Practice Free L4M3 Commercial Contracting Exam Questions Answers With Explanation

A simple definition of consideration is as follows – an exchange between the parties which results in a benefit to one party, and a detriment to the other. The case of Currie v Misa (1874) LR 10 Ex 153 provides an apt description of this:

“A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other.”

A practical example of this can be found by examining a simple contract. Party A offers £500 to Party B, who in exchange will fit his car with a new engine. Party A receives the benefit of his car being fixed, whilst Party B incurs the detriment of having to take time, effort, and perhaps expenses to fix the car.

The recognised KPI standard is the SMART model —

Specific, Measurable, Achievable, Realistic, Timely.

This ensures clarity and accountability in performance measurement.

Request for quotations is often used when the only variable is price and the purchase value is under a financial threshold. This process is less formal than ITT. RFQ should be used in the following circumstances:

- Low-value, low-risk purchases

- When the specifications are sufficiently defined or the product/service is standardised

- Where the suppliers are pre-qualified

- Where there is a framework agreement which specifies the contract terms and conditions.

Once a valid acceptance takes place, a binding contract is formed. It is therefore important to know what constitutes a valid acceptance in order to establish if the parties are bound by the agreement. There are three main rules relating to acceptance:

1. The acceptance must be communicated to the offeree.

2. The terms of the acceptance must exactly match the terms of the offer.

3. The agreement must be certain.

Among the answers:

"The person says that she will think about it overnight" does not match the terms of the offer. The offeree does not assure that she will accept the offer.

"The person asks for a lower price": This is a counter-offer.

"The person states that she is able to pay the offered price" is not certain. The offeree merely provides information on her financial ability.

Model contracts are pre-drafted templates commonly accepted in specific industries, helping to reduce negotiation time and increase consistency. They are often familiar to both parties, reducing misunderstandings. However, they are not court-approved by default and may not suit all complex needs without modifications.

One of the major disadvantages of tendering process is that it is lengthy, bureaucratic and slow. To reduce the preparation time, buying organisation can:

- Plan forward

- Standardise tendering documents (such as notices, terms and conditions,...) whenever possible

- Train procurement staff

- Write down policies for tender-waiver

Buying organisation should not eliminate the pre-qualification stage from all tendering processes. This stage is used as a filter to select the most competent suppliers for next stage in restricted tendering. To save time in this process, you can design a model questionnaire.

A framework agreement will set out the following:

- How call offs can be made - whether a mini-competition is required or a direct call off can be made

- How price is calculated

- The specification - this may have various options to cater for different needs

- The duration of the agreement

- Who can access the agreement

- Any limitations

- The main terms to be included in the contract or the form of contract to be used, where this is intended to be a standard form.

The market approach is a method of determining the value of an asset based on the selling price of similar assets.

A fixed-price strategy means you set a price and keep it constant for an extended period of time.

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

A price index (PI) is a measure of how prices change over a period of time, or in other words, it is a way to measure inflation. There are multiple methods on how to calculate inflation (or deflation).

The “battle of the forms” arises when each party seeks to have its own terms and conditions govern the contract.

Under common law, the terms last sent and accepted (expressly or by conduct) usually apply.

A liquidated damages clause specifies a predetermined amount of money that must be paid as damages for failure to perform under a contract. The amount of the liquidated damages is supposed to be the parties’ best estimate at the time they sign the contract of the damages that would be caused by a breach. If a breach occurs and the liquidated damages clause is enforceable, the parties do not calculate the actual damages (i.e., how much money a party actually lost as a result of the breach). Instead, the breaching party pays the predetermined sum provided by the liquidated damages provision.

To be enforceable, a liquidated damages clause should meet the following criteria.

Damages are difficult to estimate. A court will be more likely to enforce a liquidated damages provision if the damages that will be incurred as a result of a breach of the contract are difficult to estimate when the contract is entered into. In certain situations, injuries are easy to prove. For example, if a breach will result in the loss of sales, it is easy to determine the actual damages by calculating lost profits. Others are more difficult, like the harm caused by breach of a confidentiality agreement or theft of trade secrets. To be enforceable, the damages should be either uncertain or difficult to quantify at the time the contract is entered into.

The amount is reasonable and not a penalty. If the amount of the liquidated damages is grossly disproportionate to the actual harm incurred, a court will likely find it is a penalty or punishment and will not enforce the provision. When making this analysis, courts usually consider what was reasonable at the time the contract was entered into as opposed to when the breach occurred. There have been cases, however, where courts will decide the reasonableness of the damage estimate based on the actual harm at the time of the breach.

The scenario is excerpted and edited based on a real world case law. In that case, the court held that GPP was entitled to liquidated damages under all four of the EPC contracts, ruling that the provisions did not amount to unenforceable penalties in each of the contracts.

Developing and using generic specifications is as import in the sustainable procurement process as it is in the traditional procurement process. During this stage, human/labour rights and environmental performance criteria should be translated into specifications that meet specific requirements of the specified outcome, desired by the procurement action.

The specification stage is key to all types of contract. Building in environmental and social considerations at this early stage, provides a clear indication to suppliers that sustainability is important to the UN organization. Consider available alternatives which are less environmentally and socially damaging. Consider all the phases of a product’s life cycle (e.g. production, transportation, maintenance, disposal, etc) when determining its cost and environmental impact. Assess the overall environmental and social integrity of suppliers by looking at their policies and practices.

Specifications which are output-based rather than input-based can increase supplier innovation, reduce waste and minimise harmful social and environmental impacts.

GHS stands for the Globally Harmonized System of Classification and Labelling of Chemicals. GHS defines and classifies the hazards of chemical products, and communicates health and safety information on labels and safety data sheets). The goal is that the same set of rules for classifying hazards, and the same format and content for labels and safety data sheets (SDS) will be adopted and used around the world. An international team of hazard communication experts developed GHS.

The Global Positioning System (GPS), originally NAVSTAR GPS, is a satellite-based radionavigation system owned by the United States government and operated by the United States Space Force. It is one of the global navigation satellite systems (GNSS) that provides geolocationand time information to a GPS receiver anywhere on or near the Earth where there is an unobstructed line of sight to four or more GPS satellites. Obstacles such as mountains and buildings block the relatively weak GPS signals.

CODEX STAN 1-1985 is general standard for the labelling of packaged goods.

Environment (E), health (H) and safety (S) (together EHS) is a discipline and specialty that studies and implements practical aspects of environmental protection and safety at work. In simple terms it is what organizations must do to make sure that their activities do not cause harm to anyone.

Negotiated terms can define conditions and contingencies — “if-then” clauses — such as force majeure, variation, or termination events.

These allow the contract to handle changes flexibly.

If the deliveries often delay, buyer should use KPI to measure how many missed deliveries there are and the percentage of total missed deliveries on total number of deliveries for period. OTIF (one-time in-full) delivery might help.

Consignment stock availability means that the supplier holds adequate range/number of units of stock to offer a reliable service

Delay damages are the consequences caused by delay of deliveries

Technical support is the acceptable quality of technical information/support provided by supplier for goods supplied.

LO 2, AC 2.2

Risk-minimising clauses typically include:

Confidentiality clauses (1) to protect business data.

Variation and price adjustment clauses (4) to allow flexibility for scope or cost changes.Service duration and holidays are administrative and not risk-control terms.

Advantages of using invitation to tender may be as below:

No Nepotism: Tenders or bids are evaluated on the basis of certain predetermined criteria, such asprice, quality and value for money. In other words, the firm offering the highest quality product or service at the lowest price point would win the contract. As most tender documents are opened and evaluated in a public process, I think that there remains little room for nepotism or favoritism of any kind.

Value for Money: From the perspective of the client, tenders offer the greatest value for the amount of money spent. This is due to the fact that the client can choose from a wide pool of potential suppliers to select the ones that can produce the highest quality product or service at the lowest price point. This allows the company, establishment or organization to save money without having to compromise on quality. Therefore, despite being quite time consuming, tendering is, in my opinion, a profitable long-term process from an organization’s point of view.

Encourages Competition: The process of tendering helps promote a competitive market. This is because a number of potential contractors, firms or suppliers get a chance to bid for every project. And because selection depends on quality and price, every bidder tries to reduce operational inefficiencies and redundancies as much as possible in order to lower expenses and improve quality. This entire process encourages healthy competition in the market and prevents complacency and laziness, which in turn provides a boost to innovation and new ideas.

Easier Entry: The system of tendering makes it easier and simpler for new firms to enter the market or even a particular industry. This is due to the fact that contracts under this system are awarded on the basis of predetermined, objective criteria. As a result, even a firm that is a new entrant to the market, having no connections or contacts in the industry, can win a prestigious and lucrative contract by providing the highest value for the client’s money. This process therefore helps new firms to quickly get a foothold in the market or industry, thus significantly lowering the traditional barriers to entry.

Supplier performance management and monitoring is a fundamental part of contract management. It starts with setting KPIs, targets and consequences or actions that arise from KPI scores. The measures, objectives and targets used in the monitoring of the supplier’s performance must reflect those that were agreed when the contract was let. That is why it is important to specify a commitment to continuous improvement at the outset. It would be unfair to the supplier to suddenly introduce a range of measures after the contract had begun - however if such an introduction mid-term through the contract is unavoidable then it should be negotiated and agreed in a professional manner and not merely imposed on the supplier.

In conclusion, the details of how KPIs will be monitored and the actions or consequences resulting from scores achieved must be documented and agreed between the parties. This details may be embedded in the specification or the main body of the contract or it may be set out in a SLA.

Service level agreement often sets out the minimum quality standards of the services provided, remedies if that standards are not met, consequences if the targets are exceeded. Penalty clauses and service credits are remedies that are often used in conjunction with service level agreement to ensure the performance and to compensate the purchaser if targets are not met.

'Consensus ad idem' is a Latin term meaning “meeting of the minds.” It refers to both parties having the same understanding and intention regarding the contract’s terms. This mutual agreement is essential for forming a valid and enforceable contract.

Information Assurance (IA)

Information Assurance (IA) is the practice of managing information-related risks and the steps involved to protect information systems such as computer and network systems. The IA transformation is a partnership that stretches across the Department of Defense (DoD), Office of National Intelligence, Committee on National Security Systems, National Institute of Science and Technology (NIST), and the Office of Management and Budget.

The US Government's definition of information assurance is:

“measures that protect and defend information and information systems by ensuring their availability, integrity, authentication, confidentiality, and non-repudiation. These measures include providing for restoration of information systems by incorporating protection, detection, and reaction capabilities.”

Information Assurance (IA) is essentially protecting information systems, and is often associatedwith the following five pillars:

- Integrity

- Availability

- Authentication

- Confidentiality

- Nonrepudiation

The following pillars can be applied in a variety of ways, depending on the sensitivity of the information, or information systems within your organization. Currently, these five pillars are used at the heart of the US Governments ability to conduct safe and secure operations in a global environment.

1. Integrity

Integrity involves assurance that all information systems are protected and not tampered with. IA aims to maintain integrity through means such as anti-virus software on all computer system, andensuring all staff with access to know how to appropriately use their systems to minimize malware, or viruses entering information systems.

2. Availability

Availability simply means those who need access to information, are allowed to access it. Information should be available to only those who are aware of the risks associated with information systems.

3. Authentication

Authentication involves ensuring those who have access to information, are who they say they are. Ways of improving authentication involve methods such as two-factor authentication, strong passwords, bio-metrics and other devices. Authentication may also be used to not only identify users, but also other devices.

4. Confidentiality

IA involves the confidentiality of information, meaning only those with authorization may view certain data. This step is closely mirrored by the six data processing principles of the General Data Protection Regulation (GDPR), where by personal data must be processed in a secure manner "using appropriate technical and organizational measures" ("integrity and confidentiality").

5. Nonrepudiation

The final pillar simply means someone with access to your organizations information system cannot deny having completed an action within the system, as there should be methods in place to prove that they did make said action.

Procurement staff in the Hospital is forcing suppliers into fixed price contract. If the costs generally rise, supplier may operate at a loss. This situation can disrupt the relationship, that is the reason why some suppliers refusing to deal with BDH and a few going out of business mid-way.

Alternative methods could be variable pricing arrangement. This method would reimburse the fluctuation of market price. It will also benefit buyer if the market price drops. This type of arrangement should be applied to long-term contracts (i.e. 18 months or more).

A price adjustment clause, also known as a price variation or indexation clause, provides a structured method for managing potential changes in price over the contract's duration. This clause ensures that any price increase must be based on predefined and agreed-upon criteria, such as inflation rates or cost indices. This prevents arbitrary or unexpected price increases from the supplier.

The organisation should have an overarching strategies or policies which sets out the social and environmental objectives to be pursued via procurement and the supply chain generally. Some of these will be about the specification, but that must be tied in other aspects of the sourcing strategy. These objectives, policies and strategies can be found in corporate social responsibility policy.

The complexity of the contract will reflect the complexity of the purchase. For simple, low-value purchases, standard terms and conditions may be all that is required, but do not assume that just because the purchase is one-off, the contract will be simple. It may still need to cover the following areas:

- Warranties and guarantees if the one-off purchase has a considerable life-span and is business-critical (e.g., a back-up generator for the office which houses the national computer servers).

- Insurance requirements: including professional indemnity, public/products liability, employer's liability, and cover for any specific risks such as pollution or working at height.

- Specification requirements on quality, timing and delivery

- Minimum quality standards on the business operation (e.g., a catering provider might only be providing sandwiches for a team meeting lunch, but you still need to know its hygiene practices).

- Built-in change process for any goods or services that are beyond very simple (e.g., works contracts always have variations procedures because of the unpredictable nature of such projects).

- Ability to extend the scope of the contract should be minimal or none, and restrained to the single requirement.

- Ability to extend the duration of the contract should be limited to the ability to accommodate unexpected time overruns (which itself should be subject to a damages/penalty provision where they are attributable to the supplier, and an extension to overheads costs where they are attributable to the purchaser).

- Data security protocols need to be considered if personal data is being shared.

In the 'battle of the forms', generally who shot the last will win. This is not applied to this case. Initial RFQ is an invitation to treat, then the quotation forms an offer. Transformers & Rectifiers Ltd edits terms and conditions then sends back to supplier, this act terminates Needs's offer and makes a new offer. Delivery of goods can be deemed as acceptance from Needs Ltd. The contract is formed with its details in the edited terms and conditions.

Liquidated damages are pre-agreed fixed sums payable for specific breaches, such as late delivery.

Clauses 1 and 3 meet this definition.

Clause 2 is uncertain (“to be agreed”) and unenforceable; clause 4 is a warranty, not LDs.

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

Time-critical requirements, such as daily deliveries by a specific time, should be clearly stipulated as contractual terms. This ensures enforceability and provides a legal basis for remedy in the case of non-performance. Notes on purchase orders or general legislation do not offer the same level of protection or clarity.

Capacity to contract relates to legal and mental ability:

Severe mental disorder (1) can mean no true understanding of the contract ? lack of capacity.

A corporation acting ultra vires (4) (beyond its legal powers) is considered to lack capacity in that transaction.

Failing to concentrate (2) is carelessness, not incapacity. Being 19 years old (3) is over the usual age of majority (18), so there is capacity.

Correct combination: 1 and 4 only.

The contract provision that relieves the parties from performing their contractual obligations when certain circumstances like natural disasters, terrorist attacks, etc arise is called Force majeure. Force majeure is an example of exclusion clause.

An exemption clause in a contract is a term which either limits or excludes a party’s liability for a breach of contract. In order for an exclusion clause to be binding and operable upon the parties, the clause must:

1. The clause must be incorporated into the contract as a term.

2. The clause must pass the test of construction.

3. The clause must not be rendered unenforceable by the statutory provisions in the Unfair Contract Terms Act 1977 or the Consumer Rights Act 2015 (enacting the Consumer Rights Bill 2013-14).

One of the advantages of using the RFQ method to procure pricing is that the company making the solicitation does not need to prepare any documentation, as requests are sent out privately. With less paperwork to prepare, turnaround times for quotes are reduced. Administration cost is also lower in compare with other procurement method like ITT or RFP. RFQ is usually used in low value purchase, where buyer knows the detailed specification and the price is the only variable that need to consider.

To use RFQ effectively, the buyer should attach the detailed specification and standard terms & conditions. The RFQ should only be sent to verified suppliers.

Express terms are the terms of the agreement which are expressly agreed between the parties. Ideally, they will be written down in a contract between the parties but where the contract is agreed verbally, they will be the terms discussed and agreed between the parties.

Implied terms are terms implied into the contract by the courts. They are not expressly set out in the contract but are taken to be as effective as if they were and as if they had been included from dayone of the contract. The express terms and any implied terms together create the legally binding obligations on the parties.

Express terms are explicit and will normally override implied terms unless the implied term is created by statute and the law states that it cannot be overridden.

A lease is a contractual arrangement calling for the lessee (user) to pay the lessor (owner) for use of an asset. Some characteristics of Leases are:

- The right to use the lessor’s asset is granted in exchange for a fee called the lease payment.

- The lease payments are usually paid in installments.

- Leases may be long- or short-term.

- At its inception a lease agreement constitutes a mutually unperformed contract

Though the ownership of the asset is not transferred to the lessee, some responsibilities and risks do. The lessor and lessee may negotiate on who is responsible on maintenance, insurance, etc.

Performance management framework often consists of KPIs, targets and consequences that arise from achieved scores. To ensure that the framework has binding effect on contracting parties, it should be developed, appended to the main contract document and agreed by both parties. So the answer should be "Yes, because the framework should have legal standing as a part of contract".

This scenario is in fact based on a famous case law: Dunlop Pneumatic Tyre Company v New Garage & Motor co [1915] AC 79. In this case law, the House of Lords identified the clause as liquidated damages, and therefore enforceable.

However, if this case had happened in 2015 or afterwards, there would be some legal issues:

- The price agreement is prohibited by Competition Act 1998

- If the agreement is allowed by Competition Act, as in the case Cavendish Square Holding BV (Appellant) v Talal El Makdessi (Respondent), the clause can also be identified as a penalty and it is still enforceable.

Gainshare is an incentive for cost control

Liquidated damage is common type of disincentive for late completion

Service credit is a remedy for not achieving targets set out in an SLA

Fixed bonus payment is an incentive for early completion

In the absence of a clearly defined delivery date, contract law defaults to performance within a “reasonable time.” Given that no firm delivery date was agreed upon and the goods were delivered in a timeframe consistent with known production and delivery times, the supplier is not in breach.

Performance obligations are best captured in a formal appendix (schedule) to the main contract, ensuring flexibility while remaining legally binding.

A non-binding or post-issued SLA would lack enforceability.

An incentive contract is a sub-segment of a fixed-price or cost-reimbursement contract when there are specific cost or time commitments that are desired for a project. The standard incentive contract will allow for a fixed price to be paid for work to be completed by a specific deadline and at a specific cost.

There are two major types of incentive contracts: Cost-plus-incentive fee and Fixed-price incentive (firm target) contracts. Both types have the same formula for calculating final fee and final price.

The target fee is the amount that will be paid if the actual costs (which can be proven) match thetarget costs

The actual fee will be adjusted in proportion to the difference between the target cost and the actual cost. The usual calculation is:

Target fee + ((target cost - actual cost) x Supplier share) = final fee

The final price then becomes:

Actual cost + final fee = final price

One-off contract is the type of contract that relates to a single purchase. One-off contracts can be used for goods, services or works. One-off contract can be simple (such as buying a small number of office stationeries) or complex (such as a construction project or buying an aircraft).

A one-off contract lasts “until completion of the obligations of the parties”. The performance is unlikely to be improved during contract performance since the duration is relatively shorter than framework agreement or call-off contract.

Ad-hoc purchase is an item bought for a single and non-recurring use or purpose. Ad-hoc purchase is a type of one-off contract.

Number of on-time deliveries can be quantified, then numerical measures can be applied.

Frequency of on-time deliveries is measured as on-time deliveries as a percentage of total no. of deliveries for period.

LO 2, AC 2.2

A non-disclosure agreement is used to protect confidential information shared during discussions or collaborations. It ensures that sensitive data is not disclosed to unauthorized parties and maintains trust between contractual parties during tendering or negotiation.

Non-disclosure agreements (NDAs) are legally binding documents that protect confidential and proprietary information, including intellectual property, during pre-contractual discussions. NDAs ensure that sensitive data shared during early engagement or tender development is not misused.

An invitation to treat is an action inviting other parties to make an offer to form a contract. These actions may sometimes appear to be offers themselves, and the difference can sometimes be difficult to determine. The distinction is important because accepting an offer creates a binding contract while "accepting" an invitation to treat is actually making an offer.

One simple test to distinguish an offer and an invitation to treat is to ask what this statement will become when it is accepted. Now we apply this test to four options:

- Tender bid: Tender bid is submitted by a supplier to an invitation to tender from the buyer. It states the specific quantity, price and other elements. If buyer accepts the bid, there will be a contractbetween them. Therefore, a tender bid is an offer.

- Purchase order: Purchase order which is sent by a buyer will state the items, the quantity, the price and terms and conditions. If supplier accepts the purchase order, there will also be a contract between two parties. It is also an offer.

- Price list: Price list is prepared by a supplier. The price list often states the items and unit price. If a buyer accepts it, the contract has not yet been formed since the contract scope has not yet been decided. It is an invitation to treat.

- Invoice: Invoice is often sent after a contract is formed. It is in fact a request for payment, neither offer nor invitation to treat.

The request for quotations is a procurement method that is used for small value procurements of readily available off-the-shelf goods, small value construction works, or small value services procurements. Request for quotations works best under a framework agreement

This procurement method is also known as invitation to quote and shopping, and it does not require the preparation of tender documents to the same extent as open tendering, request for proposals or two-stage tendering.

Among 4 options:

- "Purchase of a small number of standardised products under a framework agreement": the products are standardised and there is a framework agreement in place, so RFQ is the best solution.

- "Purchase of complex machinery": Complex machinery is often a large purchase. Furthermore, suppliers' quality may vary. So RFQ is not suitable, instead, depending on the situation, buyer may opt ITT or RFP to purchase this type of machinery.

- "Design of a unique and complex software code": Unique and complex software is not off-the-shelf, thus RFQ is not suitable.

- "When the buying organisation does not know the requirements in details and needs the input from suppliers": When the detailed requirements are unknown, the best solution is request for proposal or developing dialogue with suppliers.

Market dialogue allows buyers to better understand supplier capabilities and refine their requirements. It promotes collaboration, helps clarify technical details, and indicates how much interest and competition exists in the market. However, it doesn’t replace the formal procurement process and still carries some risk if not managed transparently.

Consideration is one thing given in exchange for another.

In this case, considerations of customers are three wrappers and 1s6d. Consideration of Nestle is Rockin' Shoes record or a voucher.

The implementation section of a specification should include practical and operational elements essential for the deployment of the product or service. Mandatory training for the supplier’s staff ensures they are adequately prepared to operate within the buyer's environment. Integrations with existing systems are crucial to ensure technical compatibility and seamless operation.

There are several approaches to price adjustment for long-term contract. Describing circumstances and mechanism is one of them. Although this approach has some limitations, it is the best option. It relies on good market knowledge but provides the most equitable approach to satisfying the needs of the purchaser and the supplier.

An implied term is a term which the courts imply into a contract because it has not been expressly included by the parties. This may be because the parties did not consider it, did not think that any problem would arise in relation to it or simply omitted to include it.

The courts are very reluctant to imply terms into contracts and will only do so in the following circumstances:

1. terms implied under statute

2. terms implied under common law

3. terms implied because of custom or usage

4. terms implied due to previous dealings

5. terms implied ‘in fact’ or to reflect the parties’ intentions

An insurance policy transfers a specific set of risks such as the fire and flood risk for a particular asset.

The legal liability does not transfer to the insurance company (known as insurer).

An offer is a full statement of what the offeror is willing to provide and the terms by which they are willing to provide it.

There are some statements that are not offers:

- Invitation to treat: this states that a person or organisation is willing to enter into discussions about the possibility of a deal, but does not confirm a willingness to be bound by any terms mentioned. Catalogues, goods on display and ITTs are invitation to treat.

Civil law countries may have different perspective on this matter. Article 2:201 (3) of The Principles of European Contract Law states: 'A proposal to supply goods or services at stated prices made by a professional supplier in a public advertisement or a catalogue, or by a display of goods, is presumed to be an offer to sell or supply at that price until the stock of goods, or the supplier's capacity to supply the service, is exhausted.' Learners are advised to look at their countries' legislation for more information on offer and acceptance.

- Declaration of intention: this is defined as an aim or a plan.

- A 'mere puff' (or boast): this is anything which is not intended to be taken literally or seriously, such as many advertisement.

- Provision of information: merely provides information, but provider does not confirm willingness to be bound.

A service-level agreement (SLA) is a commitment between a service provider and a client. Particular aspects of the service – quality, availability, responsibilities – are agreed between the service provider and the service user. The most common component of an SLA is that the services should be provided to the customer as agreed upon in the contract.

A customer service charter is a document that outlines how an organization promises to work with its customers along with providing insights into how an organization operates.

A service guarantee is a marketing tool service firms have increasingly been using to reduce consumer risk perceptions, signal quality, differentiate a service offering, and to institutionalize and professionalize their internal management of customer complaint and service recovery.

The procurement team has drafted basic requirements in the specification. They will need to develop it further and more specific. Developing market dialogue with supplier is a good solution. There are number of approaches which can be taken to engage with suppliers:

- General meetings: buyer meets supplier at a networking event (such as trade show) or social media. These discussions are unlikely to deliver very specific information.

- One-to-one meetings: This will be most likely to deliver direct input into specification development and supplier-specific product development information.

- Group visits

- Meet-the-buyer events

- Formal negotiations or competitive

The answer for this QUESTION should be One-to-one meeting.

A contract for window cleaning during the next three months is a short-term service contract in which changes of input costs (labour, tools,...) are very unlikely to happen.

Fixed pricing arrangement is useful for small to medium scope project, with short timelines, where what is delivered can be adequately specified and the likelihood of changes to the specification, scope and input costs is limited.

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.

Audit trail is a chronological record the sequence of events connected to a given transaction, such as a purchase of raw materials, payroll disbursements, or a detailed financial statement. The record includes all the source documents connected to the transaction, providing context and clarity in the event a review is required. The more comprehensive the documentation, the more effective the audit trail is when used to create financial reports, verify information, and ensure compliance while eliminating fraud.

In the scenario, the procurement team gets the quotation from phone calls and emails which have weak audit trails and lack of transparency. One solution may be increasing the use of e-procurement system.

Hire purchase is an arrangement for buying expensive consumer goods, where the buyer makes an initial down payment and pays the balance plus interest in installments. Ownership is not transferred until the end of the agreement, hire purchase plans offer more protection to the vendor than other sales or leasing methods for unsecured items. That's because the items can be repossessed more easily should the buyer be unable to keep up with the repayments.

The answer is 'When the final instalment is paid'.

Advantages and Disadvantages of using model form contracts.

Model form contracts save a lot of time and money. They are written by industry experts and the buyers and suppliers both understand what is included in the contract.

They are mainly used in Construction and term maintenance contacts. Typical ones are JCT and NEC.

Without the use of model form contracts the buyer and supplier will take a long time to write the terms, negotiate and finalise the contract.

This is time and money wasted.

However, model form contracts require buyers and suppliers to have training so you understand them.

Finally, if you are a buyer in a powerful position you cannot exploit that with a model form contract as these are written for mutual benefit.

Contract schedules (or appendices) are part of the legally binding agreement and usually contain supporting or detailed information that complements the main clauses — for example, policies, commitments, and technical details.

Health and safety commitments (B): These are operational requirements that demonstrate compliance with legislation and are typically annexed as schedules.

Non-disclosure agreement (D): Confidentiality obligations or NDAs are often attached as schedules or referenced documents.

Financial statements, supplier references, and blank RFQ forms are pre-contract due diligence or sourcing documents and do not form part of the contract schedules.

Product Liability Insurance is a form of general liability insurance meant to protect a business from financial and legal consequences as a result of bodily injury or property damage due to the use of the business’s sold goods or products. Situations that are typically covered by Product Liability Insurance may include:

- A customer harms herself because of the faulty packaging on one of your products

- A drapery set that a customer purchased from your business was highly flammable and caught on fire, eventually damaging her entire kitchen

- A customer with a severe allergy finds trace amounts of tree nuts in your homemade gourmet muffins

- A homemade house cleaner that you sell damaged one of your customer’s entire hardwood floor

- A customer becomes sick with food poisoning after eating old shellfish at your restaurant, goes to the hospital, and incurs medical costs caused by your contaminated food products

- A customer’s pet becomes ill from ingesting some lining in a pet toy product that you sell

In the scenario above, the supermarket is purchasing and reselling house cleaner, which can be covered by product liability insurance.

Public liability insurance is a type of business insurance that covers the cost of claims made by the public that happen in connection with the business activities.

Professional indemnity (PI) insurance is a commercial policy designed to protect business owners, freelancers and the self-employed if clients claim a service is inadequate.

A fixed pricing arrangement offers the buyer cost certainty by locking in a set price for the duration of the contract, regardless of market volatility. This is crucial in environments requiring tight budget control, such as healthcare procurement. Although suppliers may factor in risk premiums, it is ideal when predictability is the priority.

Retention money is the payment for a service or product that is withheld pending the completion of some specified condition. For example, buyer may withhold the amount due until the supplier replace all defective goods.

Pay-less notice is the notice under a contract which states that the invoice will only be partially paid because of some issues such as supplier has to pay the damages.

Remedies for late payment are remedies that supplier may seek when a buyer pay it later than the stated payment terms. Normally, the buyer will be charged an interest rate.

There are three key components of a performance management framework:

- Key performance indicators (KPIs) - What you are measuring

- Targets - the performance level to be achieved

- Consequences - what happens if the measures are not achieved and/or if they are exceeded