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CIPS L4M3 Exam
Commercial Contracting (Page 6 )

Updated On: 1-Feb-2026
Page 6 of 39
PDF with 189 Questions

CISG will be most likely to apply to which of the following transactions?

  1. Sale of electricity
  2. Sale of a property
  3. Sale of iron ores
  4. Sale of a ship

Answer(s): C

Explanation:

Article 2 of CISG states that:
This Convention does not apply to sales:
(a) of goods bought for personal, family or household use, unless the seller, at any time before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for any such use;
(b) by auction;
(c) on execution or otherwise by authority of law;
(d) of stocks, shares, investment securities, negotiable instruments or money; (e) of ships, vessels, hovercraft or aircraft;
(f) of electricity. LO 1, AC 1.2



Bandpro is a reseller of branded computer products to the private and public sector. The procurement team must purchase 500 items each day solely by multiple phone calls and emails to suppliers. Due to this practice, it takes a lot of time to track and collect relevant documents. Some important documents even get lost, which makes procurement audit more burdensome.
Which of the following would increase the robustness of audit trails in procurement activities?

  1. Every evidence must be recorded by paper
  2. Adopt e-procurement
  3. Spend less time on auditing procurement procedures
  4. Rectify non-compliant activities

Answer(s): B

Explanation:

Audit trail is a chronological record the sequence of events connected to a given transaction, such as a purchase of raw materials, payroll disbursements, or a detailed financial statement. The record includes all the source documents connected to the transaction, providing context and clarity in the event a review is required. The more comprehensive the documentation, the more effective the audit trail is when used to create financial reports, verify information, and ensure compliance while eliminating fraud.
In the scenario, the procurement team gets the quotation from phone calls and emails which have weak audit trails and lack of transparency. One solution may be increasing the use of e-procurement system.


Reference:

- What is an audit trail?
- CIPS study guide page 6-7 LO 1, AC 1.1



In which of the following conditions, request for quotation produces the best results?

  1. With an ambiguous specification
  2. Under framework agreements
  3. Under a complex process
  4. With strategic items

Answer(s): B

Explanation:

Request for quotation has valuable function when its use is properly controlled. It works the best under framework agreements where the contract terms are already fixed.


Reference:

CIPS study guide page 3 LO 1, AC 1.1



A procurement manager is preparing a long-term contract with a major supplier. She decides to use the variable pricing arrangement using price indices. The payment terms describe the circumstances and mechanism where the price is allowed to change. In order to successfully manage this type of contract, the buying organisation should have...?

  1. Good market knowledge
  2. Selection of base year
  3. Value for money
  4. Economy of scale

Answer(s): A

Explanation:

There are several approaches to price adjustment for long-term contract. Describing circumstances and mechanism is one of them. Although this approach has some limitations, it is the best option. It relies on good market knowledge but provides the most equitable approach to satisfying the needs of the purchaser and the supplier.


Reference:

CIPS study guide page 184 LO 3, AC 3.3



When a contract has been agreed on the basis of a fraudulent misrepresentation, which of the following remedies are available?

  1. Damages only
  2. Rescission only
  3. An injunction only
  4. Both damages and rescission

Answer(s): C

Explanation:

An untrue statement of fact or law made by Party A (or its agent) to Party B, which induces Party B to enter a contract with Party A thereby causing Party B loss. An action for misrepresentation can be brought in respect of a misrepresentation of fact or law.
There are three types of misrepresentation:
- Fraudulent misrepresentation: where a false representation has been made knowingly, or without belief in its truth, or recklessly as to its truth.
- Negligent misrepresentation: a representation made carelessly and in breach of duty owed by Party A to Party B to take reasonable care that the representation is accurate. If no "special relationship" exists, there may be a misrepresentation under section 2(1) of the Misrepresentation Act 1967 where a statement is made carelessly or without reasonable grounds for believing its truth.

- Innocent misrepresentation: a representation that is neither fraudulent nor negligent. The remedies for misrepresentation are rescission and/or damages. For fraudulent and negligent misrepresentation, the claimant may claim rescission and damages. For innocent misrepresentation, the court has a discretion to award damages in lieu of rescission; the court cannot award both (see section 2(2) of the Misrepresentation Act 1967). For more information, see Practice note, Misrepresentation.


Reference:

- Misrepresentation
- CIPS study guide page 55 LO 1, AC 1.2



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