CIPS L5M3 Managing Contractual Risk Exam Practice Test

Explanation

The correct answers are as follows:

Table Description automatically generated

This is negotiation - no third party is mentioned and there is a face-to-face meeting in private

Explanation

The correct answers are as follows:

The answer is compete because they're not concerned with preserving the relationship

Explanation

They can claim damages but not terminate the contract. If Blue company has broken a Condition, they would be able to terminate the contract, but this isn't the case for a breach of a Warranty. See p.43 for more details

Explanation

The first stage is 'identify the nature and source of the conflict'. Stage 2 is assess the impact of the breach, stage 3 is look at remedies available and stage 4 is agree on a way forward and type of conflict resolution. These stages are explained on p.62 of the study guide.

Explanation

The correct answers are as follows:

This is a contract variation as they are changing the number of staff and their hours

Explanation

"the party indicates they no longer intend to fulfil their contractual obligations, usually in response to a breach". This is the definition of 'repudiate' given on p. 128 Before the exam check you understand the difference between repudiate, rescind and revoke. These are all ways contracts can end but are slightly different.

Explanation

Service Credits are a form of Liquidated Damages - it's a financial remedy, common in the IT in-dustry, which is available to a buyer when the service level falls below an expected level. See p. 31 for more details.

Explanation

The correct answers are as follows:

Table Description automatically generated

This is mediation - there's a third party with no powers. The answer can't be negotiation as negotiation doesn't have a third party. The answer can't be litigation or arbitration as the third party here does have decision making power.

Explanation

This is a minor breach. This is the definition as given in the study guide on p. 48

Explanation

The correct answers are: 1) the painter using magnolia instead of white, and 5) the supplier who was late on his delivery. These are considered minor breaches because the contract was still fulfilled and it didn't affect the contract in any significant way. In this type of question you have to use logic to deduce the right answer; 2) A consultant giving bad advice would be a major breach - it would be a huge issue, particularly if that advice led to an accident or death. Think about an Architect advising on a type of pillar, and it turns out that pillar can't support the weight of the building. That would be bad. 3) Lions and Tigers are not the same thing - so that would be a pretty fundamental mistake in a contract. 4) Breaching a non-disclosure agreement is usually considered a major breach of a contract (this is mentioned in chapter 2.1). See p. 48 for more information on minor breaches.

Explanation

The correct answers are as follows:

This is a warranty as it is a minor term. If the invoices aren't processed in 30 days this isn't a major breach- the supplier has said they'd be okay with it.

Explanation

The correct answers are 1, 4 and 5. Negotiation does NOT involve a third party and the outcome is private / confidential. See p.63 for more information on negotiation

Explanation

This is a Fundamental Breach. Fundamental Breach and Major Breach are very similar- they're both really bad and can lead to damages and the termination of the contract. The difference is that a Fundamental Breach is so bad that it goes to the root of the contract - a breach so bad that the contract is basically worthless. For example if you make a contract with a supplier to have potatoes delivered but it turns out they don't sell potatoes, only apples, and they keep sending you apples instead of potatoes. This would be a fundamental breach because its something so fundamental to the contract that there's no point in the contract existing if there's a breach like this. Condition Breach and Essence Breach are made up words- they don't exist. P.44

Explanation

The correct answers are as follows:

Table Description automatically generated

This is an anticipatory breach as the breach hasn't happened yet- it's about what will happen to the future summer order.

Explanation

Negotiation isn't an alternative dispute resolution because it's supposed to be the 'default' dispute resolution- the one you automatically do when a problem occurs. Only if negotiation fails should you turn to ADR. P. 142

Explanation

Perry should try adjudication. Litigation is public so there would be no confidentiality. Out of the four options only adjudication would provide Perry with what he needs; a binding decision which is confidential. See p.146 for more information on litigation.

Explanation

Indemnity- this is the definition given on p. 20

Explanation

A Clause for Default 'allows the lender to demand full payment of the outstanding balance'. See p.102. And always read the small print before you sign a loan agreement :)