Updated Apr-2023 Exam Materials for You to Prepare & Pass L4M3 Exam.
Pass Your L4M3 Exam at the First Try with 100% Real Exam
CIPS L4M3 Exam Syllabus Topics:
| Topic | Details |
|---|---|
| Topic 1 |
|
| Topic 2 |
|
| Topic 3 |
|
| Topic 4 |
|
| Topic 5 |
|
NEW QUESTION 58
Social and environmental criteria are often incorporated into which of the following type of specification?
- A. Conformance specification
- B. Technical specification
- C. Output specification
- D. Design specification
Answer: C
Explanation:
Developing and using generic specifications is as import in the sustainable procurement process as it is in the traditional procurement process. During this stage, human/labour rights and environmental performance criteria should be translated into specifications that meet specific requirements of the specified outcome, desired by the procurement action.
The specification stage is key to all types of contract. Building in environmental and social considerations at this early stage, provides a clear indication to suppliers that sustainability is important to the UN organization. Consider available alternatives which are less environmentally and socially damaging. Consider all the phases of a product's life cycle (e.g. production, transportation, maintenance, disposal, etc) when determining its cost and environmental impact. Assess the overall environmental and social integrity of suppliers by looking at their policies and practices.
Specifications which are output-based rather than input-based can increase supplier innovation, reduce waste and minimise harmful social and environmental impacts.
Reference:
- Sustainable Procurement
- CIPS study guide page 95-99
LO 2, AC 2.1
NEW QUESTION 59
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. An amount of money must be paid upfront
- B. The two parties must have intention to be bound
- C. All parties must have capacity to contract
- D. There must be an offer and an acceptance
- E. There must be an invitation to treat
- F. The invitation to tender must be sent by the agreed deadline
Answer: B,D
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 60
Which of the following is regulated by standard ISO 14001?
- A. Environmental management
- B. Energy management
- C. Information security management
- D. Quality management systems
Answer: A
Explanation:
ISO has about 22,000 international standards covering a vast range of aspects of product or service quality. Below are some of the most common ISO standards:
- ISO 9001: Quality management system
- ISO 27001: Information security management
- ISO 5001: Energy management
- ISO 14001: Environmental management
Reference:
- ISO 14001:2015 Environmental management systems - Requirements with guidance for use
- CIPS study guide page 86
LO 2, AC 2.1
NEW QUESTION 61
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?
- A. Right of set-off
- B. Right of third party
- C. Right of extending payment
- D. Rights to refunds or repairs
Answer: A
Explanation:
In certain circumstances, where two parties have monetary debts against each other, the right to set-off may arise. A right of set-off allows a ("Party 1") to take into account the amount owed to it by the second party ("Party 2") against any amount owed by Party 1 to Party 2, each party must be a debtor and a creditor.
Common law provides the key features that must be present for set-off to arise are;
1. mutuality of debts (each party must be the sole beneficial owner of the debt it is owed and the sole person liable for the debt it owes)
2. the claims each party has must be for non-payment of money
The common law provisions of set-off can be greatly enhanced by the inclusion of a contractual right to set-off (this is discussed further below) so that set-off is applicable in a greater range of situations. If you envisage set-off being a useful right it is not advisable to rely on the implied ability to use it (via common law or equitable set-off). Common law and equitable set-off are subject to various conditions and limitation however, a contractual right of set-off can be drafted to ensure parties are able to agree exactly how and when set-off should be applied.
In the above scenario, the supplier owes the manufacturer the payment for damages, while the manufacturer owes the supplier the payment for goods. This is mutuality of debts, which leads to right of set off.
Reference:
- Set-off on the right foot: a practical guide to set-off
- CIPS study guide page 158-159
LO 3, AC 3.2
NEW QUESTION 62
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, because these targets will propel the suppliers to continuous improvement
- B. No, the local suppliers are always the best choice
- C. Yes, the higher the targets are, the better the outcomes will be
- 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 63
Standard terms and conditions should become the governing terms for which group of items?
- A. Leverage items
- B. Routine items
- C. Strategic items
- D. Bottleneck items
Answer: B
Explanation:
Standard terms and conditions are set of terms that is prepared by an organisation. These terms can become the governing terms in low-value, low-risk transactions (or Routine items according to Kraljic's portfolio model). They can be a reference when negotiating for more important contract.
Reference:
LO 3, AC 3.1
NEW QUESTION 64
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. The company does not need to draft the drawings as well as specification anymore
- B. The company could avoid the need to draft a complex contract from blank
- C. Model form of contract eliminates the need for legal advice totally
- D. It shifts the balance of power in the favour of the buyer rather than the contractor
Answer: B
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 65
Which of the following is the model form of contract for construction which is recommended by World Bank?
- A. ITC
- B. FIDIC
- C. CIPS
- D. JCT
Answer: B
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 66
Which of the following regulates barriers to the provision of services between countries?
- A. GATS
- B. CISG
- C. Incoterms
- D. ADA
Answer: A
Explanation:
- The General Agreement on Trade in Services (GATS) is a treaty of the World Trade Organization (WTO) that entered into force in January 1995 as a result of the Uruguay Round negotiations. The treaty was created to extend the multilateral trading system to service sector, in the same way the General Agreement on Tariffs and Trade (GATT) provides such a system for merchandise trade.
- CISG is the Vienna Convention on Contracts for the International Sale of Goods. This is a voluntary treaty under United Nations Commission on International Trade Law (UNCITRAL). The purpose of the Vienna Convention is to set out a framework for international transactions based on a uniform approach. It establishes substantive rules that regulate the duties and obligations of both parties, including the delivery of goods, contract formation, and remedies for breach of contract.
- The Incoterms or International Commercial Terms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) relating to international commercial law. They are widely used in international commercial transactions or procurement processes and their use is encouraged by trade councils, courts and international lawyers. A series of three-letter trade terms related to common contractual sales practices, the Incoterms rules are intended primarily to clearly communicate the tasks, costs, and risks associated with the global or international transportation and delivery of goods. Incoterms inform sales contracts defining respective obligations, costs, and risks involved in the delivery of goods from the seller to the buyer, but they do not themselves conclude a contract, determine the price payable, currency or credit terms, govern contract law or define where title to goods transfers.
- ADA is Anti-Dumping Agreement (Implementation of Article VI of the GATT).
LO 1, AC 1.3
NEW QUESTION 67
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 68
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 customer's satisfaction
- D. Rise in fuel price
Answer: D
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 69
Which of the following is the most suitable model contract for car lift manufacturing?
- A. ITC
- B. FIDIC
- C. IMechE/IET
- D. CIPS
Answer: C
Explanation:
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. Car lifts are mechanical products, so IMechE/IET is the most suitable model contract for this type of product.
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 Chartered Institute of Procurement and Supply (CIPS) has some model contracts for IT functions including: supply and installation of computer equipment, support and maintenance of bespoke software, servicing of computer equipment,...
The International Trade Centre (ITC) produces contracts specifically designed for small companies doing international business, covering the sale of goods, distribution, services and joint ventures.
Reference:
LO 3, AC 3.1
NEW QUESTION 70
In the UK, Unfair Contract Terms Act 1977 regulates which of the following?
- A. Effectiveness of contract terms in the standard terms and conditions
- B. Validity of a contract when it is formed on the basis of misrepresentation
- C. Rule of offer and acceptance
- D. Rules regarding battle of the forms
Answer: A
Explanation:
The Unfair Contract Terms Act 1977 (c 50) is an Act of Parliament of the United Kingdom which regulates contracts by restricting the operation and legality of some contract terms. It extends to nearly all forms of contract and one of its most important functions is limiting the applicability of disclaimers of liability. The terms extend to both actual contract terms and notices that are seen to constitute a contractual obligation.
Under this regulation, if a clause within the standard terms in use is considered as 'unfair', the clause will be ineffective (or the other party will be entitled to avoid the clause). At court, the clause that is deemed to be unfair will undergo a 'reasonableness' test or an 'unfairness' test.
Reference:
- Maybe your standard terms are ineffective. Here's why
- CIPS study guide page 135
LO 3, AC 3.1
NEW QUESTION 71
A fashion company is drafting a specification for an order in next year. The company wants to expand its supply base in low cost countries. The procurement department is considering applying standard ISO 3759 on method for the preparation, marking and measuring of textile fabrics, garments and fabric assemblies for use in tests for assessing dimensional change after a specified treatment. Which of the following should be taken into account when embedding this standard into the specification?
- A. Supplier selection
- B. Type of specification
- C. Date of publication
- D. Legality
Answer: C
Explanation:
Standards are incorporated into specifications by simply cross-refering to the relevant standard by its number and date of publication. It is important to include the date of publication. All standards are reviewed from time to time and their content changes. The absence of the publication date will lead to disrupts over which version of the standard actually applies to the contract.
Reference:
LO 2, AC 2.1
NEW QUESTION 72
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
- A. 1 and 4 only
- B. 2 and 4 only
- C. 1 and 3 only
- D. 2 and 3 only
Answer: B
Explanation:
A revocation of offer is the withdrawal of a previous offer to engage in some sort of legally binding contract. The previous offer had to have been such that it would have immediately become legally binding if the other party had formally agreed to it.
A core ruling defining revocation of offers was established by Payne v. Cave. This case established that neither party is bound to an agreement until an offer has been made by one and formally accepted by the other.
If an offer has been made, the offering party has a right to withdraw it up to formal acceptance by the offeree. Revocation basically serves as formal, legally verifiable notice that a withdrawal was made, and it's valid so long as it is communicated to the offeree before they accept.
The case of Byrne v. Van Tienhoven supports this by establishing that the withdrawal of an offer by telegram is only valid if the telegram is received before the offer is accepted. The case of Dickinson v. Dodds further establishes that the party making the offer can communicate the revocation through a third party.
Reference:
- What Is a Revocation of Offer?
- CIPS study guide page 31
LO 1, AC 1.2
NEW QUESTION 73
In a contract, express terms and implied terms may contradict on the same issues. Under which of the following circumstances, implied terms will override express terms?
- A. Implied terms are created by trade customs
- B. Implied terms are created by law which prevents them to be overridden
- C. No circumstances. Express terms always take precedence over implied terms
- D. Contracting parties are silent on a matter that was not included in express terms
Answer: B
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.
Express terms are explicit and will normally override implied terms unless the implied term is created by statute and the law states that it cannot be overridden.
Reference:
- Contracts: Express and Implied Terms
- CIPS study guide page 126-132
LO 3, AC 3.1
NEW QUESTION 74
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. Company standards
- B. Brands
- C. National standards
- D. International standards
Answer: D
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 75
Nestle gave away records of "Rockin' Shoes" or a voucher to people who sent in three wrappers from Nestle's 6d. milk chocolate bars as well as 1s 6d. Which of the following were the consideration of Nestle's customer? Select TWO that apply
- A. Milk chocolate bar
- B. The voucher
- C. 1s 6d
- D. "Rockin' Shoes" record
- E. Three wrappers
Answer: C,E
Explanation:
Consideration is one thing given in exchange for another.
In this case, considerations of customers are three wrappers and 1s6d. Consideration of Nestle is Rockin' Shoes record or a voucher.
Reference:
LO 1, AC 1.2
NEW QUESTION 76
Which of the following shall help the purchaser control the selection of tier 2 suppliers?
- A. Insurance clause
- B. Subcontracting clause
- C. Guarantee clause
- D. Warranty clause
Answer: B
Explanation:
When a party takes on a contractual obligation, they are legally required to perform the obligation.
That same contracting party is still entitled to subcontract out the work to another service provider, unless the contract:
- is a contract for personal services, such an employment contract
- contains an express term preventing subcontracting out the work, or an implied term Subcontracting clauses are written to control whether the contractor is entitled to subcontract, and how purchaser shall control that subcontracting process.
Reference:
- Subcontracting clauses (delegation of contractual obligations to third parties)
- CIPS study guide page 153-157
LO 3, AC 3.2
NEW QUESTION 77
SFO procurement manager sent a request for quotation to Vogon International in which he determined the contract terms and specification. In SFO's standard terms and conditions, it is stated that 'Goods shall be delivered and Services performed by the applicable Delivery Date. Supplier must notify Buyer 3 days prior to the Delivery Date if Supplier is likely to be unable to meet a Delivery Date.' Vogon replied with a quotation without any amendment to SFO's terms & conditions. The SFO procurement manager found the prices were reasonable and submitted to senior management. Senior management team accepted that quotation and sent a notification to Vogon. On the Delivery Date, Vogon said they had no capacity to supply the product as the quotation due to a workers' strike. Did Vogon breach any agreement with SFO?
- A. No, because Vogon had no intention to be bound by the quotation, therefore, it didn't constitute a contract
- B. Yes, because the contract had been formed between SFO and Vogon with the quotation as an offer and the notification as an acceptance
- C. No, because the strike is a force majeur event, so Vogon did not breach any contract with SFO
- D. Yes, because the contract was formed since Vogon had sent the quotation as an acceptance to SFO's offer
Answer: B
Explanation:
SFO issued an RFQ with defined terms and condition and detailed specification. This RFQ can be considered as an invitation to treat. Vogon's quotation is an answer to the purchaser's RFQ and is an offer to SFO. The contract come to life at the time Vogon received the notification from SFO senior management.
The strike may be a force majeur event, depending on the contract particular clauses and jurisdiction. In common law countries, force majeur is applicable as an exclusion of liability only if the contract allows it. In many civil law countries, force majeur is an implied term. But in every jurisdiction, force majeur is only a reason for excluding liability for non-performance of a contract. In other words, the non-performance party is not liable for any breach if force majeur event occurs but the event does not exclude the breach.
LO 1, AC 1.2
NEW QUESTION 78
A tire manufacturer entered into a contract with a distributor. In the contract, the distributor is prohibited from selling the tire under the price list. The distributor must pay $5 for each tire sold in breach. The amount of $5 is known as...?
- A. Liquidated damages
- B. Caveat Emptor
- C. Quantum meruit
- D. Penalty
Answer: A
Explanation:
This scenario is in fact based on a famous case law: Dunlop Pneumatic Tyre Company v New Garage & Motor co [1915] AC 79. In this case law, the House of Lords identified the clause as liquidated damages, and therefore enforceable.
However, if this case had happened in 2015 or afterwards, there would be some legal issues:
- The price agreement is prohibited by Competition Act 1998
- If the agreement is allowed by Competition Act, as in the case Cavendish Square Holding BV (Appellant) v Talal El Makdessi (Respondent), the clause can also be identified as a penalty and it is still enforceable.
Reference:
LO 3, AC 3.2
NEW QUESTION 79
A procurement professional is drafting payment terms for a commercial contract. He is considering about payment method if defective products are found. Which of the following should be embedded in payment terms to control this issue?
- A. Remedies for late payment
- B. Retention clause
- C. Invoice preparation
- D. Pay-less notice
Answer: B
Explanation:
Retention money is the payment for a service or product that is withheld pending the completion of some specified condition. For example, buyer may withhold the amount due until the supplier replace all defective goods.
Pay-less notice is the notice under a contract which states that the invoice will only be partially paid because of some issues such as supplier has to pay the damages.
Remedies for late payment are remedies that supplier may seek when a buyer pay it later than the stated payment terms. Normally, the buyer will be charged an interest rate.
Reference:
LO 3, AC 3.3
NEW QUESTION 80
......
Updated L4M3 Certification Exam Sample Questions: https://prep4sure.real4dumps.com/L4M3-prep4sure-exam.html
