L4M3 Commercial Contracting

Name: __________________ Group:_____________

3rd Test

1. A company wishes to buy a large quantity of a standard product item in a single

purchase order, and is looking for a competitive price from the supplier. There are a
large number of suppliers in the market. The most appropriate approach to
procurement in this instance is to:
A. buy the item from a supplier’s e-catalogue
B. issue ITTs to a number of suppliers
C. invite suppliers to bid for a call-off contract
D. Issue RFQs to a number of suppliers.

2. A purchaser using Invitation to tender (ITT) will typically include which of the following
THREE
A. Submission deadline
B. Purchase order
C. Non-disclosure agreement
D. KPIs
E. Terms and Conditions
F. Pricing schedule
3. Which of the following should be included in a request for quotation? Select TWO items
that apply.
A. Latest date for reply
B. Purpose of the purchase
C. Key performance indicators
D. Criteria for awarding the contract
E. Unique reference number

4. A company receives a number of bids from suppliers in a restricted tendering

procedure, and selects one of these as its preferred bid. Does selecting the bid create a
legally binding contract between the buyer and the selected supplier?
A. Yes, because it is a formal acceptance of the supplier’s offer
B. Yes, because other buyers are made aware that their bids are unsuccessful
C. No, because there may be negotiations before a contract is signed
D. No, because selecting the preferred bid is an offer, and not accept
5. In a tendering procedure, performance specifications are preferable in the invitation to
 tender documentation when:
A. the buyer is willing to accept the specification risk
B. the potential suppliers have greater technical knowledge of the product than
the buyer
C. there are a limited number of potential suppliers
D. there is a risk of over-specification.

6. A national government wants to build a road bridge over a river, that will be able to
carry up to a specified number of vehicles per hour. It has no expertise in designing or
building bridges and is open to any offers in a competitive tendering process. The
government is likely to include its requirement in:
A. a conformance specification report.
B. an output specification.
C. a functional specification.
D. an outcome specification.
7. The buyer prefers to purchase using output specification, which of the following are
likely to be included by the purchaser
1. Required product function
2. Technical drawing
3. Requirement to comply with international quality standard
4. Required level of product performance
A. 1 and 2
B. 1 and 3
C. 1 and 4
D. 3 and 4
8. The buyer using Request for Quotation (RFQ) is likely to include which of the following
THREE elements
A. Terms of payment
B. Output specifications
C. Buyers standard terms and conditions
D. Quotation reference number
E. Identity of other suppliers who are being invited to submit quotations
9. When there is a difference or disagreement about assessment of fitness for purpose of a
product quality between the buyer and supplier, which of the following will be ideal to
resolve the difference
A. Contract KPIs
B. Cost
C. Product specifications
 D. Contract terms and conditions
10. For which one of the following is it most likely that a buyer will prepare a conformance
specification rather than a performance specification?
A. A Service
B. A high-value item
C. A sub-assembly unit
D. An item of non-standard software
11. In which part or element of purchase contract are details of discounts for bulk purchases
most likely to be found?
A. In the product specifications
B. In the implied terms of the contract
C. In the KPIs
D. In a pricing schedule
12. Which one of the following items might be included in a health and safety schedule for a
contract for the supply of works?
A. Requirements for the supplier/contractor to maintain health and safety records
B. Requirements for the buyer/customer to maintain health and safety records
C. The legal requirements relating to health and safety at work
D. Details of the supplier’s in-house health and safety procedures
13. Which of the following might constitute an offer to enter into a legal agreement? Select
Two items.
A. An invitation to tender (ITT)
B. A purchase order (PO)
C. A supplier’s quotation
D. An advertisement
E. A request for proposal (RFP)
14. Company A makes an offer of $30,000 to supplier B for the supply of service. Supplier B
replies that it will accept $30,000 for the service, but at a lower level of service than
Company A has specified. Company A refuses. A week later, supplier B has a change of
mind and tells Company A that it will accept Company’s A original offer. From a legal
perspective, what does Supplier B’s agreement to accept the original terms of Company
A’s offer constitute?
A. Acceptance of Company A’s offer and a contract now exists
B. A new offer to Company A
C. A counter-offer to company A’s offer
D. An invitation to treat
15. A company has purchased a number of containers from a supplier, believing that they
can withstand heat of up to 300c. When the containers are put into use, it is found that
 they cannot withstand this heat, and crack at the lower temperature. In which one of
the following circumstances would there be a misrepresentation by the supplier?
A. An advertisement in a trade magazine states that the containers can withstand heat
of up to 300C .
B. A sales representative informed the company that he believed the containers could
withstand heat up to 300C.
C. The supplier informed the company that the containers could withstand heat up to
300C before the purchase was agreed.
D. The supplier informed the company that the containers could withstand heat of up
to 300C after the purchase was agreed.
16. For contracts between a buyer and seller of goods in different countries that have
ratified the UN Convention on Contracts for the International Sale of Goods(CISG) the
contractual terms in the CISG:
A. May be applied instead of the law of a chosen country or jurisdiction
B. May be applied in addition to the law of a chosen country or jurisdiction
C. Must be applied instead of the law of a chosen country or jurisdiction
D. Must be applied in addition to the law of a chosen country or jurisdiction
17. A government department operates in a large number of buildings spread around the
country, and it regularly requires repair work at each property. Many of these repair
jobs are small. Which one of the following is likely to be the most suitable type of
arrangement for procurement of repair services?
A. A framework agreement with a single contractor and call-off orders
B. A framework agreement with a number of local contractors and call-off orders
C. A framework agreement with a number of local contractors and mini-competitions
D. One-off purchases for each job
18. For which of the following procurement transactions are framework agreements and
call-off orders more likely to be preferred to one-off purchases? Select TWO items.
1. Infrequently purchased items
2. Property rentals
3. Consultancy agreements
4. High-volume, low-value items
A. 1 and 2
B. 1 and 3
C. 2 and 3
D. 3 and 4
19. In a mini-competition under framework agreement, two or more suppliers compete for
a call-off order on the basis of:
A. Price
 B. Location of the supplier
C. Speed of response
D. Factors other than price
20. What type of service contract is each of the following contracts?
Contractor 1: the hire of a professional surveyor to provide valuations of the properties
of an audit client.
Contract 2: The appointment by the army of recruitment specialists to enlist new
recruits for the army.
A. Contract 1 is a subcontract and contract 2 is an outsourcing contract
B. Contract 1 is an outsourcing contract and contract 2 is a subcontract
C. Both contracts are subcontracts
D. Both contracts are outsourcing contracts
21. The inability of beneficiaries to enforce contracts they are not party to is addressed by
A. English case law
B. Commercial law Act 2017
C. Sales of Goods Act 1979
D. Right of third Party Act 1999
22. Most model form contracts will have an accompanying guidance note. The note will
highlight the following EXCEPT
A. Optimal clause that may only apply to certain circumstances
B. Blank space on the model form
C. Supply chain management
D. Options with default position
23. In commercial setup a beneficiary cannot enforce the contract they are not party to
because of
A. Privity of agreement
B. Privity of contract
C. Privity of consideration
D. Privity of association
24. An agreement under which a subcontractor to a third party agree that it will fulfil its
obligation under the contract is known as:
A. Framework agreement
B. Collateral warranty
C. Implied warranty
D. Structural agreement
25. Types of insurance cover that can be found and referenced in contracts include all of the
following EXCEPT
A. Employers liability
 B. Goods in transit cover
C. Professional indemnity cover
D. Supplier liability
26. What is the purchaser’s advantage of using cost-plus pricing arrangements
A. All costs are cover hence cannot make a loss
B. Guaranteed profit levels aid forward planning
C. Easy to justify price increases
D. Value for money demonstrated by fixed profit mark-up
27. What is the supplier’s advantage of using cost-reimbursable pricing arrangements
A. Knowledge that the supplier is not making excess profit
B. Risk of supplier collapse is reduced for a major purchaser
C. Guaranteed profit levels aid forward planning
D. Profit is limited cannot gain cost efficiencies
28. The linking of the payment (be it a price, salary or some other due payment) to an index
and the adjustment of payment in line with the movements of the index, is known as:
A. Profit index
B. Price index
C. Cost index
D. Indexation
29. When paying for the work done by the contractor, the purchaser and contractor agreed
that the purchaser can withhold a certain sum of money for a fixed period of time to be
used to cover any costs associated with remedying defects, this is known as
A. Romalpa clause
B. Retention
C. Remedies for late payment
D. Payment period
30. An employee was injured by a company’s products within its premises, the company
will use which type of insurance to remedy the situation
A. Employer’s liability
B. Professional indemnity
C. Product liability
D. Goods in transit