Managing Contractual Risk - L5M3 Exam Practice Test

Question 1

Where two parties are engaged in international trade and have a long term relationship and a degree of mutual trust, which payment mechanism is commonly used?

A. Letter of Credit

B. Documentary Collection

C. Bill of Exchange

D. Stage Payment

Correct Answer: B

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Question 2

Which of the following will you put into box 8?

A. mediation

B. adjudication

C. arbitration

D. litigation

Correct Answer: C

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Question 3

Which of the following will you put into box 6?

A. Innominate Term

B. Warranty

C. Condition

Correct Answer: A

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Question 4

Popsi Cula is a manufacturer of sugared beverages and produces over 5000 tonnes of soda each day. It is extremely important that ingredients are delivered to the factory on specific days in order for the production to keep to its very tight schedule. Popsi Cula is onboarding a new supplier - which of the following clauses would it be important for the contract to contain?

A. limitation of liability

B. time is of the essence

C. liquidated damages

D. KPIs

Correct Answer: B

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Question 5

Which of the following will you put into box 3?

A. anticipatory breach

B. payment terms

C. fundamental breach

D. specification

Correct Answer: C

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Question 6

A breach of representation by party A in a contract would allow party B to do what?

A. rescind the contract

B. claim damages

C. nothing - this is not a fundamental breach

D. rescind the contract and claim damages

Correct Answer: D

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Question 7

Which of the following statements about penalty clauses is not true?

A. they are used to deter the parties from breaching the contract

B. they can harm the working relationship

C. they are illegal

D. they provide damages in excess of the true cost of a breach

Correct Answer: C

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Question 8

George is a procurement manager at a manufacturing company and is reviewing a contract he has with a supplier. He notes that there are multiple appendices to the contract and there is no Precedence of Documents. What does this mean for the contract?

A. the contract is not valid

B. clauses in the contract take precedent over clauses in the appendices

C. the clauses that come first in the document, take precedent

D. all clauses are considered equal

Correct Answer: D

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Question 9

Which of the following will you put into box 1?

A. anticipatory breach

B. payment terms

C. fundamental breach

D. specification

Correct Answer: A

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Question 10

Parky Parks Ltd has a contract with Slides R Us for the provision of children's playground equipment. The contract contains a clause for liquidated damages and puts the figure at £500k. Which of the following statements is correct? Select TWO

A. liquidated damages is a genuine estimate of loss

B. costs incurred above £500k will be covered by Parky Parks Ltd

C. Damages under the amount of £500k are not required to be paid to Parky Parks

D. Liquidated damages needs to be a 100% accurate figure

E. If damages exceed £500k Parky Parks can apply to the courts to get Slides R Us to pay above this amount

Correct Answer: A,B

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CIPS Managing Contractual Risk - L5M3 Exam Practice Test

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