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NEW QUESTION 57
Conciliation differs from mediation in which of the following ways?
- A. the outcome of mediation is not binding and the outcome of conciliation is binding
- B. mediation is voluntary and conciliation is mandatory
- C. the mediator has no decision making power but a conciliator can provide recommen-dations
- D. mediation is cheaper than conciliation
Answer: C
Explanation:
The true statement is 'the mediator has no decision making power but a conciliator can provide recommendations'. The other statements are false; both processes are voluntary, cheap and non-binding.
NEW QUESTION 58
Which of the following would constitute an offer? Select TWO:
- A. an advert on a website
- B. a display in a shop window
- C. a price proposal that is valid for 14 days
- D. a bid on an auction
- E. an auction
Answer: C,D
Explanation:
Offers include bids on an auction and a price proposal that is valid for 14 days. The other three options are Invitations to Treat. See p.3 for the full list of what constitutes an Invitation to Treat. The tricky thing here is that an auction is an invitation to treat but a bid on an auction is an offer. An auction is an ITT because you're encouraging people to make an offer to you. A bid on the auction is the offer (you offer to buy something at a price you propose).
NEW QUESTION 59
Which of the following is usually the default method for resolving disputes?
- A. conciliation
- B. mediation
- C. litigation
- D. negotiation
Answer: D
Explanation:
Negotiation is usually the default method for resolving disputes. This is a direct quote from p.63
NEW QUESTION 60
Fruity McFruitFace is an exporter of fruit. Which of the following payment terms would be most advantageous for it?
- A. documentary collection
- B. documentary credits
- C. open account
- D. advance payment
Answer: D
Explanation:
Exporters prefer advance payment - this puts the risk with the importer / buyer. There's a table of these four terms on p.36. An importer would prefer an open account arrangements. The other two options are in the middle and the risk is more equally split between the two parties.
NEW QUESTION 61
Which of the following statements about 'Specific Performance' are TRUE? Select TWO.
- A. Orders for Specific Performance can be a cheap and quick way to remedy a breach in contract
- B. Orders for Specific Performance can be a lengthy and costly process
- C. The innocent party must mitigate all losses
- D. If a party is ordered to complete a 'Specific Performance' and doesn't, they can be ar-rested
Answer: B,D
Explanation:
1+3 are correct. Specific Performance tend to go through the courts so this is a lengthy and costly process. Because it's mandated by the courts it means that if the offending party doesn't comply, this is a criminal offence and they can be arrested. Option 2 is incorrect as it is the opposite of option 1. Option 4 is incorrect because there is no need for the innocent party to mitigate any losses. See p. 132 for more information on Specific Performance
NEW QUESTION 62
Which of the following will you put into box 5?
- A. Litigation
- B. Negotiation
- C. Arbitration
- D. Mediation
Answer: B
Explanation:
The correct answers are as follows:
This is negotiation - no third party is mentioned and there is a face-to-face meeting in private
NEW QUESTION 63
Which of the following will you put into box 1?
- A. subcontracting
- B. penalty clause
- C. consequential loss
- D. reputational damage
Answer: C
Explanation:
The correct answers are as follows:
This is consequential loss. Brian Air is going to lose the profits from the sales of the flights it had sold. Now those flights won't go ahead Brian Air can claim for consequential loss which would help balance the books.
NEW QUESTION 64
Buyer A and Supplier B have had a disagreement regarding a breach in the contract. They are looking to resolve the issue via arbitration. Which of the following is true about arbitration?
- A. the arbitrator's role is to facilitate dialogue
- B. there are strict rules and processes to follow
- C. the outcome is binding and enforceable
- D. the outcome will set a legal precedent
Answer: C
Explanation:
The outcome is binding and enforceable is the correct answer. However the ruling can be appealed. Arbitration is a flexible approach, and the outcome doesn't set legal precedent. The role of the arbitrator is to reach a decision, only in mediation is the role of the third party to facilitate dialogue rather than reach a decision. See p.80 for more information on arbitration.
NEW QUESTION 65
Which of the following would be included in a contract to assign costs and responsibilities be-tween buyer and seller when products are delivered?
- A. Indemnity
- B. Liquidated Damages
- C. Incoterms
- D. Liability
Answer: C
Explanation:
Incoterms assign costs and responsibilities about when products are delivered. See p. 37 for a full list of the different Incoterms. You don't need to know all Incoterms for the exam, but it's a good idea to know what they are and why they'd be put into a contract
NEW QUESTION 66
Which of the following will you put into box 4?
- A. Subcontracting
- B. Time is of the Essence
- C. Payment Term
- D. Specification
Answer: B
Explanation:
The correct answers are as follows:
Getting help from another supplier to fulfil the order is subcontracting.
NEW QUESTION 67
In which conflict resolution method is communication predominately written rather than spoken?
- A. conciliation
- B. adjudication
- C. arbitration
- D. negotiation
Answer: B
Explanation:
Adjudication is written. The other conflict resolution methods involve talking to the other person, or presenting arguments orally to a judge. See p.77 for more info.
NEW QUESTION 68
Harry is negotiating a contract for a new IT system for his business. He is investing heavily in the system and wants the system to be able to provide the services he requires for the next 10 years. However he is aware that technology is changing quickly and would like to include a clause in the contract to ensure that the system he is purchasing is useable for the next 10 years. What should Harry include in the contract?
- A. limitation of liability
- B. benchmarking
- C. service credits
- D. change control
Answer: B
Explanation:
Benchmarking should be included- this is common in long-term contracts where variables can af-fect the market over time. By including benchmarking, harry gets assurance that the product he purchases will meet the market expectations over the next 10 years. The other answers are incorrect; 1- there is no mention of liability in the question so this is incorrect. 2- service credits would be used if he is concerned the product would be offline/ not perform (it's a form of damages) but this isn't the case in this scenario. He's not worried about underperformance, he's worried about obsolescence. 4- change control is for when there are multiple versions of a contract due to amendments being made.
NEW QUESTION 69
Which of the following statements are TRUE about negotiation? Select THREE
- A. the process is voluntary
- B. the outcome of the negotiation is public
- C. the process can involve a neutral third party
- D. the process is flexible
- E. it is a quick and cost effective method to resolve disputes
Answer: A,D,E
Explanation:
The correct answers are 1, 4 and 5. Negotiation does NOT involve a third party and the outcome is private / confidential. See p.63 for more information on negotiation
NEW QUESTION 70
Which of the following conflict resolution styles involves a strict timeline and is commonly used within the construction industry?
- A. conciliation
- B. adjudication
- C. arbitration
- D. litigation
Answer: B
Explanation:
Adjudication has strict timescales (this is one of the advantages of using this conflict resolution method). It has roots in the construction industry and has been widely used since the 1990s. See p.76 for more information
NEW QUESTION 71
Sarah is a baker and orders free-range eggs from a local supplier which she uses to make cakes. There is a contract in place which included a specification that states that the eggs must be free-range. One day the supplier delivers eggs which Sarah uses in the cakes. Later she dis-covered that these were not free-range. Sarah believes that the supplier has broken the con-tract. Is this true?
- A. no- the specification is not a contract document
- B. Yes- this is a fundamental breach
- C. no - there has been a breach in a warranty
- D. Yes- this is a breach of a condition
Answer: C
Explanation:
"No- there has been a breach in warranty" is the correct answer. The key to answering this question lies in the fact that the specification in this example is a warranty rather than a condition of the contract. P.45 of the study guide explains that the Sale of Goods Act has implications on whether or not a specification is a condition, warranty or innominate term and it's all about whether the product is in 'good condition' and can be used for its intended purpose. In this example the eggs were used for their intended purpose and were in good condition (or Sarah wouldn't have put them in the cakes). Therefore in this example, the eggs needing to be free-range is a warranty of the contract not a condition. Therefore options A and B are both wrong. Answer C is also wrong because the question mentioned that the specification was included in the contract. If you want to know more about the implication of the Sale of Goods act on specifications see p.45.
NEW QUESTION 72
Fishfingers Ltd has a contract with a supplier of cod. When the contract was set up it was not known how important specific delivery times would be for the arrival of the fish. After several months it has now become apparent that delivering the fish within 3 hours of them being caught is fundamental to the contract as delayed delivery results in poorer quality Fish Fingers. When the contract was set up what was the delivery times?
- A. a warranty
- B. a condition of the contract
- C. a time is of the essence clause
- D. an innominate term
Answer: D
Explanation:
An Innominate Term is the correct answer. At the time the contract was written, we didn't know how important the delivery time was - therefore it wasn't a condition or a warranty- it was an innominate term. An innominate term is a term that is difficult to classify at the time of drafting a contract. A time is of the essence clause would be a good thing to include in this contract now that we know how important the delivery times are. For more information on Conditions, Warranties and Innominate Terms see p. 43
NEW QUESTION 73
Derrek owns a factory and employs a Facilities Management Company called Balls FM to look after certain aspects of the factory including cleaning and testing the machinery to ensure they are in good working condition. One day he realises that one of the cleaners doesn't work for Balls FM, he works for another company called Bells FM. Which of the following statements regarding subcontracting is true?
- A. It is okay for Balls FM to subcontract out part of the contract to Bells FM if they are unable to fulfil their obligations
- B. Balls FM have committed a fundamental breach of the contract
- C. Subcontracting is never allowed in a contract unless specifically mentioned.
- D. Subcontracting would be if Derrek delegated responsibility for managing the contract to a member of his team
Answer: A
Explanation:
"It is okay for Balls to subcontract" is the correct answer. This question is testing whether you know that subcontracting can be a remedy in a contract. It is usually okay for a supplier to use a subcontractor if they're unable to fulfil their responsibilities and the alternative would be to breach the contract. This is a difficult question because you don't get a lot of context- it's based on a similar question in the exam- but just remember subcontracting can be a solution if one party can't fulfil their obligations in a contract. This is better than them breaching the contract. See p.89 for more information on subcontracting
NEW QUESTION 74
Popsi Cula is a manufacturer of sugared beverages and produces over 5000 tonnes of soda each day. It is extremely important that ingredients are delivered to the factory on specific days in order for the production to keep to its very tight schedule. Popsi Cula is onboarding a new supplier - which of the following clauses would it be important for the contract to contain?
- A. limitation of liability
- B. KPIs
- C. liquidated damages
- D. time is of the essence
Answer: D
Explanation:
A Time is of the Essence Clause should be included. This stresses the importance of obligations being completed on time, with any delays (e.g. in delivery of ingredients) being treated as a breach of a condition. The other three options are probably important to have in a contract, but don't relate specifically to this example. See p.45 for more information on Time is of the Essence Clauses
NEW QUESTION 75
What is the name given to a term in a contract where one party promises to compensate the other party for a trigger event?
- A. indemnity
- B. warranty
- C. damages
- D. liability
Answer: A
Explanation:
Indemnity- this is the definition given on p. 20
NEW QUESTION 76
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