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Question#1

Parkers Medical Supplies is a distributor of first aid supplies to supermarkets nationwide. A new supplier has approached Parkers with an offer to supply a new and innovative product. Parkers have never dealt with this company before, so are looking to ensure that the new supplier has the necessary insurance cover as the new product could potentially cause personal injury.
Which type of insurance should Parkers insist the new supplier takes out?

A. Employers' liability

B. Public liability

C. Product liability

D. Professional indemnity

Explanation:
In the context of commercial contracting, it's crucial for buyers to ensure that suppliers have appropriate insurance coverage to mitigate potential risks associated with the products or services provided. Product liability insurance specifically covers the supplier against claims of personal injury or property damage caused by products they have supplied. This type of insurance is essential when introducing new or innovative products to the market, as there may be unforeseen risks associated with their use.
According to the CIPS L4M3 Commercial Contracting Study Guide, product liability insurance is designed to protect against claims arising from injuries or damages caused by defective products. This insurance is particularly important when the buyer is introducing a new product from a supplier with whom they have no prior experience, as it provides a safety net against potential legal and financial repercussions.
Reference: CIPS L4M3 Commercial Contracting Study Guide, Chapter 3, Section 3.2.1 C Key terms in contracts for indemnities and liabilities, sub-contracting, insurances, guarantees, and liquidated damages.

Question#2

Blakenall District Hospital (BDH) is a large hospital that is a major part of the government’s health service. Purchasing staff are in the habit of placing many long-term contracts with suppliers and sub-contractors. Whilst these contracts are usually carried out successfully, prices are often paid that are well over budget. The purchasing manager is concerned to find that, in some cases, members of staff are forcing suppliers to accept fixed price contracts. The policy hascaused several problems such as some suppliers refusing to deal with BDH and a few going out of business mid-way through performing a contract with BDH. This is due to fluctuating market prices of materials. The procurement manager suggests supplier to adopt variable pricing arrangement with price index.
Is this a right course of action?

A. No, variable pricing would only benefit the suppliers

B. Yes, this type of arrangement would provide absolute certainty when budgeting

C. Yes, this pricing arrangement would reimburse the fluctuation of material prices

D. No, price adjustment should be applied to short-term supply contract only (3-month duration or less)

Explanation:
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).
Reference: CIPS study guide page 179-184
LO 3, AC 3.3

Question#3

A purchase order can become a contract between supplier and purchaser if it is...?

A. Received by the supplier

B. Accepted by the supplier

C. Issued by the buyer

D. Edited by the supplier

Explanation:
A purchase order is a document sent from a buyer to a seller, with a request to order a product. The purchase order often has its number, description and quantity of the goods, unit prices and total price, name of issuer, time of delivery, standard terms and conditions, etc. It is effectively an offer to supplier. The purchase order will become a formal contract if supplier accepted it by written notice or by performance (such as deliver the goods to the buyer's premise).
Reference: CIPS study guide page 33
LO 1, AC 1.2 [A1]

Question#4

When writing an implementation section for an IT requirements specification, which factors would be appropriate for inclusion? Select TWO that apply.

A. Required response timeframes for service requests

B. Mandatory training required for supplier’s staff

C. Details of applicable legal and regulatory standards

D. Integrations required with existing systems

E. Lists of technical terms and abbreviations

Explanation:
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.
Reference: CIPS L4M3 Commercial Contracting Study Guide, Chapter 2, Section 2.1.3 C Components of effective specifications.

Question#5

Why would you use a non-disclosure agreement?

A. To protect parties, where information has been shared that is not in the public domain

B. To allow parties the freedom to disclose confidential information to the public domain

C. To agree between parties what information is and is not confidential and what can be in the public domain

D. To give parties permission to share all information in the public domain

Explanation:
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.
Reference: CIPS L4M3 Commercial Contracting Study Guide, Chapter 3, Section 3.2.1 C Use of NDAs in procurement.

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