Free Practice Questions for CIPS L5M3 Exam

Explanation

Frustrated is when "a situation has occurred which means that the contract can no longer be per-formed". The situation is one which is outside of the control of either party and its no one's fault that this has happened. A common example of this is when contracts were unable to be performed due to Covid-19 and the national lockdown. The government mandated everyone 'stay at home' and therefore some business contracts were unable to be fulfilled, and were therefore 'frustrated' (for example the delivery of popcorn to cinemas- the cinemas were told by the government to close so the popcorn couldn't be delivered. This wasn't anyone's fault). See p. 47 for more information on Contract Frustration

Explanation

This is affirmation of the contract. When a breach occurs the injured party has two options; termi-nate the contract or affirm the contract. In this example they have affirmed the contract- they have chosen to continue working with the offending party. See p.60.

Explanation

The correct answer is 1 'the process provides certainty that an outcome will be reached'. Options 2 and 3 are true statements but they are not advantages of litigation, they are disadvantages. Option 4 is false - litigation is a long and costly process. See p. 85 for more information on litigation

Explanation

"restitution damages cannot be mitigated by the actions of the innocent party" is the untrue state-ment out of these four. The general principle of Restitution Damages is that the innocent party is expected to be proactive in mitigating the consequences of any breach and should not allow costs to spiral out of control. See p. 124

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

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.

Explanation

The correct answers are as follows:

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.

Explanation

The correct answers are as follows:

The answer is collaborate because they have set up a meeting to discuss options.

Explanation

The correct answers are; A written agreement between two robbers to rob a bank which states that the money gained would be split evenly between the two AND a domestic agreement between two parents about who will pick the kids up from school. There are 3 instances when a contract isn't considered a contract and these are; illegal activity (like example A), a social or domestic arrange-ment (like example B) and when something is an 'Invitation to Treat'. See p.2-3 Remember con-tracts don't have to be written - they can be verbal (example C), the exchange doesn't have to be fair (example D) and it can be implied by conduct (example E).