Free Practice Questions for CIPS L4M3 Exam

NEC - New Engineering Contracts is a family of contracts invented by Institute of Civil Engineers. The contracts are suitable for procuring a diverse range of works, services and supply, ranging from major framework projects through to minor works and the purchase of supplies and goods.

FIDIC is a French language acronym for Fédération Internationale Des Ingénieurs-Conseils, which means the international federation of consulting engineers. It was started in 1913 by the trio of France, Belgium and Switzerland. The United Kingdom joined the Federation in 1949. FIDIC is headquartered in Switzerland and now boasts of membership from over 60 different countries. FIDIC published its first contract, titled The Form of contract for works of Civil Engineering construction, in 1957. As the title indicated, this first contract was aimed at the Civil Engineering sector and it soon became known for the colour of its cover, and thus, The Red Book. It has become the tradition that FIDIC contracts are known in popular parlance by the colour of their cover. This first contract by FIDIC was undertaken jointly with the International federation of Building and Public works. FIDIC’s concerted effort at achieving broad consultation and acceptance of its contract forms has seen subsequent editions of its contracts being ratified by the International Federation of Asian and Western Pacific Contractors Association, Associated General Contractors of America and the Inter-American Federation of the Construction Industry, Multilateral Development Banks among others. Because of the broad support it enjoys, FIDIC contracts are the foremost contracts in international construction.

The Joint Contracts Tribunal, also known as the JCT, produces standard forms of contract for construction, guidance notes and other standard documentation for use in the construction industry in the United Kingdom. From its establishment in 1931, JCT has expanded the number of contributing organisations.

IMechE/IET: Institution of Mechanical Engineers/Institution of Engineering and Technology - two separate institutes that issue jointly agreed model forms covering the design, supply and installation of electrical, electronic and mechanical plant including special conditions for the ancillary development of software.

An untrue statement of fact or law made by Party A (or its agent) to Party B, which induces Party B to enter a contract with Party A thereby causing Party B loss. An action for misrepresentation can be brought in respect of a misrepresentation of fact or law.

There are three types of misrepresentation:

- Fraudulent misrepresentation: where a false representation has been made knowingly, or without belief in its truth, or recklessly as to its truth.

- Negligent misrepresentation: a representation made carelessly and in breach of duty owed by Party A to Party B to take reasonable care that the representation is accurate. If no "special relationship" exists, there may be a misrepresentation under section 2(1) of the Misrepresentation Act 1967 where a statement is made carelessly or without reasonable grounds for believing its truth.

- Innocent misrepresentation: a representation that is neither fraudulent nor negligent.

The remedies for misrepresentation are rescission and/or damages. For fraudulent and negligent misrepresentation, the claimant may claim rescission and damages. For innocent misrepresentation, the court has a discretion to award damages in lieu of rescission; the courtcannot award both (see section 2(2) of the Misrepresentation Act 1967). For more information, see Practice note, Misrepresentation.

There are a number of shortcuts that can be taken when drafting the specification. These include the following:

- The use of brand names

- The use of recognised standards

- The use of samples

- Information and knowledge from users/other buyers: Drafting a specification should naturally include those already used within the organisation itself, but also variants used by other companies in the same sector and other companies in different sectors

- Information from suppliers: suppliers will always be willing to assist in specification development, as this this one way in which they can seek to influence the design to favour their own products.

Fisher v Bell [1960] and Pharmaceutical Society of Great Britain v Boots Cash Chemists [1953] identified that the courts will generally consider goods advertised in shop windows or those with a price tag attached to constitute an invitation to treat. An invitation to treat is a concept in contract law. It refers to an invitation for a party to make an offer enter into contractual negotiations.

Invitations to treat can be anything displayed to a large number of people, as long as there is no defined way to choose who can accept. Items on display in a shop, advertisements, and catalogues are all common examples of invitations to treat.

However, there are cases in the US shows that under some circumstances an advertisement can become an offer (see Leftkowitz v Great Minneapolis Surplus Stores [1957]).

Penetration pricing is a marketing strategy used by businesses to attract customers to a new product or service by offering a lower price during its initial offering. The lower price helps a new product or service penetrate the market and attract customers away from competitors.

Price skimming is a product pricing strategy by which a firm charges the highest initial price that customers will pay and then lowers it over time. As the demand of the first customers is satisfied and competition enters the market, the firm lowers the price to attract another, more price-sensitive segment of the population. The skimming strategy gets its name from "skimming" successive layers of cream, or customer segments, as prices are lowered over time.

Incentive contracts allow sharing of the risks between the contractor and the client. The contractor is reimbursed all its justifiable costs in addition to a calculated fee. Target costing is an element of incentive contracts.

Cost-plus pricing is also known as markup pricing. It's a pricing method where a fixed percentage is added on top of the cost to produce

Qualitative performance measures capture subjective or non-numerical aspects of service, such as customer satisfaction, perceptions, and opinions. These are often gathered through surveys or interviews. While quantitative data is crucial, qualitative insights can reveal hidden issues and improve relationship management.

Incentivised pricing is designed to motivate suppliers to meet or exceed performance targets by providing financial or other incentives. In urgent projects, such as constructing a hospital ward during a pandemic, incentivised pricing encourages suppliers to accelerate delivery without compromising on quality. This supports the buyer’s need for speed and reliability.

The Unfair Contract Terms Act 1977 (c 50) is an Act of Parliament of the United Kingdom which regulates contracts by restricting the operation and legality of some contract terms. It extends to nearly all forms of contract and one of its most important functions is limiting the applicability of disclaimers of liability. The terms extend to both actual contract terms and notices that are seen to constitute a contractual obligation.

Under this regulation, if a clause within the standard terms in use is considered as 'unfair', the clause will be ineffective (or the other party will be entitled to avoid the clause). At court, the clause that is deemed to be unfair will undergo a 'reasonableness' test or an 'unfairness' test.

A fixed pricing arrangement means the buyer and supplier agree on a set price that does not change regardless of market fluctuations or production costs. This gives the buyer full cost certainty, which is essential when operating to a strict or limited budget. It helps avoid financial risk over the contract duration.

Model forms of contract are published by some industry or professional organisations such as FIDIC, ITC, CIPS,... These forms are often carefully prepared by legal professionals, with correct legal terminology. The standard clauses within these forms are based on fair and balanced risk/reward allocation between the contracting parties. The model contract forms also include standard clauses to be selected or deleted on an as required basis.

Despite being standardised to be used in any jurisdiction, legal advice may be required if the users decide to make variations to the forms.

The correct answer should be "Model contract form's standard clauses often contain correct legal terminology without recourse to third party experts."