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In a contract, express terms and implied terms may contradict on the same issues. Under which of the following circumstances, implied terms will override express terms?
Answer : D
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 day one 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.
- Contracts: Express and Implied Terms
- CIPS study guide page 126-132
LO 3, AC 3.1
Which of the following clauses addresses fraud, bribery and corruption?
The Company has undertaken commercially reasonable efforts to eliminate Conflict Minerals from each Company Product and any products currently proposed to be manufactured by the Company or on its behalf in the future. ''Conflict Minerals'' means columbite-tantalite (coltan), cassiterite, gold, wolframite, or their derivatives, which originate in the Democratic Republic of the Congo or other country the exploitation and trade of which is determined by the United States to be financing conflict in the Democratic Republic of the Congo or other country.
Answer : D
This question is intended to let students know about how contractual clauses regarding ethical issues is constructed. The exam paper may not ask about this.
'Each Party hereby undertakes that, at the date of the entering into force of the Contract, itself, its directors, officers or employees have not offered, promised, given, authorized, solicited or accepted any undue pecuniary or other advantage of any kind in any way connected with the Contract and that it has taken reasonable measures to prevent subcontractors, agents or any other third parties, subject to its control or determining influence, from doing so.': This is a clause addressing fraud, bribery and corruption. It is created to prevent any undue act by contracting parties. You may find other anti-corruption clause samples in this document.
'Nothing in this Agreement shall prevent a Party from utilizing the services of any subcontractor as it deems appropriate to perform its obligations under this Agreement; provided, however, that each Party shall require its subcontractors to comply with all applicable terms and conditions of this Agreement in providing such services and each Party shall remain primarily liable to the other Party for the performance of such subcontractor.': This clause is used to control the subcontracting and subcontractors.
'Customer will be responsible for and shall ensure that while Service Provider employees, agents or contractors are on Customer's premises, all proper and legal health and safety precautions are in place and fully operational to protect such persons.': This clause is used to ensure health and safety standards.
'The Company has undertaken commercially reasonable efforts to eliminate Conflict Minerals from each Company Product and any products currently proposed to be manufactured by the Company or on its behalf in the future. ''Conflict Minerals'' means columbite-tantalite (coltan), cassiterite, gold, wolframite, or their derivatives, which originate in the Democratic Republic of the Congo or other country the exploitation and trade of which is determined by the United States to be financing conflict in the Democratic Republic of the Congo or other country.': This is a clause addressing conflict minerals.
LO 3, AC 3.2
Which of the following are likely to be implied terms in a contract? Select TWO that apply:
Answer : A, D
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:
- terms implied under statute
- terms implied under common law
- terms implied because of custom or usage
- terms implied due to previous dealings
- terms implied 'in fact' or to reflect the parties' intentions
- Contracts: Express and Implied Terms
- CIPS study guide page 32
LO 1, AC 1.2
Which of the following is an example of liquidated damages clause?
1. "In the event of a delay to the Offshore Installation Completion Date as per the Contract Schedule for which Contractor is solely responsible, Contractor shall pay to Company 0.25% per day of delay, subject to a maximum of 10% of the Initial Contract Price."
2. ''If Seller breaches its obligation to deliver goods in accordance with the schedule provided for in this contract, Seller shall pay Buyer $x per day for each day of delay"
3. "The Contractor shall defend and hold the Buyer, its officers, officials, employees and volunteers harmless from any and all claims, injuries, damages, losses or suits including attorney fees, arising out of or in connection with the performance of this Agreement, except for injuries and damages caused by the sole negligence of the Buyer."
4. "The contract is subjected to delay remedies. The amount will be agreed by both parties during the delivery"
Answer : D
Liquidated damages, also referred to as 'liquidated and ascertained damages' (LADs) are damages whose amount the parties designate during the formation of a contract[2] for the injured party to collect as compensation upon a specific breach (e.g. late performance). In supply contracts and work contracts, the liquidated damages clause often take form as known damages to be paid per day delayed. Number 1 and 2 are examples of this clause.
- Liquidated damages
- CIPS study guide 158-159
LO 3, AC 3.2
What is the pricing method that incentivises the supplier to control their costs?
Answer : C
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
LO 3, AC 3.3
