CIPS L5M3 - Managing Contractual Risk

Explanation

Adjudication has strict timescales (this is one of the advantages of using this conflict resolution method). It has roots in the construction industry and has been widely used since the 1990s. See p.76 for more information

Explanation

The correct answers are as follows:

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Subcontracting is the correct answer as they're using another company to fulfil the contract

Explanation

A limitation of liability caps a company's exposure to risk. In SOME cases this may mean that the responsibility passes to the other party- but not always. For this reason option 2 is correct and 4 isn't. Option 1 is the definition of liquidated damages and 3 is just a made-up answer. See p.20 for more information on Liability

Explanation

"A Guarantee is a secondary obligation of a contract' and 'A guarantor's responsibility cannot be higher than the Principle' are the correct answers. Guarantees are explained on p.28. Be careful not to confuse this with Warranty. A promise to repair or replace an item within a defined period of time is the definition of a warranty. That was put in there to trick you. Sorry. Remember a Guaran-tee is to do something when the Principle of the contract fails to do it. It's most common in leasing agreements- if you're a young person, you'll often need a responsible adult / parent to sign the lease as your Guarantor. As a Guarantor, they promise to pay the rent if you're unable to. Legally they can't be asked to do any more than you are assigned to do in the contract. So if your rent is £500 a month, that's all they can be asked to pay if you don't pay it. The primary obligation is between you and the landlord. The secondary obligation is between the guarantor and you.

Explanation

A variation clause and signed agreement by both parties is required to make the change. See p.16-17 for more information on contract variations. Note a 'notification of change' isn't valid unless it's accepted by the other party- so it's a good idea for both parties to sign to say they agree to the change.

Explanation

The correct answers are as follows:

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This is a fundamental breach. The key here is the scenario says 'huge issue'. Out of the four scenarios this one is the most important / serious and therefore will be the fundamental breach.

Explanation

An Innominate Term is the correct answer. At the time the contract was written, we didn't know how important the delivery time was - therefore it wasn't a condition or a warranty- it was an innominate term. An innominate term is a term that is difficult to classify at the time of drafting a contract. A time is of the essence clause would be a good thing to include in this contract now that we know how important the delivery times are. For more information on Conditions, Warranties and Innominate Terms see p. 43

Explanation

The correct answers are as follows:

The answer is liability as the topic is who will take on the liability for being the Principle Designer of the building

Explanation

Negligence can be a source of a breach. P.42

Explanation

"A contract between an end customer and a company which has full responsibility for its perfor-mance" is the correct answer. This is the definition of Prime Contract given on p. 47