L4M3 Exam Dumps - CIPS Level 4 Diploma in Procurement and Supply Questions and Answers

An insurance policy transfers a specific set of risks such as the fire and flood risk for a particular asset.

The legal liability does not transfer to the insurance company (known as insurer).

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:

- terms implied under statute

- terms implied under common law

- terms implied because of custom or usage

- terms implied due to previous dealings

- terms implied ‘in fact’ or to reflect the parties’ intentions

Consideration refers to the exchange of something of value between the contracting parties and is a fundamental requirement for a valid contract. It can be in the form of goods, services, money, or a promise. Without consideration, there is no enforceable contract even if other elements like offer and acceptance are present.

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.

A service-level agreement (SLA) is a commitment between a service provider and a client. Particular aspects of the service – quality, availability, responsibilities – are agreed between the service provider and the service user. The most common component of an SLA is that the services should be provided to the customer as agreed upon in the contract.

A customer service charter is a document that outlines how an organization promises to work with its customers along with providing insights into how an organization operates.

A service guarantee is a marketing tool service firms have increasingly been using to reduce consumer risk perceptions, signal quality, differentiate a service offering, and to institutionalize and professionalize their internal management of customer complaint and service recovery.

ISO standards are internationally agreed by worldwide experts. They overcome countries' differences and facilitate global trade. If a buying organisation is sourcing globally, they should use ISO standards within the specification.

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 andshows 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".

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.

Understanding Liquidated Damages

Liquidated damages are meant as a fair representation of losses in situations where actual damages are difficult to ascertain. In general, liquidated damages are meant to be fair, rather than punitive.

Liquidated damages may be referred to in a specific contract clause to cover circumstances where a party faces a loss from assets that do not have a direct monetary correlation. For example, if a party in a contract were to leak supply chain pricing information that is vital to a business, this could fall under liquidated damages.

A common example is a design phase for a new product that may involve consultation with outside suppliers and consultants in addition to a company's employees. The underlying plans or designs for a product might not have a set market value. This may be true even if the subsequent product is crucial to the progress and growth of a company. These plans may be deemed to be trade secrets of the business and highly sensitive. If the plans were exposed by a disgruntled employee or supplier, it could greatly hamper the ability to generate revenue from the release of that product. A company would have to make an estimation in advance of what such losses could cost in order to include this in a liquidated damages clause of a contract.

Limitations of Liquidated Damages

It is possible that a liquidated damages clause might not be enforced by the courts. This can occur if the monetary amount of liquidated damages cited in the clause is extraordinarily disproportional to the scope of what was affected by the breached contract.

Such limitations prevent a plaintiff from attempting to claim an unsubstantiated exorbitant amount from a defendant. For instance, a plaintiff might not be able to claim liquidated damages that amount to multiples of its gross revenue if the breach only affected a specific portion of its operations. The concept of liquidated damages is framed around compensation related to some harm and injury to the party rather than a fine imposed on the defendant.

The courts typically require that the parties involved make the most reasonable assessment possible for the liquidated damages clause at the time the contract is signed. This can provide a sense of understanding and reassurance of what is at stake if that aspect of the contract is breached. A liquidated damages clause can also give the parties involved a basis to negotiate from for an out-of-court settlement.

Advantages for the use of model forms of contract include:

• Helps to reduce the time and cost in contract development, particularly in detailed negotiation of terms and conditions.

• Avoids starting from the beginning each time, avoids” re-inventing the wheel” each time.

• Model contract forms may be widely accepted by both buyers and sellers across the industry or sector.

• Model contract forms are even handed and designed to be fair to both parties in the contract.

• Model contract forms include standard clauses that can be selected or deleted on an as required basis.

• Model contract form’s standard clauses are more likely to contain the correct legal terminology without recourse to third party experts.

Disadvantages of this type of contract include:

• Terms may be less advantageous, than may be achieved through negotiations, particularly where there is one party who is much stronger than the other.

• The generic contract may be difficult to adapt to the specific circumstances between two parties.

• Terms may not necessarily include special clauses or requirements to cover a particular or unusual situation.

• Legal advice and input may still be required, particularly where significant variations to the norm are required.

• There may be costs associated with training staff in the detailed application of the model forms of contract.

- 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 thebuyer, 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