[Dec 06, 2025] Pass CIPS L4M3 Exam Info and Free Practice Test
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NEW QUESTION # 64
An organization has a normal tender process that often last 1 month from defining the needs to contract award. Manufacturing department suddenly required a new special part that they could not foresee within a month. Which of the following should be the priority actions of procurement manager in this urgent situation?
Select TWO that apply:
- A. Submit full business justification
- B. Develop relationships with potential suppliers
- C. Get high-level authority approval
- D. Review contract performance
- E. Design new specification
Answer: A
Explanation:
This urgent needs occasionally occur due to a sudden change in circumstances. The process for selecting a replacement supplier must still be controlled. If there is a reason for normal processes to be waived, this must be fully documented and approved at a high level.
Reference: CIPS study guide page 7
LO 1, AC 1.1
NEW QUESTION # 65
Is a verbal contract legally enforceable?
- A. Yes, a verbal agreement is just as legally enforceable as a written one
- B. Yes, but only if you have a witness at the time the verbal agreement was made
- C. No, verbal contracts are never legally enforceable
- D. No, only contracts in writing will be legally enforceable
Answer: A
Explanation:
A verbal contract is generally enforceable in law, provided that it contains all the necessary elements of a valid contract: offer, acceptance, consideration, intention to create legal relations, and capacity. However, certain types of contracts (e.g., for land) may require written form under the Statute of Frauds. Evidence and clarity are the challenges, not enforceability.
Reference:CIPS L4M3 Commercial Contracting Study Guide, Chapter 1, Section 1.1.2 - Types of contracts:
verbal and written.
NEW QUESTION # 66
Which of the following are commonly used as model forms of contracts in construction in the UK?
- A. AS
- B. NEC
- C. IET
- D. CIPS
- E. Select TWO that apply
- F. JCT
Answer: B,F
Explanation:
- NEC: New Engineering Contract - a family of standard contracts primarily used in construction in the UK; includes works, consultants, services
- JCT: Joint Contracts Tribunal - a family of standard contracts used in construction in the UK; includes works, consultants. subcontracts, services
- AS: Australian Standards contracts - different contracts for a range of purchase types including constructions, consultancy, periodic supply of goods
- IET: Institution of Engineering and Technology which issue jointly agreed model forms covering the design, supply and installation of electrical, electronic and mechanical plant 'including special conditions for the ancillary development of software'
- CIPS: Chartered Institute of Procurement and Supply - CIPS has developed its own suites of standard forms of contract for IT functions including: supply and installation of computer equipment, support and maintenance of bespoke software, servicing of computer equipment.
Reference:
LO3, AC 3.1
NEW QUESTION # 67
Which of the following are the conditions for revocation of offer to be valid?
1. The offeree has not received the offer yet
2. Revocation of offer must be communicated with the offeree
3. Revocation of offer must be sent via email
4. Offeree has not accepted the offer yet
- A. 1 and 4 only
- B. 2 and 4 only
- C. 1 and 3 only
- D. 2 and 3 only
Answer: B
Explanation:
A revocation of offer is the withdrawal of a previous offer to engage in some sort of legally binding contract.
The previous offer had to have been such that it would have immediately become legally binding if the other party had formally agreed to it.
A core ruling defining revocation of offers was established by Payne v. Cave. This case established that neither party is bound to an agreement until an offer has been made by one and formally accepted by the other.
If an offer has been made, the offering party has a right to withdraw it up to formal acceptance by the offeree.
Revocation basically serves as formal, legally verifiable notice that a withdrawal was made, and it's valid so long as it is communicated to the offeree before they accept.
The case of Byrne v. Van Tienhoven supports this by establishing that the withdrawal of an offer by telegram is only valid if the telegram is received before the offer is accepted. The case of Dickinson v. Dodds further establishes that the party making the offer can communicate the revocation through a third party.
Reference:
- What Is a Revocation of Offer?
- CIPS study guide page 31
LO 1, AC 1.2
NEW QUESTION # 68
A buyer is procuring innovative new IT systems and has issued a performance specification as part of the invitation to tender. Is this a suitable approach?
- A. No, because the bidder may use it to inflate costs
- B. Yes, because it allows the bidder to present solutions and further inform the requirement
- C. Yes, because it will improve relationships and collaboration between both parties
- D. No, because the Procurement Team should only include outputs in specifications
Answer: B
Explanation:
A performance specification outlines the results or outputs required, rather than dictating how they should be achieved. This is ideal for innovation-focused procurement, like IT systems, as it allows suppliers to bring forward creative, technical solutions. It encourages market input and can lead to better value and performance.
Reference:CIPS L4M3 Commercial Contracting Study Guide, Chapter 2, Section 2.1.3 - Types of specifications including performance-based.
NEW QUESTION # 69
Transformers & Rectifiers Ltd wanted to buy some specialist gaskets. They sent a request for quotation with specification to Needs Ltd. The supplier replied with a quotation in which had its own terms and conditions.
The buyer edited delivery terms on the quotation and sent the document back to Needs Ltd. Gaskets were delivered to Transformers' premise with an invoice from Needs Ltd. Which of the following is most likely to be the governing terms if the two companies must settle the dispute at court?
- A. Edited terms and conditions
- B. Terms and conditions in the invoice
- C. Terms and conditions in the request for quotation
- D. Terms & conditions in the original quotation
Answer: A
Explanation:
In the 'battle of the forms', generally who shot the last will win. This is not applied to this case. Initial RFQ is an invitation to treat, then the quotation forms an offer. Transformers & Rectifiers Ltd edits terms and conditions then sends back to supplier, this act terminates Needs's offer and makes a new offer. Delivery of goods can be deemed as acceptance from Needs Ltd. The contract is formed with its details in the edited terms and conditions.
Reference: CIPS study guide page 43-44
LO 1, AC 1.2
NEW QUESTION # 70
Which of the following is a true statement on express and implied terms?
- A. Express terms must always be in writing
- B. Implied terms may derive from oral negotiations
- C. Express terms must be prepared by the party with expert knowledge
- D. Express terms always take precedent over implied terms
Answer: B
Explanation:
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.
The types of express terms to be found in a contract are many and varied and will depend on the type of contract. Any term written into the contract is an express term and may refer to price, time scales, warranties and indemnities, limitations on liability, conditions precedent and so on.
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:
1. terms implied under statute
2. terms implied under common law
3. terms implied because of custom or usage
4. terms implied due to previous dealings
5. terms implied 'in fact' or to reflect the parties' intentions
Reference:
- CIPS study guide page 126-132
- Contracts: Express and Implied Terms
LO 3, AC 3.1
NEW QUESTION # 71
Curnoe Ltd supplied tyres to Garage Ltd. Garage Ltd agreed in the contract that for any specified breaches of contract, it would pay Curnoe Ltd £5 per tyre sold in breach. It subsequently sold tyres at below the listed price, which was one of the breaches mentioned in the contract. What is the £5 per tyre provision an example of?
- A. Exclusion clause
- B. Liquidated damages
- C. Quantum meruit
- D. Unliquidated damages
Answer: B
Explanation:
Liquidated damages are a pre-agreed amount stated in the contract, payable upon a specific breach. These clauses are enforceable if the amount is a genuine pre-estimate of loss and not punitive. In this case, the £5 per tyre is a typical liquidated damages clause as it quantifies the penalty for non-compliance.
Reference:CIPS L4M3 Commercial Contracting Study Guide, Chapter 3, Section 3.2.1 - Liquidated damages, indemnities, and breach clauses.
NEW QUESTION # 72
To check whether supplier actually complies with the labour standards set out in the contract, the purchaser should have...?
- A. Right to terminate the contract
- B. Right of audit
- C. Right to rescind the contract
- D. Right to penalise the supplier
Answer: B
Explanation:
Many firms have compliance policies for suppliers in place. To ensure that the supplier actually comply with the standards set out, the purchaser can employ the right to audit. The buyer usually obtains the right to examine records of a vendor to determine if a fraud or a violation of company policy has occurred through the following methods:
- Right-to-audit agreement The agreement can be printed on the back of a purchase order, contract, or other procurement form.
- A simple request If the right-to-audit agreement wasn't included on the procurement form, and the buyer suspects irregularities, he may have to beg the vendor to allow an audit to be performed. If the buyer is a major customer of the vendor, the buyer may be able to wield a big enough stick to obtain permission to look at the records.
- Right-to-audit Pitfalls
Reference:
- CIPS study guide page 160
- Reserving the Right to Audit the Suspicious Vendor: Right-to-audit clauses in vendor contracts help control fraud and abuse by affording discovery devices in examinations.
LO 3, AC 3.2
NEW QUESTION # 73
Cleveland Insurance (Cleveland) offers a range of insurance services. The main software used in the call centre is a customer relationship management (CRM) system. Cleveland perceived an urgent need to replace the existing CRM system to deal with the increasing number of customers and services.
Urgent Digital Ltd (Digital) is one of the bidders of Cleveland's ITT. Its bid team is led by Hank Irvine, its technical director. Hank realises that winning the Cleveland contract (valued at approximately £50M) will enhance his career. During discussions with Cleveland, Hank offers certain assurances regarding timescales for the project. He has not carried out any investigations into the viability of the timescales. Hank has little idea whether the timescales can be met.
Cleveland decides that Digital's bid meets with its requirements, especially given the assurances in timescale offered by Hank, and decides to proceed with it, subject to a formal contract. Eventually, a formal contract is signed by both parties. The initial assurances given by Hank about the timing of the project are never going to be achieved and are at best grossly exaggerated.
Hank's pre-contractual assurance is most likely to be an example of which of the following?
- A. Initial impossibility
- B. Threat
- C. Fraudulent misrepresentation
- D. Inaccuracy in communication
Answer: A
Explanation:
Hank's pre-contractual assurances may amount to misrepresentation. Fraudulent misrepresentation is a strong possibility since Hank had carried out no investigations into the viability of the project timescales. This could amount to recklessness in using information without taking any steps to see if it is true or not.
The scenario above was constructed based on the case BSkyB v EDS, a famous case in IT sector.
LO 1, AC 1.2
NEW QUESTION # 74
Which of the following are among five 'pillars' of information assurance?
1. Recovery plan
2. Availability
3. Non-repudiation
4. Governance
- A. 2 and 3 only
- B. 3 and 4 only
- C. 1 and 4 only
- D. 1 and 2 only
Answer: A
Explanation:
Information Assurance (IA)
Information Assurance (IA) is the practice of managing information-related risks and the steps involved to protect information systems such as computer and network systems. The IA transformation is a partnership that stretches across the Department of Defense (DoD), Office of National Intelligence, Committee on National Security Systems, National Institute of Science and Technology (NIST), and the Office of Management and Budget.
The US Government's definition of information assurance is:
"measures that protect and defend information and information systems by ensuring their availability, integrity, authentication, confidentiality, and non-repudiation. These measures include providing for restoration of information systems by incorporating protection, detection, and reaction capabilities." Information Assurance (IA) is essentially protecting information systems, and is often associated with the following five pillars:
- Integrity
- Availability
- Authentication
- Confidentiality
- Nonrepudiation
The following pillars can be applied in a variety of ways, depending on the sensitivity of the information, or information systems within your organization. Currently, these five pillars are used at the heart of the US Governments ability to conduct safe and secure operations in a global environment.
1. Integrity
Integrity involves assurance that all information systems are protected and not tampered with. IA aims to maintain integrity through means such as anti-virus software on all computer system, and ensuring all staff with access to know how to appropriately use their systems to minimize malware, or viruses entering information systems.
2. Availability
Availability simply means those who need access to information, are allowed to access it. Information should be available to only those who are aware of the risks associated with information systems.
3. Authentication
Authentication involves ensuring those who have access to information, are who they say they are. Ways of improving authentication involve methods such as two-factor authentication, strong passwords, bio-metrics and other devices. Authentication may also be used to not only identify users, but also other devices.
4. Confidentiality
IA involves the confidentiality of information, meaning only those with authorization may view certain data. This step is closely mirrored by the six data processing principles of the General Data Protection Regulation (GDPR), where by personal data must be processed in a secure manner "using appropriate technical and organizational measures" ("integrity and confidentiality").
5. Nonrepudiation
The final pillar simply means someone with access to your organizations information system cannot deny having completed an action within the system, as there should be methods in place to prove that they did make said action.
Reference:
- What is Information Assurance (IA)?
- CIPS study guide page 99-100
LO 2, AC 2.1
NEW QUESTION # 75
A tire manufacturer entered into a contract with a distributor. In the contract, the distributor is prohibited from selling the tire under the price list. The distributor must pay $5 for each tire sold in breach. The amount of $5 is known as...?
- A. Penalty
- B. Liquidated damages
- C. Quantum meruit
- D. Caveat Emptor
Answer: B
Explanation:
This scenario is in fact based on a famous case law: Dunlop Pneumatic Tyre Company v New Garage & Motor co [1915] AC 79. In this case law, the House of Lords identified the clause as liquidated damages, and therefore enforceable.
However, if this case had happened in 2015 or afterwards, there would be some legal issues:
- The price agreement is prohibited by Competition Act 1998
- If the agreement is allowed by Competition Act, as in the case Cavendish Square Holding BV (Appellant) v Talal El Makdessi (Respondent), the clause can also be identified as a penalty and it is still enforceable.
Reference: CIPS study guide page 158-159
LO 3, AC 3.2
NEW QUESTION # 76
While it is recognised that longer-term contracts have the potential to drive significant benefits for the organisation, a number of situations are more suited to making one-off purchases. Which of the below situations is likely to be more suited to a one-off purchase?
- A. The purchase of compatible IT infrastructure equipment
- B. The ordering of equipment for a special project
- C. The purchase of internal and external audit services
- D. A requirement for the maintenance of buildings
Answer: B
Explanation:
One-off purchases are ideal for unique, non-recurring needs such as equipment for a special project. These purchases are typically not repeated, do not require long-term supplier relationships, and are handled separately from strategic or ongoing procurement activities.
Reference:CIPS L4M3 Commercial Contracting Study Guide, Chapter 4, Section 4.1.2 - Types of procurement arrangements.
NEW QUESTION # 77
Which of the following is most likely to be an one-off contract?
- A. Commercial lease agreement of an office building
- B. Franchise Agreement
- C. Contract for construction of a power plant
- D. Framework Agreement for supply of mono-crystalline silicon
Answer: C
Explanation:
One-off contracts are used where a supplier is only needed for a single activity unlikely to be repetitive, and where the need of the buyer is concrete and finite. Among the answers, only construction for power plant is one-off since the work is non-repetitive and the need is clearly defined.
A framework agreement is an agreement between one or more businesses or organisations, "the purpose of which is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, the quantity envisaged".
A Commercial Lease Agreement is a contract used when renting business property to or from another individual or company. It gives the tenant (or renter) the right to use the property for business purposes during the term of the lease in exchange for payment to the landlord.
A franchise agreement is a legally binding document that outlines a franchisor's terms and conditions for a franchisee. Every franchise is governed by these terms, which are generally outlined in a written agreement between both parties.
Reference: CIPS study guide page 55-58
LO 1, AC 1.3
NEW QUESTION # 78
Which of the following is the set of principles that enables courts to determine exactly what the written contract says and what that must mean, then the court will uphold that?
- A. Rules of interpretation
- B. Unfair Contract Act 1977
- C. Order of precedence
- D. Rules of contract formation
Answer: A
Explanation:
Courts may be called upon to interpret a statute due to disputes over the meaning of a word or phrase contained within a statute. These disputes may arise through a variety of reasons. It has long been held that words are an imperfect means of communication. Omissions may have occurred at the drafting stage, word or phraseology ambiguity, etymological change through time, oversight on specific points, or a failure to adapt legislation to new developments. This may result in the judiciary providing a role in statutory interpretation. Statutory interpretation in its broadest sense is the process of determining the true meaning of a written document. In UK, the Interpretation Act 1978 provides limited scope to assist judges with statutory interpretation in that it only provides standard definitions to common provisions such as a rebuttable presumption that terminology in the masculine gender also include the feminine, and that the singular includes plural.
An order of precedence clause sets out the order in which the contract documents take precedence in the event of an inconsistency.
The Unfair Contract Terms Act 1977 (c 50) is an Act of Parliament of the United Kingdom which regulates contracts by restricting the operation and legality of some contract terms. It extends to nearly all forms of contract and one of its most important functions is limiting the applicability of disclaimers of liability. The terms extend to both actual contract terms and notices that are seen to constitute a contractual obligation.
Reference:
- Rules of Statutory Interpretation
- CIPS study guide page 43-46
LO 1, AC 1.2
NEW QUESTION # 79
......
CIPS L4M3 (CIPS Commercial Contracting) Exam covers a wide range of topics related to commercial contracting. This includes contract management, negotiation techniques, risk management, contract law, procurement strategy, and supplier selection and evaluation. Candidates who are interested in taking L4M3 exam must have a good understanding of these topics and be able to apply them in a real-world setting. L4M3 exam consists of multiple-choice questions and case studies, and candidates must pass the exam to obtain the professional diploma.
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