CIPS Updated L4M3 Exam Questions and Answers by jai

The key features, advantages and disadvantages of standard terms are summarised below:

- Form: Concise, generic and designed to be attached to purchase or sales orders

- Non-negotiable

- Ineffective terms: may be replaced by implied terms or national legal code rules, or subject to court 'balance of interest' judgement.

- Advantages: Basic contractual protection for most common circumstances; Avoid having to create new contract for repeat business.

- User friendly

- Usage: Low value, low risk, repetitive transactions

- Coverage: Definitions, relationship to other contracts, formation of the contract, order of precedence, price, invoicing and payment, specification, legal compliance, warrantee and liability, ownership and risk, intellectual property, data management and ethics.

- Disadvantages: Does not allow for specific circumstances; Risk for creating battle of the forms; Can create contractual uncertainty if used with purchase orders under call-off contracts.

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.

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'.

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 the target 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