Commercial Contracting Flashcards
One advantage of tendering could be
a. It encourages close relationships
b. It encourages competition.
c. It can involve a range of stakeholders.
d. It discourages competition.
b. It encourages competition.
A criticism of the tendering process is
a. It encourages fraud.
b. It concentrates on value for money rather than cost.
c. It cannot be used for services.
d. It can be complex and time consuming.
d. It can be complex and time consuming.
A Buyer is concerned about prompt delivery and has insisted that the requirement for on time delivery is inserted in to the contract as an express term – was this the right thing to do?
a. No. Because on time delivery should be an implied term.
b. No. Because implied terms are more important than express terms.
c. Yes. Because express terms generally take precedence over implied terms.
d. Yes. Because otherwise any delivery requirement would not be part of the contract.
c. Yes. Because express terms generally take precedence over implied terms.
To be valid, acceptance must be
a. Made by a senior manager
b. In writing.
c. Made whilst the offer is open.
d. If sent by letter must be physically received
c. Made whilst the offer is open.
Which of the following best describes a ‘counter-offer’?
a. The seller agreeing to all of the buyer’s contract terms.
b. The buyer sending a purchase order after seeing a seller’s advertisement.
c. The buyer agreeing to a seller’s quote subject to a revised price.
d. The seller agreeing to negotiate contractual terms with the buyer.
c. The buyer agreeing to a seller’s quote subject to a revised price.
A Buyer wishes to obtain prices for the supply of a specific item. Which of the following approaches would be most useful?
a. RFQ.
b. RFP.
c. RFI.
d. RFX.
a. RFQ.
If a counter offer is made what happens to the original offer?
a. It is still valid.
b. It is changed.
c. It is destroyed.
d. The original offer is deemed to be accepted
c. It is destroyed.
Acceptance must be
a. Unconditional.
b. Conditional.
c. In writing.
d. Verbal.
a. Unconditional.
For which of the following purchases is it more likely that a performance specification rather than a conformance specification will be required?
a. Computer software.
b. Branded products.
c. Ready mixed Concrete.
d. Cotton Fabric.
a. Computer software.
Can consideration given in the past act as future consideration
a. It can if the new contract is linked.
b. It can if the same two parties are contracting.
c. Past consideration cannot act as future consideration.
d. Past consideration cannot act as future consideration unless sufficient.
c. Past consideration cannot act as future consideration.
Which of the following approaches to developing a specification will provide a buyer with the least amount of choice in the marketplace:
a. Performance.
b. Technical.
c. Use of standards.
d. Brands.
d. Brands.
Technical or conformance specifications more likely to be used in which of the following circumstances
a. We require the part to fit with an existing product.
b. We know little about the product.
c. The performance of the product is more important than the inputs.
d. We wish to encourage supplier innovation.
a. We require the part to fit with an existing product.
Performance or output specifications are most appropriate for which of the following:
a. Branded Products.
b. Catering services.
c. Blended Chemicals.
d. A part to fit into an existing machine.
b. Catering services.
Which of these is an attribute of a service
a. They can be stored.
b. They are tangible.
c. They can be owned.
d. They are intangible.
d. They are intangible.
In which of the following situation would specifying by brand be most appropriate
a. When the end user specifies it.
b. When they are perceived as better quality.
c. When the warranty specifies it.
d. When they meet the technical specification.
c. When the warranty specifies it.
Which of these is considered to have legal Capacity
a. Drunk People
b. Company officials
c. Minors
d. The insane
b. Company officials
Which Three Ways can an offer come to an end
a. Death.
b. Acceptance.
c. Deposition.
d. Failure of Conditionality.
a. Death.
b. Acceptance.
d. Failure of Conditionality.
What term is given for specifications where the buyer outlines what they expect the part or material to be able to achieve?
a. Input specification.
b. Performance specification.
c. Conformance specification.
d. Technical specification.
b. Performance specification.
The Vienna convention is a voluntary agreement covering
a. Goods Only.
b. Goods and Services.
c. Goods, Services and Works.
d. Goods, Services, Works and Software.
a. Goods Only.
Model forms of contracts are developed by
a. Governments.
b. Suppliers.
c. Trade associations.
d. Buyers.
c. Trade associations.
What are the benefits of using Standard Terms? (2 apply)
a. It removes the need for expensive legal advice each time they are used.
b. It gives basic contractual protection at low cost.
c. It mitigates the issue of battle of the forms.
d. It gives basic contract protection at high cost.
a. It removes the need for expensive legal advice each time they are used.
b. It gives basic contractual protection at low cost.
The battle of the forms occurs when
a. In every transaction.
b. In transactions where the terms have not been pre agreed.
c. Where standard terms and conditions do not apply.
d. Only when agreed by the buyer and the seller.
b. In transactions where the terms have not been pre agreed.
A Buyer wishes to control sub contracting in a particular contract – which clause could the insert to cover this?
a. Payment clause.
b. Transition clause.
c. Indemnity clause.
d. Assignment clause.
d. Assignment clause.
A Supplier publishes a catalogue on an biannual basis. If a buyer wished to purchase from the catalogue when would the contract come into existence?
a. When the supplier publishes the catalogue.
b. When the buyer sends the PO to the supplier.
c. When the order is acknowledged by the supplier.
d. When delivery is made.
c. When the order is acknowledged by the supplier.
An organisation has decided to include an NDA in a contract with a supplier for the design and development of some new equipment was this the right thing to do?
a. No – NDA’s have no legal basis.
b. No- NDA’s cannot be used between organisations only individuals.
c. Yes- An NDA will ensure the supplier keeps all information confidential including that in the public domain.
d. Yes – Providing it specifies the information to be kept confidential and the duration.
d. Yes – Providing it specifies the information to be kept confidential and the duration.
Which of the following is a key section of a contract?
a. Articles.
b. Warranties.
c. List of stakeholders.
d. Glossary.
a. Articles.
A Contract for hire covers which of the following:
a. It transfers title and possession to the hirer.
b. It transfers title and temporary possession to the hirer.
c. It transfers temporary possession to the hirer but not the title.
d. It doesn’t deal with the issues of title or possession.
c. It transfers temporary possession to the hirer but not the title.
A comprehensive quotation provided by the supplier to the buyer can be regarded as which of the following
a. An Invitation to treat.
b. A Formal offer.
c. A Formal acceptance.
d. A Conditional offer.
b. A Formal offer.
Which of the following is a remedy for Misrepresentation?
a. Restitution.
b. Rescission.
c. Repudiation.
d. Remediation
b. Rescission.
A Buyer has an arrangement with a local bakery for the provision of catering for meetings on a fixed price per head basis. The supplier can end the arrangement at any time. This is an example of which of the following:
a. Spot Contract.
b. Term Contract.
c. Standing Offer.
d. Call Off Contract.
c. Standing Offer.
The element of a contract requiring each party to give up something of value is called?
a. Capitalisation.
b. Condition.
c. Consolidation.
d. Consideration.
d. Consideration.
Which of the following are types of Misrepresentation?
a. Fraudulent, Conflicting, Rescission.
b. Fraudulent, Negligent, Innocent.
c. Negligent, Innocent, Guilty.
d. Innocent, Guilty, Fraudulent
b. Fraudulent, Negligent, Innocent.
A KPI that sets a target for customer satisfaction is concerned with:
a. Cost performance.
b. Quality performance.
c. Sufficiency of resources
d. Delivery performance.
b. Quality performance.
Customer Opinion Surveys are examples of what type of KPI?
a. Qualify.
b. Qualitative.
c. Quantitative.
d. Quantity.
b. Qualitative.
An organisation has procured a cleaning service and wishes to communicate to stakeholder the minimum level of performance expected. They have decided to use an SLA – is this the right move?
a. No- SLA’s only describe the services provided not the expected performance.
b. No – SLA’s only describe the maximum performance levels not the minimum.
c. Yes- It is a legal requirement to provide an SLA for any services procured.
d. Yes- SLA’s do cover the minimum level of performance expected.
d. Yes- SLA’s do cover the minimum level of performance expected.
Which of the following would be considered when defining KPIs.
a. How often should performance be measured.
b. Does the individual setting the measures have contractual authority.
c. Is the KPI contractually binding.
d. Qualitative measures would not be relevant as they need to be numerical.
a. How often should performance be measured.
In order to ensure a SLA is effective it must (3 apply)
a. Have the same force as any other part of the contract.
b. Be legally binding.
c. Define the consequences for breach.
d. Include a pre-determined and realistic financial penalty.
a. Have the same force as any other part of the contract.
b. Be legally binding.
c. Define the consequences for breach.
One starting point for finding information when developing a specification is to use
a. A standard form.
b. A sample version.
c. A tender.
d. A model form.
b. A sample version.
Which of the following best describes the legal interpretation of the term ‘damages’?
a. The supplier being forced by the court to reimburse the buyer for costs Incurred due to unsatisfactory performance of a contract by the supplier.
b. The buyer invoking a contract clause that enables them to buy the goods from another supplier in the event of late delivery by the original supplier.
c. A supplier being forced by the buyer to replace goods that are found, upon receipt, to be faulty.
d. A supplier being forced by a court to perform a contract in the manner and time stipulated by the buyer.
a. The supplier being forced by the court to reimburse the buyer for costs Incurred due to unsatisfactory performance of a contract by the supplier.
Which of the following best describes one of the main advantages for the buyer of the ‘Fixed price’ method of contract pricing?
a. Prices are monitored by reference to independently-published indices.
b. It is particularly useful for contracts for goods whose prices fluctuate over time.
c. It can be used when the exact nature of the work to be done is not known at the outset.
d. The supplier would bear any risk of the contract being under-priced.
d. The supplier would bear any risk of the contract being under-priced.
Which of the following contracts would be best suited to a ‘indexation pricing ‘method?
a. A contract for the supply of 100 printing machines to be delivered next month.
b. A contract for window cleaning during the next three months.
c. A contract for the supply of lubricating oil for immediate delivery.
d. A contract for road building estimated to take five years to complete.
d. A contract for road building estimated to take five years to complete.
Which of the following best describes ‘price indices’ that might be used in a contract price adjustment formula?
a. A measure of cost movements of a range of materials published independently of both buyer and seller.
b. Records kept by the buyer of price increases requested by the seller over time.
c. Records kept by the buyer of many suppliers’ price increases over a period of time.
d. A statement by the government indicating that the prices of goods such as oil have increased.
a. A measure of cost movements of a range of materials published independently of both buyer and seller.
Which of the following best describes the legal significance of an initial written enquiry sent by the purchaser to a potential supplier?
a. An invitation to treat.
b. Acceptance.
c. An offer.
d. Consideration.
a. An invitation to treat.
Which of the following best describes a potential benefit for the buyer of negotiating a ‘prompt payment’ clause?
a. It is likely to improve the buying organisation’s cash-flow.
b. It is likely to improve the supplier’s cash-flow.
c. It is likely that the supplier will negotiate extra discount with the buyer.
d. It is likely that the buyer will not need to verify the invoice before payment.
c. It is likely that the supplier will negotiate extra discount with the buyer.
Which of the following would most likely be regarded as a disadvantage to a buyer of the fixed pricing method within a contract?
a. The purchaser knows its financial commitment to the contract from the outset.
b. The price of the contract will reflect the supplier’s risk.
c. Any risk of under-pricing is loaded onto the seller, which should ensure that its costing is sound.
d. It can be used for products or services where the supplier can accurately estimate the resources required to fulfil the contract.
b. The price of the contract will reflect the supplier’s risk.
Quotations requested from several potential suppliers with the aim of getting better prices are commonly known as which of the following?
a. Counter offer.
b. Competitive bids.
c. Marginal costings.
d. Independent expert estimate
b. Competitive bids.
What is a Force Majeure term in a contract
a. A term implied into the contract to give it business efficacy.
b. An exclusion of liability for events outside the control of either party.
c. An exclusion of liability term for events caused by negligence.
d. A term that highlights the major contractual obligations of the parties.
b. An exclusion of liability for events outside the control of either party.
Which of these is NOT normally a requirement of a good specification:
a. It should be of the correct type.
b. It should be accurate.
c. It should be clear.
d. It should specify the quantity required.
d. It should specify the quantity required.
Should you include an insurance clause in major contracts?
a. Yes, to ensure supplier maintains correct level of financial protection.
b. Yes, to ensure that all liabilities are limited.
c. No, because the contract is for goods only.
d. No, as warranties and conditions will cover all eventualities.
a. Yes, to ensure supplier maintains correct level of financial protection.
Which of the following would generally use stage payments?
a. A Spot purchase.
b. A Long-term contract.
c. A Framework agreement.
d. A Call-off contract.
b. A Long-term contract.
Which contractual clause allows for an immediate right to compensation without the need for a lengthy dispute?
a. Payment.
b. Indemnity.
c. Assignment.
d. Transition.
b. Indemnity.
Which of the following best describes liquidated damages?
a. Formal written assurance of quality conditions.
b. Pre-determined amount payable on breach.
c. A court decision on losses which have been liquidated
d. Damages where a company has gone out of business during the contract.
b. Pre-determined amount payable on breach.
Labour standards cover which of the following:
a. Employment and procurement procedures.
b. Employment of sub-contractors only.
c. Employment of the workforce.
d. Employment of buyers staff only.
c. Employment of the workforce.
Which statement is true in relation to contractual responsibility?
a. Liability is being legally responsible for something.
b. Indemnity is being legally responsible for something.
c. Warranty is being legally responsible for something.
d. Damages is being legally responsible for something.
a. Liability is being legally responsible for something.
Which of the following is a standard covered by the ILO?
a. Unfair discrimination on the basis of marital status.
b. Unfair discrimination of the basis of appearance.
c. Unfair discrimination on the basis of class.
d. Unfair discrimination on the basis of gender identity.
d. Unfair discrimination on the basis of gender identity.
Why would a buyer use a target pricing arrangement?
a. In order to incentivise suppliers.
b. In order to place all the risks on to the buyer.
c. In order to comply with legislation.
d. In order to use a model form contract.
a. In order to incentivise suppliers.
In order to be valid Consideration has to be
a. Sufficient.
b. Adequate.
c. Complete.
d. Financial.
a. Sufficient.
A buyer has let a construction contract (for which they have a limited budget) for a new head office for their organisation on a cost plus basis – was this the right thing to do?
a. Yes. Because otherwise the buyer would be unsure of having the project completed on time.
b. Yes. Because it provides cost certainty for the buyer.
c. No. Because the supplier will have no motivation to control costs.
d. No. Because cost plus is unsuitable for large construction projects.
c. No. Because the supplier will have no motivation to control costs.
In large high risk contracts such as construction it is usual for the Buyer to hold back a proportion of the payment for a specific time in case of defects- this is know as what:
a. Retention sum.
b. Repudiation sum.
c. Defect Sum.
d. Deposit Sum.
a. Retention sum.
Whose terms generally prevail in the Battle of the Forms:
a. It is always the buyers.
b. It is always the sellers.
c. It is who fired the last shot.
d. It is hard to determine.
c. It is who fired the last shot.
Which remedy for breach of contract involves one party paying the other for the value of the work performed so far?
a. Force Majeure.
b. Quantum Meruit.
c. Rescission.
d. Liquidated Damages.
b. Quantum Meruit.
Which is the legal phase used in situations where the buyer had the opportunity to read the contract terms and conditions but chose not to.
a. Caveat Emptor.
b. Frustration
c. Force Majeure.
d. Duress.
a. Caveat Emptor.
Which are the Remedies for breach of contract – 4 apply
a. Specific Performance.
b. Impeachment.
c. Damages.
d. Quantum Meruit.
e. Injunction.
f. Imprisonment.
a. Specific Performance.
c. Damages.
d. Quantum Meruit.
e. Injunction.
Which are the 5 ways a contract can be declared void or voidable
a. Illegality.
b. Breach.
c. Duress and Undue influence.
d. Misrepresentation.
e. Failure to perform.
f. Mistake.
a. Illegality.
c. Duress and Undue influence.
d. Misrepresentation.
e. Failure to perform.
f. Mistake.
A minor term in a contract would is known as
a. A condition.
b. A penalty clause.
c. A warranty.
d. Innominate.
c. A warranty.
A clause considered to be a major term in a contract is known as what
a. A penalty clause.
b. A condition.
c. A warranty.
d. Innominate.
b. A condition.
What is the correct legal name for the situation where one party voluntary forgoes its legal rights in a contract?
a. Lien.
b. Surrender.
c. Waiver.
d. Let.
c. Waiver.
Which ONE of the following is a provision in a contract under which one party commits to compensate the
other for any harm or loss arising out of the contract?
a. Indemnity
b. Intellectual property
c. Exclusion clause
d. Warranty
a. Indemnity
Which of the following are likely to feature within a request for quotation (RFQ)?
1. Delivery terms are fixed
2. Suppliers are not pre-qualified
3. Suppliers have been pre-qualified
4. Quality must be assessed
a. 1 and 2 only
b. 2 and 3 only
c. 1 and 3 only
d. 2 and 4 only
c. 1 and 3 only
A procurement manager has negotiated a firm fixed price throughout a contract with a duration of two
years. Was this the right thing to do?
a. No, because even with these contracts the pricing can change
b. No, because this is an unfair term and therefore it is not legally binding
c. Yes, because this has provided certainty and so it is an aid to budgeting
d. Yes, because this type of pricing will always be better than a spot price
c. Yes, because this has provided certainty and so it is an aid to budgeting
Ace Group is seeking to encourage one of its key suppliers to improve its contract delivery performance.
Ace Group wants to encourage the supplier to identify cost savings and ways to enhance quality. Which of the
following would help?
a. Gainshare
b. Using industry indices
c. Penalty clauses
d. Service credits
a. Gainshare
When is the best time for the buyer’s express terms to be provided to a supplier in a competitive bidding
process with negotiation?
a. At the contract commencement meeting
b. When the negotiation is nearing completion
c. With the contract award notification
d. As part of the invitation to tender
d. As part of the invitation to tender
Which ONE of the following is often used with service level agreements (SLAs), as part of performance
management, to encourage a supplier to meet a buyer’s requirements?
a. Service guarantees
b. Service credits
c. Service warranties
d. Service penalties
b. Service credits
A public sector organisation maintains a large and diverse property estate comprising of more than 100
buildings in multiple locations around the country. To maintain this property estate, which of the following will be the most effective arrangement between the organisation and its suppliers?
a. Framework agreements
b. One-off purchases
c. Spot transactions
d. Purchase orders
a. Framework agreements
A large manufacturing group is going through a period of investment under which a number of its facilities
will close on a short-term basis for re-fit and for upgrade works to be undertaken. The chief procurement officer (CPO) is concerned about the impact on the organisation’s ability to meet customer orders should any
of the work carried out by suppliers overrun. In respect of this particular concern, the CPO should consider using which of the following contractual terms with these suppliers?
a. Insurance
b. Force majeure
c. Liquidated damages
d. Jurisdiction
c. Liquidated damages
Which of the following will typically be included with an invitation to tender (ITT)? Select the THREE that
apply.
a. Specification
b. Purchase order
c. Terms and conditions
d. Requisition
e. Performance measures
f. Mandate
a. Specification
c. Terms and conditions
e. Performance measures
Under general legal principles of contract formation, which of the following will always automatically result in the termination of an offer? Select the TWO that apply.
a. Acceptance
b. Negotiation
c. Clarification
d. Non-disclosure
e. Revocation
a. Acceptance
e. Revocation
Which of the following enables bidders to present solutions that the buyer might not have considered when responding to an invitation to tender (ITT)?
a. Technical specification
b. Input specification
c. Performance specification
d. Conformance specification
c. Performance specification
The concept of the ‘battle of the forms’ relates mostly to which of the following?
a. The buyer’s specification
b. Terms and conditions that apply
c. The invitation to tender
d. Key performance indicators
b. Terms and conditions that apply
Westhire Authority (WA) is a large public sector organisation. It covers a vast geographic area and has a
considerable property estate. It uses a number of suppliers to carry out routine and, on occasions, emergency repairs and other maintenance on both the grounds and the buildings of its property estate. Which type of
arrangement would WA have in place for these requirements?
a. Framework agreement
b. Sole supply agreement
c. Dual-sourcing agreement
d. Contingency agreement
a. Framework agreement
Global Energy Efficiency Group (GEEG) is a major manufacturing organisation. It has committed to invest
significantly in new turbines but is unsure about which products are available and how these might change in the future due to new technology advances. What should GEEG do as a priority to help draft a specification?
a. Arrange a meeting with Finance
b. Talk to its incumbent supplier
c. Use recognised international standards
d. Undertake market engagement
d. Undertake market engagement
Which of the following are examples of key performance indicators (KPIs) that can be used to measure the performance of a supplier of raw materials?
1. The percentage of orders delivered on time and in full
2. The number of visitors to an organisation’s website
3. A supplier’s staff retention rate
4. The percentage of items with defects
a. 1 and 2 only
b. 2 and 3 only
c. 3 and 4 only
d. 1 and 4 only
d. 1 and 4 only
Which of the following are characteristics of liquidated damages within a contract?
1. Apply excessive penalties for all breaches
2. Explain the process for dispute management
3. Set out the circumstances and when they apply
4. State the financial implications for the supplier
a. 1 and 2 only
b. 2 and 3 only
c. 3 and 4 only
d. 1 and 3 only
c. 3 and 4 only
Express terms apply in all contracts through the buyer’s and supplier’s statutory rights. Is this statement TRUE?
a. Yes, in most contracts statutory rights are expressly stated
b. No, express terms are specifically agreed between the parties
c. Yes, all terms must be expressly stated in the contract to be legally binding
d. No, if it is a verbal agreement, no terms will apply at all
b. No, express terms are specifically agreed between the parties
Model form contracts are popular because they offer additional protections to suppliers. Is this statement correct?
a. Yes, in industries that use model contracts they protect a buyer from all supplier conditions
b. No, they are popular because it is a legal requirement to use them if available in that industry sector
c. Yes, in those industries that use them model contracts considerably limit supplier liability
d. No, they are popular because they are widely accepted and understood in industries that use them
d. No, they are popular because they are widely accepted and understood in industries that use them
Which of the following arrangements permit the supplier to charge more, in certain circumstances, over
the term of the contract? Select the TWO that apply.
a. Pricing schedules
b. Fixed priced
c. Bills of quantity
d. Indexation
e. Price adjustment formula
d. Indexation
e. Price adjustment formula
Which of the following are necessary conditions for misrepresentation within a commercial agreement?
Select the THREE that apply.
a. The statement must be made after the contract is created
b. The statement must relate to fact
c. The statement must be false
d. The statement must be made by a contracting party
e. The statement must be made in public
f. The statement must be fraudulent
b. The statement must relate to fact
c. The statement must be false
d. The statement must be made by a contracting party
