Test Online Free CIPS L5M3 Exam Questions and Answers
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Lisa has a contract with an internet provider and the contract stated the need for Wi-Fi to be online 100% of the time. The Wi-Fi has only been available 97% of the time. In order for
Lisa to claim compensation from her internet provider, which of the following would need to be present in the contract?
Answer: Explanation:
This would be service credits. If this is present and the contract stated 100% online access-Lisa could claim 3% of her money back. See p.112 for information on service credits
Question 2Selectable Answer
Franky B's is a popular restaurant chain which is seeking a resolution to a conflict it has with its supplier of Fried Chicken. It is looking for a dispute resolution that does not involve the court but in which an expert third party will make a binding decision.
Which is the most suitable dispute resolution method for Franky B's?
Answer: Explanation:
This is Adjudication. The other answers are incorrect- litigation involves the court. Conciliation and mediation do not provide binding decisions. P. 143
Question 3Selectable Answer
Conciliation differs from mediation in which of the following ways?
Answer: Explanation:
The true statement is 'the mediator has no decision making power but a conciliator can provide recommendations'. The other statements are false; both processes are voluntary, cheap and non-binding.
Question 4Selectable Answer
Which of the following will you put into box 1?
Answer: Explanation:
The correct answers are as follows:
The answer is compromise as they're seeking a solution that will satisy everyone.
Question 5Selectable Answer
1.A breach of representation by party A in a contract would allow party B to do what?
Answer: Explanation:
A breach of representation is a major/ fundamental breach and allows the innocent party to rescind the contract and claim damages. A Breach of Representation is when you provide false information about who you are- this might have been a fundamental reason as to why the contract went ahead. If it turns out not to be true, the other party has the right to cancel the contract and claim damages. See p.126
Question 6Selectable Answer
Which of the following will you put into box 1?
Answer: Explanation:
The correct answers are as follows:
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Subcontracting is the correct answer as they're using another company to fulfil the contract
Question 7Selectable Answer
Which of the following would constitute an offer? Select TWO:
Answer: Explanation:
Offers include bids on an auction and a price proposal that is valid for 14 days. The other three options are Invitations to Treat. See p.3 for the full list of what constitutes an Invitation to Treat. The tricky thing here is that an auction is an invitation to treat but a bid on an auction is an offer. An auction is an ITT because you're encouraging people to make an offer to you. A bid on the auction is the offer (you offer to buy something at a price you propose).
Question 8Selectable Answer
Mark is a consultant who works with building managers and advises them on how to make their buildings safer.
What type of insurance should Mark have?
Answer: Explanation:
Mark needs professional indemnity insurance. Types of insurance is a known exam topic and the study guide does not cover this particularly well. Types of insurance is mentioned on p.25 but Pro-fessional Indemnity Insurance isn't really explained and this does come up in the exam. Professional Indemnity Insurance is needed when your job is to give advice to people (like as a Consultant). It's used for if the advice you give turns out to be bad. For example, if Mark told the building manager he should get ABC Fire Alarm installed, and actually this Fire Alarm doesn't meet the necessary Health and Safety standards, he could get sued by the building manager. He could then claim on his Professional Indemnity Insurance.
Question 9Selectable Answer
GoGo Ltd has contracted Reny Manufacturing to produce a bespoke piece of equipment for them. It is an asset and costs a significant amount of money. A contract is drawn up which states that GoGo Ltd has the right to terminate the contract at any time for any reason. Halfway through production of the asset, GoGo Ltd calls Reny Manufacturing to cancel the order. Reny Manufacturing has incurred many costs already. Can GoGo Ltd cancel the order?
Answer: Explanation:
The correct answer is 3 - 'yes there is a termination clause in the contract'. In this scenario it would be immoral for GoGo Ltd to cancel, but it wouldn't be illegal. They have the right to use the clause that's been put into the contract. It's possible that Reny might sue for damages, but this doesn't prevent GoGo Ltd from cancelling the order (they might be okay with paying the damages). There is a very similar question to this in the exam. Termination clauses are discussed on p.134 - I recommend brushing up on this topic before the exam.
Question 10Selectable Answer
Sarah is a baker and orders free-range eggs from a local supplier which she uses to make cakes. There is a contract in place which included a specification that states that the eggs must be free-range. One day the supplier delivers eggs which Sarah uses in the cakes.
Later she dis-covered that these were not free-range. Sarah believes that the supplier has broken the con-tract. Is this true?
Answer: Explanation:
"No- there has been a breach in warranty" is the correct answer. The key to answering this question lies in the fact that the specification in this example is a warranty rather than a condition of the contract. P.45 of the study guide explains that the Sale of Goods Act has implications on whether or not a specification is a condition, warranty or innominate term and it's all about whether the product is in 'good condition' and can be used for its intended purpose. In this example the eggs were used for their intended purpose and were in good condition (or Sarah wouldn't have put them in the cakes). Therefore in this example, the eggs needing to be free-range is a warranty of the contract not a condition. Therefore options A and B are both wrong. Answer C is also wrong because the question mentioned that the specification was included in the contract. If you want to know more about the implication of the Sale of Goods act on specifications see p.45.
Question 11Selectable Answer
Restitution damages are often calculated before contracts are signed and are clearly stated within a contract.
Which of the following statements is not true?
Answer: Explanation:
"restitution damages cannot be mitigated by the actions of the innocent party" is the untrue state-ment out of these four. The general principle of Restitution Damages is that the innocent party is expected to be proactive in mitigating the consequences of any breach and should not allow costs to spiral out of control. See p. 124
Question 12Selectable Answer
Which of the following will you put into box 1?
Answer: Explanation:
The correct answers are as follows:
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This is 'Time is of the Essence' - failure to deliver the food on time will have consequences.
Question 13Selectable Answer
When drafting a liability clause in a contract, which of the following statements are TRUE? Select THREE
Answer: Explanation:
The correct answers are 1, 3 and 5: exclusions should be narrowly defined and clearly
state which types of liabilities are excluded, liability is a legal responsibility and liability cannot be excluded for injury resulting from negligence. These are all explained on p. 22. Liability is never there to publish anyone (this is a red herring answer that CIPS like to put into different questions and it's usually the wrong answer - no one should look to publish anyone else). The option 'Liability can only be limited where there is valid insurance' is not true. A contract can state any limitations on liability so long as it's agreed by both parties, they're fair and don't contradict any laws. The thing about not being able to exclude liability regarding personal injury is a Law in the UK.
Question 14Selectable Answer
Which of the following statements about penalty clauses is not true?
Answer: Explanation:
2 - penalty clauses are not illegal. However they may be judged excessive in a court of law and thrown out. Most contracts will instead opt for liquidated damages rather than a penalty clause. See p.90
Question 15Selectable Answer
Which of the following is not a way in which a contract can end?
Answer: Explanation:
Litigation is the correct answer. This is not a way in which a contract can end- it is a conflict resolution method. The three ways in which a contract can end are; performance, agreement and breach. See p. 42 for more details on how contracts end
