Test Online Free CIPS L4M3 Exam Questions and Answers
Practice a live sample before buying full access. This page keeps the free L4M3 question set organized by page so visitors and search engines can reach the canonical -questions.html URL directly.
Which of the following is the best definition of consideration in contract law?
Answer: Explanation:
A simple definition of consideration is as follows C an exchange between the parties which results in a benefit to one party, and a detriment to the other. The case of Currie v Misa (1874) LR 10 Ex 153 provides an apt description of this:
“A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other.”
A practical example of this can be found by examining a simple contract. Party A offers £500 to Party B, who in exchange will fit his car with a new engine. Party A receives the benefit of his car being fixed, whilst Party B incurs the detriment of having to take time, effort, and perhaps expenses to fix the car.
Reference:
- Consideration & Promissory Estoppel
- CIPS study guide page 36-40
LO 1, AC 1.2
Question 2Selectable Answer
Non-disclosure
Answer: Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question 3Selectable Answer
Which of the following are always considered as minimum preconditions for a contract? Select TWO that apply:
Answer: 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: CIPS study guide page 28-43
LO 1, AC 1.2
Question 4Selectable Answer
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...?
Answer: 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: CIPS study guide page 184
LO 3, AC 3.3
Question 5Selectable Answer
When a contract has been agreed on the basis of a fraudulent misrepresentation, which of the following remedies are available?
Answer: Explanation:
An untrue statement of fact or law made by Party A (or its agent) to Party B, which induces Party B to enter a contract with Party A thereby causing Party B loss. An action for misrepresentation can be brought in respect of a misrepresentation of fact or law. There are three types of misrepresentation:
- Fraudulent misrepresentation: where a false representation has been made knowingly, or without belief in its truth, or recklessly as to its truth.
- Negligent misrepresentation: a representation made carelessly and in breach of duty owed by Party A to Party B to take reasonable care that the representation is accurate. If no "special relationship" exists, there may be a misrepresentation under section 2(1) of the Misrepresentation Act 1967 where a statement is made carelessly or without reasonable grounds for believing its truth.
- Innocent misrepresentation: a representation that is neither fraudulent nor negligent. The remedies for misrepresentation are rescission and/or damages. For fraudulent and negligent misrepresentation, the claimant may claim rescission and damages. For innocent
misrepresentation, the court has a discretion to award damages in lieu of rescission; the court cannot award both (see section 2(2) of the Misrepresentation Act 1967). For more information, see Practice note, Misrepresentation.
Reference:
- Misrepresentation
- CIPS study guide page 55 LO 1, AC 1.2
Question 6Selectable Answer
Required safety level
Answer: Explanation:
According to CIPS, there are two main types of specification:
- Conformance specification C is more output driven as it outlines the product details exactly which may include the material, dimensions, tolerances, source, ingredients, packaging, storage of the part or material.
- Performance specification C is more output driven in terms of what the part or material must achieve.
Among the four options, only 2. 'Description of the operating environments' and 3. 'Chemical formulae' are possible components of a conformance specification. Brand names can be a part of a performance specification, according to a document published by CIPS and NIGP.
Graphical user interface, text, application
Description automatically generated
Reference:
- CIPS study guide page 8-10
- Knowledge Byte - Specification Development
- Principles and Practices of Public Procurement: Specifications LO 1, AC 1.1
Question 7Selectable Answer
Since services are intangible, so KPIs for services must be qualitative in all circumstances. Is this statement correct?
Answer: 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: CIPS study guide page 117-122
LO 2, AC 2.2
Question 8Selectable Answer
Which of the following is the contract provision that relieves the parties from performing their contractual obligations when certain circumstances like natural disasters, terrorist attacks, etc arise?
Answer: Explanation:
The contract provision that relieves the parties from performing their contractual obligations when certain circumstances like natural disasters, terrorist attacks, etc arise is called Force majeure. Force majeure is an example of exclusion clause.
An exemption clause in a contract is a term which either limits or excludes a party’s liability for a breach of contract.
In order for an exclusion clause to be binding and operable upon the parties, the clause must:
Question 9Selectable Answer
Non-disclosure
Answer: Explanation:
There are a number of ways for an offer to be terminated. They are events that may occur after an offer has been made which bring it to an end so that it can no longer be accepted. An offer is terminated in the following circumstances:
Question 10Selectable Answer
A retailer prefers to display its best selling products and promotion programme on the building windows.
According to rule of contract formation, this act will generally constitute...?
Answer: Explanation:
Fisher v Bell [1960] and Pharmaceutical Society of Great Britain v Boots Cash Chemists [1953] identified that the courts will generally consider goods advertised in shop windows or those with a price tag attached to constitute an invitation to treat. An invitation to treat is a concept in contract law. It refers to an invitation for a party to make an offer enter into contractual negotiations.
Invitations to treat can be anything displayed to a large number of people, as long as there is no defined way to choose who can accept. Items on display in a shop, advertisements, and catalogues are all common examples of invitations to treat.
However, there are cases in the US shows that under some circumstances an advertisement can become an offer (see Leftkowitz v Great Minneapolis Surplus Stores [1957]).
Reference:
- What is an Invitation to Treat in Contract Law?
- CIPS study guide page 29
LO 1, AC 1.2
Question 11Selectable Answer
Which of the following is the best definition of “ultra vires”?
Answer: Explanation:
Ultra vires is a Latin phrase, meaning "beyond the powers." Describes actions taken by government bodies or corporations that exceed the scope of power given to them by laws or corporate charters. When referring to the acts of government bodies (e.g., legislatures), a constitution is most often the measuring stick of the proper scope of power.
Reference: CIPS study guide page 42-43
LO 1, AC 1.2
Question 12Selectable Answer
Under hire purchase agreement, when will the ownership of asset legally belong to the purchaser?
Answer: Explanation:
Hire purchase is an arrangement for buying expensive consumer goods, where the buyer makes an initial down payment and pays the balance plus interest in installments. Ownership is not transferred until the end of the agreement, hire purchase plans offer more protection to the vendor than other sales or leasing methods for unsecured items. That's because the items can be repossessed more easily should the buyer be unable to keep up with the repayments.
The answer is 'When the final instalment is paid'.
Reference:
- Hire Purchase Agreements
- CIPS study guide page 70 LO 1, AC 1.3
Question 13Selectable Answer
Under which of the following scenarios an RFQ is most likely to be used?
Answer: 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
Question 14Selectable Answer
A senior buyer is preparing specification for the next purchase. He intends to embed social and environmental criteria that align with his organisation's overarching strategy.
Which of the following provides the social and environmental objectives that an organisation pursues?
Answer: Explanation:
The organisation should have an overarching strategies or policies which sets out the social and environmental objectives to be pursued via procurement and the supply chain generally. Some of these will be about the specification, but that must be tied in other aspects of the sourcing strategy. These objectives, policies and strategies can be found in corporate social responsibility policy.
Reference: CIPS study guide page 96
LO 2, AC 2.1
Question 15Selectable Answer
Which of the following indicates the ratio between profit and costs?
Answer: Explanation:
Mark up is the profit as a percentage of total costs.
LO 3, AC 3.3
