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CIPS L4M3 Exam
Commercial Contracting (Page 7 )

Updated On: 1-Feb-2026
Page 7 of 39
PDF with 189 Questions

Which of the following is an agreement between service provider and user that quantifies the minimum quality of service?

  1. Service charter
  2. Service guarantee
  3. SLA
  4. Service standard

Answer(s): C

Explanation:

A service-level agreement (SLA) is a commitment between a service provider and a client. Particular aspects of the service ­ quality, availability, responsibilities ­ are agreed between the service provider and the service user. The most common component of an SLA is that the services should be provided to the customer as agreed upon in the contract. A customer service charter is a document that outlines how an organization promises to work with its customers along with providing insights into how an organization operates. A service guarantee is a marketing tool service firms have increasingly been using to reduce consumer risk perceptions, signal quality, differentiate a service offering, and to institutionalize and professionalize their internal management of customer complaint and service recovery.


Reference:

CIPS study guide page 110 LO 2, AC 2.2



Which of the following is the type of insurance that cover the liabilities of service provider such as legal advice, accountancy, technical designs, etc?

  1. PII
  2. Product liability
  3. Employer's liability
  4. Public liability

Answer(s): A

Explanation:

The most usual forms of insurance cover are as below:
- Employer's liability: Employers' liability insurance, sometimes known as employment practices liability insurance (EPLI), protects employers from financial loss if a worker has a job-related injury or illness not covered by workers' compensation. Employers' liability insurance can be packaged with workers' compensation insurance to further protect companies against the costs associated with workplace injuries, illnesses, and deaths. Employers' liability insurance is also called "part 2" of a workers' compensation policy.
- Public/product liability: Public liability insurance covers you against any claims made against your business ­ for example if you were held legally liable for personal injury, or for damage done to property. The insurance will also cover you for any legal costs associated with defending claims against your business.

- Professional indemnity insurance (PII): Professional indemnity or liability insurance offers such coverage to professional advice or service providing individuals and companies ensuring protection against any legal costs and damages awarded as a result of claims relating to negligence.
Whereas more general forms of liability insurance focus on direct forms of harm such as sustaining injuries, professional indemnity insurance provides a far more detailed and comprehensive form of coverage. The cover protects a firm or individual's liability relating to any financial loss caused by errors or omissions in the service provided as well as any alleged failure to perform on behalf of a client.
- Goods in transit coverage: Goods in transit insurance, sometimes referred to as GIT, covers goods against loss or damage while being moved from one place to another. These goods can be being carried by individuals in their own vehicle, self employed drivers or contractors or by third party carriers. The insurance can cover both domestic and international trips, with specific add-ons available for insurance within Europe.


Reference:

CIPS study guide page 151-152 LO 3, AC 3.2



Standard terms and conditions should become the governing terms for which group of items?

  1. Leverage items
  2. Bottleneck items
  3. Strategic items
  4. Routine items

Answer(s): D

Explanation:

Standard terms and conditions are set of terms that is prepared by an organisation. These terms can become the governing terms in low-value, low-risk transactions (or Routine items according to Kraljic's portfolio model). They can be a reference when negotiating for more important contract.


Reference:

CIPS study guide page 132-139 LO 3, AC 3.1



XYZ Ltd and Engineer Corp signed a long-term supply contract in which both parties had agreed on performance targets. Recently, due to increased customer demands, XYZ Ltd realises that they should make changes to the contract with Engineer Corp with regards to performance management. These changes are approved and signed by both the buyer and seller. The changes to the contract are known as...?

  1. An amendment to the prime contract
  2. A stand-alone subcontract to the prime contract
  3. An appendix to the prime contract
  4. A separate counter-offer to the supplier

Answer(s): A

Explanation:

The changes are made to the prime contract. They are also signed and approved by both parties. These changes are known as amendment (variation) to the contract. A contract amendment allows the parties to make a mutually agreed-upon change to an existing contract. An amendment can add to an existing contract, delete from it, or change parts of it. The original contract remains in place, only with some terms altered by way of the amendment.


Reference:

- Modify an Existing Contract with a Contract Amendment
- CIPS study guide page 26-28 LO 1, AC 1.1



Information assurance protects information systems and...?

  1. Hard copy
  2. Computers
  3. Inventory
  4. People

Answer(s): B

Explanation:

Information Assurance (IA) is the practice of managing information-related risks and the steps involved to protect information systems such as computer and network systems. The IA transformation is a partnership that stretches across the Department of Defense (DoD), Office of National Intelligence, Committee on National Security Systems, National Institute of Science and Technology (NIST), and the Office of Management and Budget. The US Government's definition of information assurance is:
"measures that protect and defend information and information systems by ensuring their availability, integrity, authentication, confidentiality, and non-repudiation. These measures include providing for restoration of information systems by incorporating protection, detection, and reaction capabilities."


Reference:

- What is Information Assurance (IA)?
- CIPS study guide page 99-100 LO 2, AC 2.1



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