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L5M3 Managing Contractual Risk Paper *3.
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1.
Perfect Constructions Limited has been contracted by a procurement organisation to complete a construction of some apartments to be used for accommodation. Before the contract was signed, PCL was required by the procurement organization to provide a written promise to take responsibility for any faults or costs that might be incurred if any unsatisfactory performance is identified? Which of thefollowing was used by the procurement organisation to ensure this?
2.
An indemnity clause is suitable to be used under which of the following circumstances? Select the TWO that apply.
3.
A large manufacturing company has begun a project to increase the size of its premises. The procurement team has estimated that if the main supplier fails to complete the project on schedule it will incur costs and loses of $20,000 per day for every day there is a delay. Which of the following clauses should the large manufacturer use in the contract with the supplier?
4.
It is important to include a contract variation clause in every long-term contract. Is this statement TRUE?
5.
Which of the following are examples of the losses that cannot be indemnified in a contract between the buyer and supplier?
- A loss caused by the negligence of the supplier during contract performance
- Loss caused by the deliberate act of the of the receiving party
- Loss caused by supplier incompetency when carrying out contract obligations
- A loss caused by the receiving party’s own crimes
6.
The general principle relating to penalty clause is that they must be which of the following to be legally enforceable by the courts?
- An adequate punishment for the suppliers failure
- Enough to justify any legal action against the supplier
- Proportionate in relation to the interest of the innocent party
- Reasonable in the context of the losses incurred
7.
Express terms apply in all contracts through the buyer’s and suppliers statutory rights. Is this statement TRUE?
8.
Is it always necessary to include a force majeure clause into a contract of services with a supplier?
9.
Where a company is bidding for a contract but it has a poor credit rating, the procurement organisation could obtain which of the following from the parent company to reduce the risk?
10.
A buyer is seeking to include a clear performance procedures clause within the contract to act as a lever to encourage the supplier to focus on achieving the stated performance measures. Should they consider using a clause applying service credits?
11.
Which of the following are contractual financial remedies relating to either non-or under-performance of a supplier?
- Liquidated damages
- Payment terms
- Service credits
- Termination clauses
12.
Which of the following explain the characteristics of unliquidated damages in a contract?
- The sum payable by the breaching party is unspecified and unknown
- The sum payable is agreed and known before the contract commences
- Take into account losses not foreseeable which may be caused by the breach
- Provide a high level of certainty as the sum payable in the event of breach is specified
13.
Which of the following are types of direct loss?
- Stock burnt in fire
- Reputational damage
- Loss of future customers
- Damage to assets
14.
Which of the following are the correct characteristics of an indirect loss?
15.
Specific performance is always a legal right for the buyer in the event of supplier breach of contract. Is this correct?
16.
A loss that cannot be easily linked to the risk event is known as which of the following
17.
Which of the following methods can be used by the courts to assess the damages in the event of breach of contract? Select TWO that apply
18.
Liquidated damages are used within a contract to exclude liability for specific events which are outside the control of the contracting parties. Is this correct?
19.
Which of the following are the factors that may be considered by the parties regarding the conflict resolution to select?
- Cost
- Power
- Privacy
- Competition
20.
Which of the following are the legitimate reasons why a contract could legally come to an end before its original agreed term? Select TWO that apply.
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