Question 1

Which of the following conflict resolution styles involves a strict timeline and is commonly used within the construction industry?

Accepted 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

Question 2

What is the purpose of a limitation on liability clause?

Accepted Answer

B

Explanation: A limitation of liability caps a company's exposure to risk. In SOME cases this may mean that the responsibility passes to the other party- but not always. For this reason option 2 is correct and 4 isn't. Option 1 is the definition of liquidated damages and 3 is just a made-up answer. See p.20 for more information on Liability

Question 3

Which of the following statements about penalty clauses is not true?

Accepted Answer

B

Explanation: 2 - penalty clauses are not illegal. However they may be judged excessive in a court of law and thrown out. Most contracts will instead opt for liquidated damages rather than a penalty clause. See p.90

Question 4

Verity Fashion is a clothing manufacturer and has an order to create 10,000 pairs of flipflops for a
retailer for the summer. The order was placed over the phone in February. The order has been
completed and has been boxed up ready for delivery. The retailer calls Verity Fashion in June and
says that the order is no longer required. What action can Verity Fashion take?

Accepted Answer

A

Explanation: Verity can sue for damages. The order was placed over the phone meaning that there was a verbal contract in place. Contracts do not need to be written to be enforceable so option 2 is incorrect. There is no termination clause mentioned in the question so you can assume that there isn't one. This means that the retailer is committing a breach of the verbal contract by cancelling the order. Verity could therefore apply for damages. (Whether or not they'd be awarded is a different matter!). This question tests your understanding of when contracts can be terminated and remedies for breaches. See p. 134.

Question 5

Which of these is NOT a stage in negotiation?

Accepted Answer

D

Explanation: Adjourning is not a stage. The 6 stages of negotiation are; preparation, opening, discussion, pro- posal, bargaining and agreement. P.64

Question 6

If a party is to 'repudiate' a contract, what does this mean?

Accepted Answer

C

Explanation: "the party indicates they no longer intend to fulfil their contractual obligations, usually in response to a breach". This is the definition of 'repudiate' given on p. 128 Before the exam check you understand the difference between repudiate, rescind and revoke. These are all ways contracts can end but are slightly different.

Question 7

Which of the following are a suitable course of action to take in the event of a minor breach of a contract? Select TWO

Accepted Answer

B, C

Explanation: In the event of a minor breach, CIPS says it is best to work with the defaulting party by conducting progress meetings and collaboration. This is on p. 50 of the study guide

Question 8

What is a Prime Contract?

Accepted Answer

B

Explanation: "A contract between an end customer and a company which has full responsibility for its perfor- mance" is the correct answer. This is the definition of Prime Contract given on p. 47

Question 9

Which of the following will you put into box 6?

Accepted Answer

C

Explanation: The correct answers are as follows: https://kxbjsyuhceggsyvxdkof.supabase.co/storage/v1/object/public/file-images/CIPS_L5M3/page_22_img_2.jpg The answer is liquidated damages as they're seeking compensation for loss.

Question 10

Restitution Measures are an award which seeks to return the value of a benefit which has been seen
to be unfairly received. Which of the following statements about Restitution Measures is TRUE?
Select TWO

Accepted Answer

A, C

Explanation: The correct answers are 1 and 3. These are taken from p. 124. Option 2 is incorrect - this is the definition of reliance damages. Option 4 is also incorrect- restitution damages are limited to pre- agreed levels stated in the contract.

Question 11

John is a chocolatier and has a big order of Easter Eggs coming up in April. He also creates chocolates
to sell all year round in his shop, but Easter Eggs represent a large proportion of his profits each year.
John's chocolate making machine has just broken and he has ordered a new one to be delivered in
February. However due to a delay, the manufacturer of the new machine can't deliver until May.
What course of action can John take?

Accepted Answer

C

Explanation: 3 is the correct answer. This question is testing your understanding of 'consequential loss' which is explained on p.109. Consequential loss is where you can claim damages for incidental loss (loss that isn't a direct cause of the breach of the contract, such as future earnings). In this scenario the breach is the late delivery and the incidental damage is John not being able to sell any chocolate in his shop or make his Easter Eggs. There are questions like this in the real exam- remember to think what the textbook would say and don't overthink this. The scenario doesn't always give you a lot of information (for example this doesn't say if there is a contract in place) so think- which of these four options is the most logical and what is this question trying to test me on.

Question 12

What is the first stage in conflict resolution?

Accepted Answer

C

Explanation: The first stage is 'identify the nature and source of the conflict'. Stage 2 is assess the impact of the breach, stage 3 is look at remedies available and stage 4 is agree on a way forward and type of conflict resolution. These stages are explained on p.62 of the study guide.

Question 13

Which of the following will you put into box 7?

Accepted Answer

A

Explanation: The correct answers are as follows: https://kxbjsyuhceggsyvxdkof.supabase.co/storage/v1/object/public/file-images/CIPS_L5M3/page_48_img_2.jpg This is a condition. Again the food being organic would be fundamental to the contract as the health of the llamas depend on it.

Question 14

Which of the following will you put into box 6?

Accepted Answer

C

Explanation: The correct answers are as follows: https://kxbjsyuhceggsyvxdkof.supabase.co/storage/v1/object/public/file-images/CIPS_L5M3/page_48_img_1.jpg This is a warranty as it is a minor term. If the invoices aren't processed in 30 days this isn't a major breach- the supplier has said they'd be okay with it.

Question 15

Which of the following is a source of breach in a contract?

Accepted Answer

A

Explanation: Negligence can be a source of a breach. P.42

Free CIPS L5M3 Actual Exam Questions