Exam Questions 2 Flashcards
Q1/ Why is it important for a specification to be part of the contract document
To ensure that is legally bound, so that if a supplier does not meet the requirements of the specification that you have some legal address. Specifications are central to all commercial contracts
Q2/ List 2 advantages and 2 disadvantages of a standard contract template
All key risks set out
Standard clause prompter drafters to think about relevance
Legal meaning out words will be fully considered
Standard List of schedules prompts inclusion
Potential to use wrong template
Can result in complacency as part of the drafter
Failure to cross-check references can lead to nonsensical requirements or conditions
Reference to legislation may become obsolete
Schedules may be appended with no firm reference to them in the contract terms
Disparity between references in contract terms and schedules
Q3/ List and briefly describe the 5 sections of a contract (P18)
- The schedules-this is the main part where all the project specifics exist
- Terms and conditions (definitions and interpretation)-
- Articles-a summary party A enters into a contract with party B-who the parties are
- Recitals-set the facts around the contract- A wants to buy B
- Contract Particulars-completion dates, specific insurance required,
Q4/ Describe 4 common schedules in a contract (P23)
- performance management framework-KPIS, Targets, assessment scheme, incentives-these need to be linked to clauses in the body of the of the contract. Also needs to be a mechanism for adjustment in this
- Health and Safety-sets out pre-construction info required by law, requirements for risk assessments, hazards, live contract documents-to be updated through project
- Core Lists or exclusion lists-what is included and what is not. Links to pricing schedule.
- Preliminaries-often in construction contracts-explain the context in which the contract has to be performed.
Q5/. Why might contract variations arise and how should they be dealt with?
Changes may occur as a result of unforeseen circumstances (i.e. change in regulations)
Change may be necessary because of external events or at the request of one or other party
KPIs can become obsolete if there are easier ways to measure
Technology may change rapidly
A lack of a change mechanism may cause stagnation, ineffective delivery or early termination
There should be a formal change mechanism
A change process should include:
Who can request a change? Who can authorise a change? Who can accept a change? Mechanism for agreeing price adjustments Implications for the contract if a variation (change) order is rejected Format for a variation (change) order
Q6/. List 5 conditions for contract creation
- Offer
- Acceptance
- Consideration
- Capacity to contract
- Intention to create legal relations
Q7/ Explain what the follow case law relates to
- Fisher v Bell
- Carbolic Smokeball Company v Cahill-advertising
- Fisher v Bell (Flick knife)-Invitation to treat. Flick knife on display and shopkeeper charged with offering an offensive weapon. He was acquitted on the basis that the display was not an offer but an invitation to treat.
- Carbolic Smokeball Company v Cahill-advertising puff-stated that they would pay £100 to anyone who caught flu after using their puff balls. They placed £1000 in the bank for claims. Cahill caught flu and claimed. The company refused to pay but they lost the case because it was not an advertising puff-the fact that they placed £1000 on deposit was evidence that it was part of the offer
Q8/ What is the difference between an offer and a counteroffer?
A full statement of what the offeror is willing to provide and the terms by which they are willing to provide it
A counter offer is when you receive an offer but instead of accepting it you state that you will accept there offer but subject to a change (in which case it is a new offer)
Q9/ Acceptance is subject to which three conditions (P33)?
- Can only occur while the offer is open, and it must be absolute and unconditional
- Cannot be made by someone with diminished capacity
- Subject-to-contract letter-this is not a formal offer or acceptance
Q10/ Explain the distinction between sufficient consideration and adequate consideration
Adequacy and sufficiency of consideration. Consideration must be sufficient but not necessarily adequate. I can sell my car for £1 and that is sufficient because there is an exchange and the law does not denote what is adequate.
Q11/ What is the distinction between domestic and commercial arrangements when considering the intention to create legal relations?
Commercial contracts are generally assumed to be intended to be enforceable while domestic agreements are thought not to be.
Q12/ Which groups would be deemed as not having the capacity to contract?
Infants/minors
People with mental health issues
People under the influence of drugs
Ultra vires – public sector organisations may only legally be able to contract to do certain things. The equivalency in commercial companies set out in ‘articles of incorporation’
NB All commercial entities, and the people who represent them, are deemed to have a capacity to contract.
Q13/ What is the battle of the forms and suggest 2 ways to stop this arising
A series of forms (orders, delivery notes etc.) issued in sequence by purchaser and
suppliers, each containing terms that appear to override those on the previous
document. The battle of the forms is won by the person who ‘fires the last shot’. Shots can however continue to be fired after the battle has been won or lost
- get them to sign your terms and conditions
- put a contract in place.
Q14/ Describe the main risks of oral contracts.
Formal record of transaction is unlikely in oral contracts and confirmation on the following may therefore be difficult:
Warranty
Specification
Timescales
Cost
Liabilities
It can lead to ambiguity over terms and Procurement and supply personnel should avoid oral contracts where possible
Q15/ What is the purpose of the Vienna Convention (CISG)? What does it cover?
. Its purpose is to set out a framework for international transactions based on a uniform approach and it aims to get around the problems created by differences in local laws.
It is only applicable in specific situations
- Applies only to goods
- Applies only to private commercial transactions (B2B)
- Applies only where the parties have their place of business in different Contracting States
Note-Countries and parties can exclude parts of the treaty
Only covers offer, acceptance and consideration
Q16/ Give an example of each of the three types of misrepresentation and explain the remedies available.
Fraudulent Misrepresentation-deliberately lying in order to induce someone into entering into a contract. This machine produces 1000 products per hour when it has never done that and you know the maximum it can ever produce is 500 per hour -termination and damages
Negligent Misrepresentation-not deliberate but inducing someone to enter into a contract based on information you gave them which is incorrect (and you are negligent in not knowing it). This machine produces 1000 products per hour when you have not actually check that it can do that-termination and damages
Innocent Misrepresentation-genuine mistake made-termination or damages
Q17/James is a lettings manager. He tells a client that there is no water meter in a property and that they will pay a fixed cost of around £30pm. The client moves in and within the first week Thames Water contacts the client and tells them they have taken a meter reading and that they will receive the first bill in six months. It will be based on the amount of water they have used. When the client complains to James, James apologises and admits to them that he did not check whether the property had a water meter or not. This is
a. Innocent Misrepresentation
b. Fraudulent Misrepresentation
c. Negligent Misrepresentation
d. It is not misrepresentation
c. Negligent Misrepresentation
- Under general legal principles of contract formation, which of the following will always automatically result in the termination of an offer? Select THREE that apply.
a. Acceptance
b. Negotiation
c. Variation
d. Non-disclosure
e. Revocation
f. Lapse
a. Acceptance
e. Revocation
f. Lapse
- Which would be a key advantage of using a standard contract template?
a. the buyer will not need to negotiate any terms or conditions
b. it is likely to cover the precise needs of the procurement
c. all the main key risk areas are likely to be covered
d. It ensures that there is the capacity to contract
c. all the main key risk areas are likely to be covered
- James walks into a shop. There is a toy with a £5.00 ticket on it. James takes it to the counter and hands over £5.00. James’ action is called
a. a counteroffer
b. an offer
c. an invitation to treat
d. acceptance
b. an offer
- Explain the following terms
a. ultra vires
b. Caveat Emptor
c. Bona fide
d. “Time is of the essence”
a. ultra vires- – public sector organisations may only legally be able to contract to do certain things. The equivalency in commercial companies set out in ‘articles of incorporation’
b. Caveat Emptor - it means let the buyer beware. Buyers must take responsibility for carrying out due diligence before entering into a contract. The law does not protect the buyer against making a bad bargain!
c. Bona fide in good faith
d. “Time is of the essence” it means that delivery is considered primary clause in the contract (rather than secondary) so if this is put in you can terminate the contract. If you don’t put it in them it is seen as less important and you can only claim damages
- What is meant by the rules of interpretation? P 45
Set of rules which have evolved to defines how the law will interpret contract. i.e words will have there everyday meaning unless there is a specific definition within the contract
- Suggest the circumstances when it may be useful to use the following –
a. Performance based specification
b. Framework Agreement
c. Standards within a specification
d. Standard terms and conditions
a. Performance based specification – often used for services. i.e. when you want the supplier to determine the best way to achieve a result. You need clear outputs/outcomes
b. Framework Agreement – when the buyers want to pre-evaluate a supplier/s and agree terms and conditions up front. The buyer however may not know the exact times or volumes of requirements but want to simplify the procurement process when a requirement does arise.
c. Standards within a specification – these can act a a shortcut to suppliers and make it clear exactly what the requirements are. If there is a clear need to conform to a standard as such FCS or food standards then quoting this in the specification can make it very clear to the supplier what the requirement is. Need to be very careful not add in standards that are really not required as this can reduce competition and add cost.
d. Standard terms and conditions – low value one off purchases
- Give your own examples of the following scenarios
a. Past Consideration
b. Implied Consideration
c. A promise to perform an existing obligation
a. Past Consideration - supplier comes to you and states that they added 6 additional parts to the last delivery they made three months ago and now they would like payment for it.
b. Implied Consideration-a supplier contact you to ask you about the next service. They state that as well as servicing the boiler they would like to service two pumps on the shop flow. You agree
c. A promise to perform an existing obligation – a supplier is on contract to service the fire alarm systems and attend call out when the system fails. All parts, 24 hours call out charges and labour are included. The fire alarm goes off in the middle of the night. There is no fire and the alarm cannot be silenced-a fault light is showing on the panel. The company is contacted and they have to send someone out for three hours from 1am to 4am. The engineer says that the company will be sending an extra bill because it is the middle of the night they need to charge an extra £200.
- You have been tasked with arranging the procurement of an industrial tank to replace your existing tank. The value of the purchase is £100,000. Identity the type of contract agreement you would use (LO1.3) and what factors you may need to cover in the contract.
One off contract – any personal on site, training, warranty, liquidated damages, H & S requirements, inspection and testing, service levels, time is off the essence/delivery, quality standards, built in change process, confidentiality,
- What is the difference between a direct call off from a framework agreement and the call off from a term contract?
Direct call off-this is when you have a framework agreement in which T & Cs have already been agreed. A direct call off would be made under a framework agreement if the framework agreement allows this. The framework agreement may say-for PAT testing use supplier A, for lighting use supplier B etc. Or there may only be one supplier on a framework. The supplier is not committed under a framework to supply and the purchase is not committed to order from a framework.
Term contract-a term contract is when you have an agreement with a supplier for an agreement period of time. Supplier A is to supply all electrical parts between Date xxxx and xxxx. In this agreement you have an agreement that you will use that supplier for a given time. There is a schedule of rates/pricing and you call off based on that. The supplier is commitment to meeting all orders place.
- Explain the following
a. title to goods
b. acceptance by performance
c. transfer of risk
d. specific performance
a. title to goods A Standard Clause to be used in a contract for the sale of goods to specify when title to the goods passes from the seller to the buyer. (ownership passes)
b. acceptance by performance-acceptance can be implied by actions. If the purchasers uses the goods then it is assumed that they have accepted the terms on which they are offer
c. transfer of risk- the point at which liability for damage transfers from one party to another (not the same as ownership)
d. specific performance -where a court order a party that I in breach of contract to perform exactly what it is required to do under the contract-ensures they cannot just get out of it by paying damages
e. force majeure-exclusion clause which relates to things that are outside the control of the parties, but why by their nature they are unforeseeable. Acts of good
- Suggest five factors that would need to be considered in a contract for the lease of a fleet of forklift trucks
Maintenance
Risk-what transfers to the buyer and when
Period of hire-how does this link to the life span of the vehicles
End of contract-who is responsible for what
Extending the length or scope of the contract
Q/ Express terms apply in all contracts through the buyer’s and supplier’s statutory rights. Is this correct?
a. Yes, in most jurisdictions there are expressly stated statutory rights.
b. No, these terms are specifically stated within the contract.
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, these terms are specifically stated within the contract.
