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CIPS Managing Contractual Risk Sample Questions (Q56-Q61):NEW QUESTION # 56
Which of the following will you put into box 7?
Answer: A
Explanation:
The correct answers are as follows:
This is litigation as it involves a legal team and it's public. Out of the 4 options only litigation is a public dispute resolution.
NEW QUESTION # 57
Where two parties are engaged in international trade and have a long term relationship and a degree of mutual trust, which payment mechanism is commonly used?
Answer: A
Explanation:
Documentary collection is used in international transactions where there is trust. This is explained on p. 35 It's basically when supplier and buyer delegate collection of payments to their respective banks. They need to trust that each other will actually pay - otherwise they wouldn't delegate this. A Letter of Credit is a documentary credit confirmed by a bank, usually for export. A Bill of Ex-change is a promise to pay at a later date, usually supported by a bank. Stage payments are used in big purchases, such as construction projects where payment is given to the contractor when certain milestones are hit.
NEW QUESTION # 58
Which of these statements about Guarantees are TRUE? Select 2
Answer: A,C
Explanation:
"A Guarantee is a secondary obligation of a contract' and 'A guarantor's responsibility cannot be higher than the Principle' are the correct answers. Guarantees are explained on p.28. Be careful not to confuse this with Warranty. A promise to repair or replace an item within a defined period of time is the definition of a warranty. That was put in there to trick you. Sorry. Remember a Guaran-tee is to do something when the Principle of the contract fails to do it. It's most common in leasing agreements- if you're a young person, you'll often need a responsible adult / parent to sign the lease as your Guarantor. As a Guarantor, they promise to pay the rent if you're unable to. Legally they can't be asked to do any more than you are assigned to do in the contract. So if your rent is £500 a month, that's all they can be asked to pay if you don't pay it. The primary obligation is between you and the landlord. The secondary obligation is between the guarantor and you.
NEW QUESTION # 59
Which of the following will you put into box 6?
Answer: D
Explanation:
The correct answers are as follows:
The answer is liquidated damages as they're seeking compensation for loss.
NEW QUESTION # 60
A large financial organisation ensures that they have contracts with all of their suppliers. In which instance would indemnity not necessarily form part of the contract?
Answer: B
Explanation:
Indemnity isn't usually used for confidentiality agreements - this is stated on p.21 of the study guide. This is because it's hard to indemnify against- you don't know what the consequence of a breach of confidentiality is going to be so it's hard to quantify. Unliquidated damages is more suitable. The study guide does state that indemnity is frequently used in intellectual property rights, software licence agreements and share purchase agreements. This is also written on p. 21.
NEW QUESTION # 61
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