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CIPS L4M3 Questions - Pass Exam With Ease (2025)

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CIPS L4M3 certification is particularly relevant for professionals who are involved in negotiating and managing contracts with suppliers, contractors, and other external parties. It provides them with the skills and knowledge required to effectively manage risks, negotiate favorable terms, and ensure compliance with legal and ethical standards. CIPS Commercial Contracting certification is also valuable for professionals who are looking to advance their careers in procurement and supply chain management.

CIPS L4M3 exam, also known as the CIPS Commercial Contracting exam, is a crucial certification for procurement professionals who want to excel in commercial contracting. L4M3 exam is designed to test the candidate's knowledge and understanding of the entire contracting process, from identifying the need for a contract to managing the post-contractual relationship. L4M3 Exam assesses the candidate's ability to develop, negotiate, and manage commercial contracts effectively.

CIPS L4M3 (CIPS Commercial Contracting) Exam is one of the most prestigious qualifications in the procurement and supply chain management field. It is designed to test the knowledge, skills, and competency of professionals who are involved in commercial contracting. L4M3 exam is instrumental in ensuring that individuals have all the necessary skills and knowledge to manage contracts and commercial agreements effectively.

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CIPS Commercial Contracting Sample Questions (Q114-Q119):

NEW QUESTION # 114
Under hire purchase agreement, when will the ownership of asset legally belong to the purchaser?

A. When the purchaser takes possession of the asset
B. When the down payment is made
C. When the final instalment is paid
D. When the agreement is signed

Answer: C

Explanation:
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'.
Reference:
- Hire Purchase Agreements
- CIPS study guide page 70
LO 1, AC 1.3

NEW QUESTION # 115
A procurement professional is drafting payment terms for a commercial contract. He is considering about payment method if defective products are found. Which of the following should be embedded in payment terms to control this issue?

A. Remedies for late payment
B. Invoice preparation
C. Pay-less notice
D. Retention clause

Answer: D

Explanation:
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.
Reference:
LO 3, AC 3.3

NEW QUESTION # 116
Which of the following is a key feature of liquidated damage clauses?

A. Liquidated damage is a penalty
B. The amount of damage is predetermined
C. The liquidated damages are non-negotiable
D. The amount of liquidated damages must be exceptionally larger than the actual damages incurred

Answer: B

Explanation:
Liquidated damages are presented in certain legal contracts as an estimate of otherwise intangible or hard-to-define losses to one of the parties. It is a provision that allows for the payment of a specified sum should one of the parties be in breach of contract.
Understanding Liquidated Damages
Liquidated damages are meant as a fair representation of losses in situations where actual damages are difficult to ascertain. In general, liquidated damages are meant to be fair, rather than punitive.
Liquidated damages may be referred to in a specific contract clause to cover circumstances where a party faces a loss from assets that do not have a direct monetary correlation. For example, if a party in a contract were to leak supply chain pricing information that is vital to a business, this could fall under liquidated damages.
A common example is a design phase for a new product that may involve consultation with outside suppliers and consultants in addition to a company's employees. The underlying plans or designs for a product might not have a set market value. This may be true even if the subsequent product is crucial to the progress and growth of a company. These plans may be deemed to be trade secrets of the business and highly sensitive. If the plans were exposed by a disgruntled employee or supplier, it could greatly hamper the ability to generate revenue from the release of that product. A company would have to make an estimation in advance of what such losses could cost in order to include this in a liquidated damages clause of a contract.
Limitations of Liquidated Damages
It is possible that a liquidated damages clause might not be enforced by the courts. This can occur if the monetary amount of liquidated damages cited in the clause is extraordinarily disproportional to the scope of what was affected by the breached contract.
Such limitations prevent a plaintiff from attempting to claim an unsubstantiated exorbitant amount from a defendant. For instance, a plaintiff might not be able to claim liquidated damages that amount to multiples of its gross revenue if the breach only affected a specific portion of its operations. The concept of liquidated damages is framed around compensation related to some harm and injury to the party rather than a fine imposed on the defendant.
The courts typically require that the parties involved make the most reasonable assessment possible for the liquidated damages clause at the time the contract is signed. This can provide a sense of understanding and reassurance of what is at stake if that aspect of the contract is breached. A liquidated damages clause can also give the parties involved a basis to negotiate from for an out-of-court settlement.
Reference:
- Liquidated Damages
- CIPS study guide page 158-159
LO 3, AC 3.2

NEW QUESTION # 117
A retailer prefers to display its best selling products and promotion programme on the building windows. According to rule of contract formation, this act will generally constitute...?

A. An invitation to treat
B. A mailbox rule
C. A legal capacity
D. An offer

Answer: A

Explanation:
Fisher v Bell [1960] and Pharmaceutical Society of Great Britain v Boots Cash Chemists [1953] identified that the courts will generally consider goods advertised in shop windows or those with a price tag attached to constitute an invitation to treat. An invitation to treat is a concept in contract law. It refers to an invitation for a party to make an offer enter into contractual negotiations.
Invitations to treat can be anything displayed to a large number of people, as long as there is no defined way to choose who can accept. Items on display in a shop, advertisements, and catalogues are all common examples of invitations to treat.
However, there are cases in the US shows that under some circumstances an advertisement can become an offer (see Leftkowitz v Great Minneapolis Surplus Stores [1957]).
Reference:
- What is an Invitation to Treat in Contract Law?
- CIPS study guide page 29
LO 1, AC 1.2

NEW QUESTION # 118
What is an example of the legal term an 'Invitation to treat'?

A. An invitation to another person to make an offer to contract
B. A formal agreed contract between two or more parties
C. A response to a quotation from a supplier
D. An invitation to work in partnership with another supplier

Answer: A

Explanation:
An invitation to treat is a legal concept that refers to an indication that a party is open to receiving offers, but it is not an offer in itself. Common examples include advertisements, display of goods in shops, or issuing a tender. It invites others to make offers, which may or may not be accepted.
Reference:CIPS L4M3 Commercial Contracting Study Guide, Chapter 1, Section 1.2.1 - The formation of a contract including offer, acceptance and invitation to treat.

NEW QUESTION # 119
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