
Reference:
LO 1, AC 1.2
NEW QUESTION 49
Which of the following is the model form of contract for construction which is recommended by World Bank?
- A. FIDIC
- B. JCT
- C. CIPS
- D. ITC
Answer: A
Explanation:
FIDIC is the International Federation of Consulting Engineers (or Federation Internationale des Ingenieurs Conseils in French). FIDIC has produced many publications, including the model form contracts, best practice guidances, research on sustainability, integrity and risk management. FIDIC model form contracts have been developed by this organisation since 1999, now they consist of several different books which are marked by colours. Thus, FIDIC model contracts also have the nickname "Rainbow suite of contracts". Basically, the "Rainbow Suite" include the following books:
* Yellow book: Plant and Design-Build Contract (2 editions: 1999 and 2017)
* Silver book: EPC/Turnkey Contract (2 editions: 1999 and 2017)
* Red book: Construction Contracts (2 editions: 1999 and 2017)
* Emerald book: Conditions of Contract for Underground Works (1st Ed 2019)
* Blue-Green book: Dredgers Contract (2 editions: 2006 and 2016)
* Gold book: Design, Build and Operate Contract Guide
* Pink book: Construction Contract Multilateral Development Bank Harmonised Ed (2 editions: 2005 and 2010) This type of model contract is commonly used around the world because its author, International Federation of Consulting Engineers, collaborates closely with development banks such as World Bank, Africa Development Bank, Asia Development Bank, etc. Every construction project that is financed by these institutions must adopt the FIDIC contracts.
The Joint Contracts Tribunal, also known as the JCT, produces standard forms of contract for construction, guidance notes and other standard documentation for use in the construction industry in the United Kingdom. From its establishment in 1931, JCT has expanded the number of contributing organisations.
ITC (International Trade Centre) produces contracts specifically designed for small companies doing international business, covering the sale of goods, distribution, services and joint ventures. Many small companies are now engaged in international trade, but don't have access to the necessary contract forms to protect themselves. ITC and leading legal experts developed eight generic contract templates that incorporate internationally recognized standards and laws for most small business situations.
CIPS has several model forms of contract designed specifically for IT buying and servicing.
Reference:
LO 3, AC 3.1
NEW QUESTION 50
Which of the following are features of performance specification?
1. Method of achieving the buyer's desired result
2. What needs to be achieved when using the product
3. Purposes of the product
4. Technical and physical characteristics of the product
- A. 1 and 2 only
- B. 2 and 3 only
- C. 2 and 4 only
- D. 1 and 4 only
Answer: B
Explanation:
There are 2 major types of specifications:
1. Performance specifications
These are Specifications that define the purpose of the goods or services in terms of how effectively it will perform. Performance is a logical extension of function. Performance specifications define the task or desired result by focusing on what is to be achieved. They do not describe the method of achieving the desired result.
2. Technical (or conformance) specifications
These are Specifications that define the technical and physical characteristics and/or measurements of a product, such as physical aspects (e.g. dimensions, colour, and surface finish), design details, material properties, energy requirements, processes, maintenance requirements and operational requirements. They are used when functional and performance characteristics are insufficient to define the requirement and are often used for engineering and information technology requirements.
Reference:
- Specification Writing
- CIPS study guide page 9-11
LO 1, AC 1.1
NEW QUESTION 51
Which of the following is used to detail the complex matter that may be verbiage to the main document?
- A. Contract variation
- B. Schedule
- C. Standard terms and conditions
- D. Subcontracting
Answer: B
Explanation:
Without further explanation, a schedule may be deemed to form an integral part of the obligations of either or both parties. Obviously, the scope or binding nature of such schedule depends on the way it is referred to in the obligatory language of the main agreement. Accordingly, merely attaching the general terms and conditions of sale without explaining to which part of the sale they apply or which provisions apply does not subject a sale pursuant to the body text of the agreement to those general terms and conditions.
Subcontracting is the practice of assigning, or outsourcing, part of the obligations and tasks under a contract to another party known as a subcontractor.
Reference:
- Schedules, annexes and exhibits
- CIPS study guide page 22-26
LO 1, AC 1.1
NEW QUESTION 52
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. International standards
- B. National standards
- C. Company standards
- D. Brands
Answer: A
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 53
ABC Ltd is a UK based company. It plans to enter into a contract with XYZ Ltd which is based in Singapore. Which of the following are the mandatory elements for the contract between ABC Ltd and XYZ Ltd to be legally binding? Select THREE that apply.
- A. All parties must have capacity to contract
- B. An amount of money must be paid upfront
- C. There must be an invitation to treat
- D. The two parties must have intention to be bound
- E. The invitation to tender must be sent by the agreed deadline
- F. There must be an offer and an acceptance
Answer: D,F
Explanation:
The formation of the contract is where the contractual journey begins; if no contract is formed, neither of the parties can be under any obligations. Therefore, it is very important to have an understanding of each part of a contract's formation.
In order for a legally binding agreement to be formed, there are four basic requirements to be met:
2.1 Offer
2.2 Acceptance
2.3 Certainty & Intention to Create Legal Relations
2.4 Consideration & Promissory Estoppel
Reference:
- CIPS study guide page 28-42
- Formation of the contract
LO 1, AC 1.2
NEW QUESTION 54
You are to do the KPIs and targets for international supplier and the following was done
1. Delivery in an hour
2. Return orders in an hour
Is that a good thing or not?
- A. Yes, the higher the targets are, the better the outcomes will be
- B. No, the local suppliers are always the best choice
- C. Yes, because these targets will propel the suppliers to continuous improvement
- D. No, because the KPIs are not a realistic and justified
Answer: D
Explanation:
KPIs and the targets for supplier should be SMART:
- Specific: What exactly do you want to achieve?
- Measurable: How will you identify that you have achieved your goal?
- Achievable: Is your goal really attainable?
- Relevant: Is it relevant to you or, in other words, does it align with where you want to be?
- Time-bound (or timely): When will you deliver your goal, and what are the key milestones?
The two KPIs (Delivery in one hour, Return orders in one hour) are not realistic and achievable for international suppliers. Therefore, you should not put such high targets for supplier.
Reference:
- What Are SMART KPIs? (Spoiler: They Don't Really Exist!)
- CIPS study guide page 107-108
LO 2, AC 2.2
NEW QUESTION 55
In common law, which of the following documents is legally binding without the need for consideration?
- A. One-off contract
- B. Blanket order
- C. Hire purchase agreement
- D. Deed
Answer: D
Explanation:
In common law (the legal system in which most rules come from case law or precedents, such as UK, US, Australia, etc), the contract is legally binding if it has the following requirements:
- Offer
- Acceptance
- Certainty & Intention to Create Legal Relations
- Consideration & Promissory Estoppel
- Legal capacity
According to these rules, 'Blanket order', 'One-off purchase', and 'Hire purchase agreement' are contractually binding. One of the reason is that they have consideration.
However, there is a type of legal instruments that does not need consideration to be legally binding. They are called 'Deeds'. A deed (anciently "an evidence") is any legal instrument in writing which passes, affirms or confirms an interest, right, or property and that is signed, attested, delivered, and in some jurisdictions, sealed. It is commonly associated with transferring (conveyancing) title to property. At common law, to be valid and enforceable, a deed must meet several requirements:
- It must state on its face that it is a deed, using wording like "This Deed..." or "executed as a deed".
- It must indicate that the instrument itself conveys some privilege or thing to someone.
- The grantor must have the legal ability to grant the thing or privilege, and the grantee must have the legal capacity to receive it.
- It must be executed by the grantor in presence of the prescribed number of witnesses, known as instrumentary witnesses (this is known as being in solemn form).
- In some jurisdictions, a seal must be affixed to it. Originally, affixing seals made persons parties to the deed and signatures optional, but seals are now outdated in most jurisdictions, so the signatures of the grantor and witnesses are primary.
- It must be delivered to (delivery) and, in some jurisdictions, accepted by the grantee (acceptance).
Reference:
- Deed - Wikipedia
- Formation of the contract
- CIPS study guide page 40
LO 1, AC 1.2
NEW QUESTION 56
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. 1 and 3 only
- B. 2 and 3 only
- C. 2 and 5 only
- D. 1 and 4 only
Answer: A
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 57
According to mailbox rule in some common law countries, at which point the offeree's acceptance will be effective?
- A. When the letter of acceptance has been correctly addressed, its postage paid, and posted.
- B. When the letter of acceptance is received by the offeror.
- C. When the letter of acceptance has been written.
- D. When the letter of acceptance is opened and its contents read by the offeree.
Answer: A
Explanation:
When parties do not negotiate face-to-face, a key Question: becomes when things like acceptances, rejections and revocations take effect. The general rule is that acceptances are effective on dispatch (when they are mailed). Everything else becomes effective when the offeror actually receives them. This idea is codified by the "mailbox rule" which states that acceptance is effective on dispatch, even before the offeror has received it. (The one minor exception to this rule involves option contracts for which acceptances are not effective until they are received by the offeror.) Reference:
- The Mailbox Rule
- CIPS study guide page 34
NEW QUESTION 58
Under a price adjustment agreement, which of the following would be supplier's justification for increasing unit price?
- A. Rise in customer's satisfaction
- B. Rise in fuel price
- C. Rise in economies of scale
- D. Rise in shares price
Answer: B
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 59
To expand its operation, Steel Co. decides to build a new plant. Despite of excitement, the senior management is very concerned about the complexity and risks of such project. Hugo, the procurement manager, suggests that the company can adopt a model form of contract. What is the advantage of using model form of contract?
- A. It shifts the balance of power in the favour of the buyer rather than the contractor
- B. Model form of contract eliminates the need for legal advice totally
- C. The company does not need to draft the drawings as well as specification anymore
- D. The company could avoid the need to draft a complex contract from blank
Answer: D
Explanation:
Advantages and Disadvantages of using model form contracts.
Model form contracts save a lot of time and money. They are written by industry experts and the buyers and suppliers both understand what is included in the contract.
They are mainly used in Construction and term maintenance contacts. Typical ones are JCT and NEC.
Without the use of model form contracts the buyer and supplier will take a long time to write the terms, negotiate and finalise the contract.
This is time and money wasted.
However, model form contracts require buyers and suppliers to have training so you understand them.
Finally, if you are a buyer in a powerful position you cannot exploit that with a model form contract as these are written for mutual benefit.
Reference:
- Procurement Study Buddy on Facebook
- CIPS study guide page 147
NEW QUESTION 60
Under which of the following scenarios an RFQ is most likely to be used?
- A. Purchase of a small number of standardised products under a framework agreement
- B. Purchase of complex machinery
- C. When the buying organisation does not know the requirements in details and needs the input from suppliers
- D. Design of a unique and complex software code
Answer: A
Explanation:
The request for quotations is a procurement method that is used for small value procurements of readily available off-the-shelf goods, small value construction works, or small value services procurements. Request for quotations works best under a framework agreement This procurement method is also known as invitation to quote and shopping, and it does not require the preparation of tender documents to the same extent as open tendering, request for proposals or two-stage tendering.
Among 4 options:
- "Purchase of a small number of standardised products under a framework agreement": the products are standardised and there is a framework agreement in place, so RFQ is the best solution.
- "Purchase of complex machinery": Complex machinery is often a large purchase. Furthermore, suppliers' quality may vary. So RFQ is not suitable, instead, depending on the situation, buyer may opt ITT or RFP to purchase this type of machinery.
- "Design of a unique and complex software code": Unique and complex software is not off-the-shelf, thus RFQ is not suitable.
- "When the buying organisation does not know the requirements in details and needs the input from suppliers": When the detailed requirements are unknown, the best solution is request for proposal or developing dialogue with suppliers.
Reference:
- Request for Quotations
- CIPS study guide page 3-4
LO 1, AC 1.1
NEW QUESTION 61
A procurement manager is preparing a long-term contract with a major supplier. She decides to use the variable pricing arrangement using price indices. The payment terms describe the circumstances and mechanism where the price is allowed to change. In order to successfully manage this type of contract, the buying organisation should have...?
- A. Economy of scale
- B. Value for money
- C. Selection of base year
- D. Good market knowledge
Answer: D
Explanation:
There are several approaches to price adjustment for long-term contract. Describing circumstances and mechanism is one of them. Although this approach has some limitations, it is the best option. It relies on good market knowledge but provides the most equitable approach to satisfying the needs of the purchaser and the supplier.
Reference:
LO 3, AC 3.3
NEW QUESTION 62
Which of the following is likely to reduce risks of different rules regarding when offers and acceptance become effective between legal systems?
- A. Deemed receipt protocol
- B. Withdrawal protocol
- C. Letter of intent
- D. Time lapse
Answer: A
Explanation:
Regarding rule of offer and acceptance, there are some differences among legal system around the world. For example, mailbox rule is generally applied in common law countries such as UK, US, Australia,.. while it is ignored in civil law countries. To clarify on rule of offer and acceptance in international trade, offerors may use expressed terms in their offers. These terms known as deemed receipt protocol.
Reference:
LO 1, AC 1.2
NEW QUESTION 63
Which of the following is a true statement on express and implied terms?
- A. Express terms always take precedent over implied terms
- B. Express terms must be prepared by the party with expert knowledge
- C. Implied terms may derive from oral negotiations
- D. Express terms must always be in writing
Answer: C
Explanation:
Express terms are the terms of the agreement which are expressly agreed between the parties. Ideally, they will be written down in a contract between the parties but where the contract is agreed verbally, they will be the terms discussed and agreed between the parties.
Implied terms are terms implied into the contract by the courts. They are not expressly set out in the contract but are taken to be as effective as if they were and as if they had been included from day one of the contract. The express terms and any implied terms together create the legally binding obligations on the parties.
The types of express terms to be found in a contract are many and varied and will depend on the type of contract. Any term written into the contract is an express term and may refer to price, time scales, warranties and indemnities, limitations on liability, conditions precedent and so on.
An implied term is a term which the courts imply into a contract because it has not been expressly included by the parties. This may be because the parties did not consider it, did not think that any problem would arise in relation to it or simply omitted to include it.
The courts are very reluctant to imply terms into contracts and will only do so in the following circumstances:
1. terms implied under statute
2. terms implied under common law
3. terms implied because of custom or usage
4. terms implied due to previous dealings
5. terms implied 'in fact' or to reflect the parties' intentions
Reference:
- CIPS study guide page 126-132
- Contracts: Express and Implied Terms
LO 3, AC 3.1
NEW QUESTION 64
Since services are intangible, so KPIs for services must be qualitative in all circumstances. Is this statement correct?
- A. Yes, quantitative KPIs are limited to timeliness of supply of goods, defective rates and in-full quantities, which are applied to monitor supplier of physical goods
- B. No, some KPIs for services are measurable by means of outcome, time and space performed
- C. No, KPIs for services must always be quantitative so that they can be measured easily
- D. Yes, the only measure mattered to supply of services is end-users' satisfaction
Answer: B
Explanation:
KPIs are used to monitor supplier's performance. They can be qualitative or quantitative. Of course, service providers can be monitored by quantitative KPIs regarding the outcome achieved (such as uptime in IT contracts), timeliness of deliveries (such as in construction contracts)...
Reference:
LO 2, AC 2.2
NEW QUESTION 65
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. WTO rules
- B. Egypt's legal system
- C. CISG
- D. Canada's legal system
Answer: D
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 66
The model form contract invented by Institute of Civil Engineers is...?
- A. IMechE/IET
- B. FIDIC
- C. JCT
- D. NEC
Answer: D
Explanation:
NEC - New Engineering Contracts is a family of contracts invented by Institute of Civil Engineers. The contracts are suitable for procuring a diverse range of works, services and supply, ranging from major framework projects through to minor works and the purchase of supplies and goods.
FIDIC is a French language acronym for Federation Internationale Des Ingenieurs-Conseils, which means the international federation of consulting engineers. It was started in 1913 by the trio of France, Belgium and Switzerland. The United Kingdom joined the Federation in 1949. FIDIC is headquartered in Switzerland and now boasts of membership from over 60 different countries. FIDIC published its first contract, titled The Form of contract for works of Civil Engineering construction, in 1957. As the title indicated, this first contract was aimed at the Civil Engineering sector and it soon became known for the colour of its cover, and thus, The Red Book. It has become the tradition that FIDIC contracts are known in popular parlance by the colour of their cover. This first contract by FIDIC was undertaken jointly with the International federation of Building and Public works. FIDIC's concerted effort at achieving broad consultation and acceptance of its contract forms has seen subsequent editions of its contracts being ratified by the International Federation of Asian and Western Pacific Contractors Association, Associated General Contractors of America and the Inter-American Federation of the Construction Industry, Multilateral Development Banks among others. Because of the broad support it enjoys, FIDIC contracts are the foremost contracts in international construction.
The Joint Contracts Tribunal, also known as the JCT, produces standard forms of contract for construction, guidance notes and other standard documentation for use in the construction industry in the United Kingdom. From its establishment in 1931, JCT has expanded the number of contributing organisations.
IMechE/IET: Institution of Mechanical Engineers/Institution of Engineering and Technology - two separate institutes that issue jointly agreed model forms covering the design, supply and installation of electrical, electronic and mechanical plant including special conditions for the ancillary development of software.
Reference:
LO 3, AC 3.1
NEW QUESTION 67
Royal Naval Hospital at Rockstown, Anyport manages a fleet of nine ambulance vehicles. During busy periods, it becomes very difficult to keep track of the location of each ambulance (and the nature of their journey). Continual problems lead to the proposal for a new control system (ERNS).
For this ERNS project, the procurement department has drafted a specification in which only a bullet point list of basic requirements was written down. The procurement manager understands that the specification should be developed more specifically but a cross functional team from the Hospital could not do that. A senior buyer suggests that some of Hospital's pre-qualified suppliers could support them in developing the specification.
Which of the following should be a priority approach of procurement department in developing dialogue with those suppliers about specification development?
- A. Internal discussion
- B. General networking
- C. Request for quotation from the suppliers
- D. One-to-one meeting with the suppliers
Answer: D
Explanation:
The procurement team has drafted basic requirements in the specification. They will need to develop it further and more specific. Developing market dialogue with supplier is a good solution. There are number of approaches which can be taken to engage with suppliers:
- General meetings: buyer meets supplier at a networking event (such as trade show) or social media. These discussions are unlikely to deliver very specific information.
- One-to-one meetings: This will be most likely to deliver direct input into specification development and supplier-specific product development information.
- Group visits
- Meet-the-buyer events
- Formal negotiations or competitive
The answer for this QUESTION should be One-to-one meeting.
Reference:
LO 2, AC 2.1
NEW QUESTION 68
Which of the following can be considered as implied terms in a contract?
1. Case law
2. Statute
3. Trade custom
4. A term can never be implied, it must always be expressed by the parties
- A. 2, 3 and 4 only
- B. 1, 2 and 4 only
- C. 1,3 and 4 only
- D. 1, 2 and 3 only
Answer: D
Explanation:
An implied term is a term which the courts imply into a contract because it has not been expressly included by the parties. This may be because the parties did not consider it, did not think that any problem would arise in relation to it or simply omitted to include it.
The courts are very reluctant to imply terms into contracts and will only do so in the following circumstances:
1. terms implied under statute
2. terms implied under common law
3. terms implied because of custom or usage
4. terms implied due to previous dealings
5. terms implied 'in fact' or to reflect the parties' intentions
Reference:
- Contracts: Express and Implied Terms
- CIPS study guide page 126
LO 3, AC 3.1
NEW QUESTION 69
Michelle contacts Hannah and asks her if she would be interested in purchasing her car for £2000. Hannah immediately takes £2000 to Michelle and says she wants to buy the car. Michelle subsequently refuses to proceed. Has the contract between Michelle and Hannah been made?
- A. No, because by refusing to proceed, Michelle rejects Hannah's counter-offer
- B. Yes, by her performance Hannah has accepted Michelle's offer on selling the car
- C. Yes, because both parties have full legal capability to enter into a contract
- D. No, because Michelle has rejected Hannah's offer on buying the car
Answer: D
Explanation:
To solve the question, you must distinguish the following notion:
- Offer: The case of Storer v Manchester City Council [1974] 1 WLR 1403 outlines that an offer is: An expression of willingness to contract on specified terms, with the intention that it is to be binding once accepted
- Acceptance: in order for a contract to be formed, the offer must be accepted. Acceptance represents the meeting of the minds of the parties to the contract - both agree to exchange something for the other (payment, services, goods, etc.).
- Counter offer: is an offer made in response to a prior offer.
- Invitation to treat: An important distinction to make in contract law is that between an offer and an invitation to treat. An invitation to treat is usually an invitation for another party to make an offer. It may also be defined as an indication that a party is open to negotiation.
Here are some key distinctions of offers and invitation to treats.
Offer:
* Certain promise to be bound
* Clear and specified terms
* The conduct or words of the party show certainty
* There is no room for negotiation
Invitation to treat:
* There is room for negotiation
* There is an invitation for offers
* There is a request for information
* Lack of certainty
In the scenario above, initially Michelle just gives an invitation to treat because she is asking whether Hannah is interested to buy her car (request for information from Hannah). Hannah may reject or go into a negotiation with Michelle. Then, Hannah makes an offer by taking the money and shows her intention to be legally bound. At this point, when Hannah's offer is present, Michelle can accept or reject. When she rejects, the contract is not formed. The answer must be "No, because Michelle has rejected Hannah's offer on buying the car".
Reference:
- Definition of Counter Offer
- Formation of the contract
- CIPS study guide page 28-35
LO 1, AC 1.2
NEW QUESTION 70
......
Validate your Skills with Updated L4M3 Exam Questions & Answers and Test Engine: https://www.pass4surequiz.com/L4M3-exam-quiz.html
Tested & Approved L4M3 Study Materials Download: https://drive.google.com/open?id=1NV4oPv_QLI72Pl3u8s2NYvzEUEe78Szu