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CIPS L4M3 Exam

Certification Provider: CIPS
Exam Name: Commercial Contracting
Number of questions in our database: 189
Exam Version: Feb. 15, 2024
L4M3 Exam Official Topics:
  • Topic 1: Risks presented by contracting on suppliers terms or through oral contracts/ Analyse the content of specifications for procurements
  • Topic 2: Cost plus and cost reimbursable pricing arrangements/ Invitations to treat or invitations to negotiate
  • Topic 3: Compare types of contractual agreements made between customers and suppliers/ Standardisation of requirements versus increasing the range of products
  • Topic 4: Drafting specifications and developing marketdialogue with suppliers/ Understand the legal issues that relate to the formation of contracts
  • Topic 5: Analyse contractual terms for contracts that arecreated with external organisations/ The Vienna Convention on the International Sales of Goods
  • Topic 6: Appraise examples of key performance indicators (KPIs) in contractual agreements/ Analyse the legal issues that relate to the creation of commercial agreements with customers or suppliers
  • Topic 7: Recognise examples of contractual terms typically incorporated into contracts that are created with external organisations/ Invitation to tender or request for quotation
  • Topic 8: Terms that apply to labour standards and ethical sourcing/ Including social and environmental criteria inspecifications
  • Topic 9: Recognise types of pricing arrangements incommercial agreements/ The battle of the forms and precedence of contract terms
  • Topic 10: Defining contractual performance measures or key performance indicators (KPI)/ Understand the key clauses that are included informal contracts

Free CIPS L4M3 Exam Actual Questions

The questions for L4M3 were last updated On Feb. 15, 2024

Question #1

Which of the following statements is FALSE on contracts for the leasing of assets?

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Correct Answer: C

A lease is a contractual arrangement calling for the lessee (user) to pay the lessor (owner) for use of an asset. Some characteristics of Leases are:

- The right to use the lessor's asset is granted in exchange for a fee called the lease payment.

- The lease payments are usually paid in installments.

- Leases may be long- or short-term.

- At its inception a lease agreement constitutes a mutually unperformed contract

Though the ownership of the asset is not transferred to the lessee, some responsibilities and risks do. The lessor and lessee may negotiate on who is responsible on maintenance, insurance, etc.


LO 1, AC 1.3

Question #2

Which of the following are likely to be express terms in a contract?

1. Legislation

2. Custom and practice

3. Contract particulars

4. Terms and conditions

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Correct Answer: C

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.

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.


- Contracts: Express and Implied Terms

- CIPS study guide page 32

LO 1, AC 1.2

Question #3

Which of the following is the most suitable model contract for car lift manufacturing?

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Correct Answer: C

IMechE/IET: Institution of Mechanical Engineers/Institution of Engineering and Technology - two separate institutes that 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. Car lifts are mechanical products, so IMechE/IET is the most suitable model contract for this type of product.

FIDIC is a French language acronym for Fdration Internationale Des Ingnieurs-Conseils, which means the international federation of consulting engineers. It was started in 1913 by the trio of France, Belgium and Switzerland. The United Kingdom joined the Federation in 1949. FIDIC is headquartered in Switzerland and now boasts of membership from over 60 different countries. FIDIC published its first contract, titled The Form of contract for works of Civil Engineering construction, in 1957. As the title indicated, this first contract was aimed at the Civil Engineering sector and it soon became known for the colour of its cover, and thus, The Red Book. It has become the tradition that FIDIC contracts are known in popular parlance by the colour of their cover. This first contract by FIDIC was undertaken jointly with the International federation of Building and Public works. FIDIC's concerted effort at achieving broad consultation and acceptance of its contract forms has seen subsequent editions of its contracts being ratified by the International Federation of Asian and Western Pacific Contractors Association, Associated General Contractors of America and the Inter-American Federation of the Construction Industry, Multilateral Development Banks among others. Because of the broad support it enjoys, FIDIC contracts are the foremost contracts in international construction.

The Chartered Institute of Procurement and Supply (CIPS) has some model contracts for IT functions including: supply and installation of computer equipment, support and maintenance of bespoke software, servicing of computer equipment,...

The International Trade Centre (ITC) produces contracts specifically designed for small companies doing international business, covering the sale of goods, distribution, services and joint ventures.


LO 3, AC 3.1

Question #4

According to mailbox rule in some common law countries, at which point the offeree's acceptance will be effective?

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Correct Answer: D

When parties do not negotiate face-to-face, a key Question: becomes when

things like acceptances, rejections and revocations take effect. The general rule is that acceptances are effective on dispatch (when they are mailed). Everything else becomes effective when the offeror actually receives them. This idea is codified by the ''mailbox rule'' which states that acceptance is effective on dispatch, even before the offeror has received it. (The one minor exception to this rule involves option contracts for which acceptances are not effective until they are received by the offeror.)


- The Mailbox Rule

- CIPS study guide page 34

Question #5

Which of the following is the most suitable model contract for car lift manufacturing?

Reveal Solution Hide Solution
Correct Answer: C

IMechE/IET: Institution of Mechanical Engineers/Institution of Engineering and Technology - two separate institutes that 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. Car lifts are mechanical products, so IMechE/IET is the most suitable model contract for this type of product.

FIDIC is a French language acronym for Fdration Internationale Des Ingnieurs-Conseils, which means the international federation of consulting engineers. It was started in 1913 by the trio of France, Belgium and Switzerland. The United Kingdom joined the Federation in 1949. FIDIC is headquartered in Switzerland and now boasts of membership from over 60 different countries. FIDIC published its first contract, titled The Form of contract for works of Civil Engineering construction, in 1957. As the title indicated, this first contract was aimed at the Civil Engineering sector and it soon became known for the colour of its cover, and thus, The Red Book. It has become the tradition that FIDIC contracts are known in popular parlance by the colour of their cover. This first contract by FIDIC was undertaken jointly with the International federation of Building and Public works. FIDIC's concerted effort at achieving broad consultation and acceptance of its contract forms has seen subsequent editions of its contracts being ratified by the International Federation of Asian and Western Pacific Contractors Association, Associated General Contractors of America and the Inter-American Federation of the Construction Industry, Multilateral Development Banks among others. Because of the broad support it enjoys, FIDIC contracts are the foremost contracts in international construction.

The Chartered Institute of Procurement and Supply (CIPS) has some model contracts for IT functions including: supply and installation of computer equipment, support and maintenance of bespoke software, servicing of computer equipment,...

The International Trade Centre (ITC) produces contracts specifically designed for small companies doing international business, covering the sale of goods, distribution, services and joint ventures.


LO 3, AC 3.1


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