QUESTION: 89

MWB operates serviced offices in central London. Rock entered a contractual licence with MWB to occupy office space in Marble Arch and had accumulated licence fees in arrears. The original licence agreement contained a `No Oral Modification' clause that said: 'All variations to this licence must be agreed, set out in writing and signed on behalf of both parties before they take effect'. After 6 months, Rock director re-negotiated to extend payment period over phone call and MWB credit controller agreed his proposal. Is this agreement considered as an effective variation to the original licence agreement?

Yes, because parties who agree to altering the original contract orally despite a `No Oral.
Modification' clause, must have intended to dispense with the clause
No, because the mechanism for variation has been set out in the original contract
Yes, because the credit controller had agreed with Rock director's proposal
No, because Rock director assumed that the variation was effective and convinced credit controller to believe it

Answer(s): C

Explanation:

The license can be amended during its lifespan. However, in this case, it already has a clause allowing for mechanism of variation which sets out who can authorise changes and prohibits any oral variation. Therefore, the agreement between Rock's director and MWB credit controller is not an effective variation to the license.

Reference:

CIPS study guide page 26-27 LO 1, AC 1.1

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QUESTION: 90

Which of the following is most likely to be an one-off contract?

Franchise Agreement
Framework Agreement for supply of mono-crystalline silicon
Contract for construction of a power plant
Commercial lease agreement of an office building

Answer(s): C

Explanation:

One-off contracts are used where a supplier is only needed for a single activity unlikely to be repetitive, and where the need of the buyer is concrete and finite. Among the answers, only construction for power plant is one-off since the work is non-repetitive and the need is clearly defined.
A framework agreement is an agreement between one or more businesses or organisations, "the purpose of which is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, the quantity envisaged". A Commercial Lease Agreement is a contract used when renting business property to or from another individual or company. It gives the tenant (or renter) the right to use the property for business purposes during the term of the lease in exchange for payment to the landlord. A franchise agreement is a legally binding document that outlines a franchisor's terms and conditions for a franchisee. Every franchise is governed by these terms, which are generally outlined in a written agreement between both parties.

Reference:

CIPS study guide page 55-58 LO 1, AC 1.3

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QUESTION: 91

Which of the following may be a benefit for purchaser in using call off contract?

Ability to discover new potential suppliers
No long-term commitment required
Secured supply
Maintaining a degree of competition between suppliers

Answer(s): C

Explanation:

Benefits for the purchaser in using call off contract are as below:
- The benefit of a call off contract is that they allow the supply of materials, goods and services to be secured over multiple delivery dates across the length of a project.
- Agreed prices, either fixed or pre-agreed mechanism for adjustment. This helps with setting and controlling budgets.
- Simple order mechanisms at the point of need
- Schedules of rates pricing enables electronic procure-to-pay systems, which gives greater control and visibility of spend
- The value of spend ad length of contract justify the cost of proper market engagement and tender or negotiation processes resulting in better value for money
- The longer the contract, the greater the opportunities for aligning working practices to create joint efficiency.

Reference:

- Call Off Contracts What are they and how are they used?
- CIPS study guide page 63-64 LO 1, AC 1.3

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QUESTION: 92

A procurement professional is drafting payment terms for a commercial contract. He is considering about payment method if defective products are found.
Which of the following should be embedded in payment terms to control this issue?

Remedies for late payment
Pay-less notice
Invoice preparation
Retention clause

Answer(s): D

Explanation:

Retention money is the payment for a service or product that is withheld pending the completion of some specified condition. For example, buyer may withhold the amount due until the supplier replace all defective goods.
Pay-less notice is the notice under a contract which states that the invoice will only be partially paid because of some issues such as supplier has to pay the damages. Remedies for late payment are remedies that supplier may seek when a buyer pay it later than the stated payment terms. Normally, the buyer will be charged an interest rate.

Reference:

CIPS study guide page 190-191 LO 3, AC 3.3

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QUESTION: 89

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QUESTION: 90

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QUESTION: 91

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QUESTION: 92

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