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NEW QUESTION 53
Since services are intangible, so KPIs for services must be qualitative in all circumstances. Is this statement correct?

A. Yes, quantitative KPIs are limited to timeliness of supply of goods, defective rates and in-full quantities, which are applied to monitor supplier of physical goodsB. No, some KPIs for services are measurable by means of outcome, time and space performedC. No, KPIs for services must always be quantitative so that they can be measured easilyD. Yes, the only measure mattered to supply of services is end-users' satisfaction

Answer: B

Explanation:
KPIs are used to monitor supplier's performance. They can be qualitative or quantitative. Of course, service providers can be monitored by quantitative KPIs regarding the outcome achieved (such as uptime in IT contracts), timeliness of deliveries (such as in construction contracts)...
Reference:
LO 2, AC 2.2

 

NEW QUESTION 54
Which of the following would be useful tools to incentivise supplier innovation over the duration of the contract?
1. Gainshare arrangement
2. Liquidated damages
3. Service credits
4. Fixed bonus payments

A. 1 and 3 onlyB. 2 and 4 onlyC. 3 and 4 onlyD. 1 and 4 only

Answer: D

Explanation:
Gainshare is an incentive for cost control
Liquidated damage is common type of disincentive for late completion
Service credit is a remedy for not achieving targets set out in an SLA
Fixed bonus payment is an incentive for early completion
Reference:
LO 3, AC 3.3

 

NEW QUESTION 55
A tire manufacturer entered into a contract with a distributor. In the contract, the distributor is prohibited from selling the tire under the price list. The distributor must pay $5 for each tire sold in breach. The amount of $5 is known as...?

A. PenaltyB. Liquidated damagesC. Caveat EmptorD. Quantum meruit

Answer: B

Explanation:
This scenario is in fact based on a famous case law: Dunlop Pneumatic Tyre Company v New Garage & Motor co [1915] AC 79. In this case law, the House of Lords identified the clause as liquidated damages, and therefore enforceable.
However, if this case had happened in 2015 or afterwards, there would be some legal issues:
- The price agreement is prohibited by Competition Act 1998
- If the agreement is allowed by Competition Act, as in the case Cavendish Square Holding BV (Appellant) v Talal El Makdessi (Respondent), the clause can also be identified as a penalty and it is still enforceable.
Reference:
LO 3, AC 3.2

 

NEW QUESTION 56
Which of the following is the contract provision that relieves the parties from performing their contractual obligations when certain circumstances like natural disasters, terrorist attacks, etc arise?

A. Insurance clauseB. Indemnity clauseC. Exclusion clauseD. Liquidated damage clause

Answer: C

Explanation:
The contract provision that relieves the parties from performing their contractual obligations when certain circumstances like natural disasters, terrorist attacks, etc arise is called Force majeure. Force majeure is an example of exclusion clause.
An exemption clause in a contract is a term which either limits or excludes a party's liability for a breach of contract. In order for an exclusion clause to be binding and operable upon the parties, the clause must:
1. The clause must be incorporated into the contract as a term.
2. The clause must pass the test of construction.
3. The clause must not be rendered unenforceable by the statutory provisions in the Unfair Contract Terms Act 1977 or the Consumer Rights Act 2015 (enacting the Consumer Rights Bill 2013-14).
Reference:
- Exclusion Clauses Lecture
- CIPS study guide page 149
LO 3, AC 3.2

 

NEW QUESTION 57
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