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NEW QUESTION 52
Which of the following will be always automatically deemed as a consideration?
Answer: D
Explanation:
Consideration only appears in common law countries. Below are some examples of what is and what is not consideration:
- Past consideration is something that has already been done or given. This cannot act as consideration
- Implied consideration: if the detail of a promise to pay is expressed after the provision of goods or services, but there is an implication that such promise would be forthcoming, this may (depending on the facts) be valid consideration.
- A promise given to a third party: this is not normally consideration, and is based on a concept known as privity of contract. Anyone who is not a party to the contract, even if they are beneficiary of it, cannot sue if the terms of the contract are breached.
- A promise to perform over and above an existing obligation: This is always consideration Reference:
- Consideration & Promissory Estoppel
- CIPS study guide page 36-40
LO 1, AC 1.2
NEW QUESTION 53
Southwark is negotiating a contract with Orchard to provide software and IT services. Orchard will manufacture and install the products which are contractually supplied by IBM. Southwark's procurement manager is worried that during the contract there would be some problems that they would not able to claim for damages from Orchard. Which of the following should be included in the head contract so that Southward can sue IBM, should the need arise?
Answer: C
Explanation:
A Collateral Warranty is a contract under which a consultant, a building contractor or a sub- contractor warrants to a third party that is has fulfilled its obligations under its professional appointment, building contract or sub-contract. The purpose of a Collateral Warranty is to give a third party, who is not a party to the original contract, rights to enforce that original contract.
In this case, IBM is the subcontractor, then purchaser can use collateral warranty deed to bind them.
Reference:
- Collateral Warranties - an Overview
- CIPS study guide page 39-40
LO 1, AC 1.2
NEW QUESTION 54
Blakenall District Hospital (BDH) is a large hospital that is a major part of the government's health service. Purchasing staff are in the habit of placing many long-term contracts with suppliers and sub-contractors. Whilst these contracts are usually carried out successfully, prices are often paid that are well over budget. The purchasing manager is concerned to find that, in some cases, members of staff are forcing suppliers to accept fixed price contracts. The policy has caused several problems such as some suppliers refusing to deal with BDH and a few going out of business mid-way through performing a contract with BDH. This is due to fluctuating market prices of materials. The procurement manager suggests supplier to adopt variable pricing arrangement with price index. Is this a right course of action?
Answer: C
Explanation:
Procurement staff in the Hospital is forcing suppliers into fixed price contract. If the costs generally rise, supplier may operate at a loss. This situation can disrupt the relationship, that is the reason why some suppliers refusing to deal with BDH and a few going out of business mid-way.
Alternative methods could be variable pricing arrangement. This method would reimburse the fluctuation of market price. It will also benefit buyer if the market price drops. This type of arrangement should be applied to long-term contracts (i.e. 18 months or more).
Reference:
LO 3, AC 3.3
NEW QUESTION 55
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