CIPS L4M8 Chapter 2 UPDATED ACTUAL
Exam Questions and CORRECT Answers
Sourcing involves - CORRECT ANSWER - identifying and vetting those suppliers who
are able to supply the product or service, as required in a specification from a procurement
professional
Different stages of Ordering - CORRECT ANSWER - - User need
- Raise requisition
- Approved process
- Issue PO
- Receive goods/service
- Approve invoice
Different stages of Sourcing - CORRECT ANSWER - - Understand the need
- Develop strategy
- Raise requisition
- Source suppliers
- Issue ITT/RFQ
- Negotiate and award contract
- SRM/contract management
Sourcing can take place in the following locations - CORRECT ANSWER - - Localised
- Regional
- National
- Global
Localised sourcing - CORRECT ANSWER - conducted with suppliers who are near to the
buying organisation
,Regional sourcing - CORRECT ANSWER - conducted with suppliers in the same area, but
slightly further away than the localised choices
National sourcing - CORRECT ANSWER - conducted throughout an entire country. EG
suppliers may be hundreds of miles away from the buying organisation but they are still
controlled by the same legislation and regulations
Global sourcing - CORRECT ANSWER - conducted worldwide. This type of sourcing
often involves different legislation and regulations to those of the buying organisation
The buyer needs to think about the following factors when deciding which type of sourcing is
best - CORRECT ANSWER - - Urgency of need: local suppliers shorter lead times
- Volume of need: larger quantities for economies of scale better for global sourcing
- Quality of need: high quality may need further than local
- Budget allocated to need: low budget may need global sourcing
Contracts can either be - CORRECT ANSWER - Verbal or Written
The five stages of forming a contract - CORRECT ANSWER - 1. Intention
2. Capacity
3. Offer
4. Consideration
5. Acceptance
Stages of a contract: 1.Intention - CORRECT ANSWER - the contracting parties must
intend to enter into a legal contract. If there is no intention to create a legal relationship, the
contract is not legally binding
,Stages of a contract: 2. Capacity - CORRECT ANSWER - all parties should be of sound
mind and fully aware of their contractual obligations
Stages of a contract: 3. Offer - CORRECT ANSWER - the promise in exchange for
performance from the other party
Stages of a contract: 4. Consideration - CORRECT ANSWER - the exchange of one thing
for another within an agreement
Stages of a contract: 5. Acceptance - CORRECT ANSWER - the point where the offeree
accepts the proposal from the offeror. Offers can be accepted by body language, a formal letter or
email or by paying for the goods/services
Invitation to treat - CORRECT ANSWER - an expression of willingness to negotiate with
the intention of forming a contract
Implied terms - CORRECT ANSWER - are always present in a contract in a contract and
are set by national law. The do not have to be written or verbally agreed: they always exist
Express terms are - CORRECT ANSWER - terms that are negotiated and created rather
than being automatically included. They are agreed between the parties negotiating the contract
Examples of Implied terms - CORRECT ANSWER - - Sale of Goods Act
- Goods being fit for purpose
- Negligence
- Confidential breaches
Examples of Express terms - CORRECT ANSWER - - Payment terms
- Specification
- Delivery details
, - Quantities
Standard term contract - CORRECT ANSWER - A pre-written contract that leaves little or
no room for negotiation on terms between the parties
Standard term, or model, contracts include the following elements - CORRECT
ANSWER - - Definitions
- General terms
- Commercial provisions: payment terms, liability, performance and delivery details
- Secondary commercial provisions: confidentiality and intellectual property rights
- Standard clauses: force majeure and the law of the country to be followed
Advantages of standard/model contracts - CORRECT ANSWER - - Saves time
- Saves money
- Industry standard contracts are widely accepted and understood by both buyers and suppliers
Disadvantages of standard/model contracts - CORRECT ANSWER - - Bespoke terms may
not be included
- Better terms could be negotiated
- Buyers do not get experience in creating contracts
Express terms include the following - CORRECT ANSWER - - Price
- Specification
- Payment terms
- Warranties
- Conditions
- Retention of title
- Damages
- Exclusion clauses
Exam Questions and CORRECT Answers
Sourcing involves - CORRECT ANSWER - identifying and vetting those suppliers who
are able to supply the product or service, as required in a specification from a procurement
professional
Different stages of Ordering - CORRECT ANSWER - - User need
- Raise requisition
- Approved process
- Issue PO
- Receive goods/service
- Approve invoice
Different stages of Sourcing - CORRECT ANSWER - - Understand the need
- Develop strategy
- Raise requisition
- Source suppliers
- Issue ITT/RFQ
- Negotiate and award contract
- SRM/contract management
Sourcing can take place in the following locations - CORRECT ANSWER - - Localised
- Regional
- National
- Global
Localised sourcing - CORRECT ANSWER - conducted with suppliers who are near to the
buying organisation
,Regional sourcing - CORRECT ANSWER - conducted with suppliers in the same area, but
slightly further away than the localised choices
National sourcing - CORRECT ANSWER - conducted throughout an entire country. EG
suppliers may be hundreds of miles away from the buying organisation but they are still
controlled by the same legislation and regulations
Global sourcing - CORRECT ANSWER - conducted worldwide. This type of sourcing
often involves different legislation and regulations to those of the buying organisation
The buyer needs to think about the following factors when deciding which type of sourcing is
best - CORRECT ANSWER - - Urgency of need: local suppliers shorter lead times
- Volume of need: larger quantities for economies of scale better for global sourcing
- Quality of need: high quality may need further than local
- Budget allocated to need: low budget may need global sourcing
Contracts can either be - CORRECT ANSWER - Verbal or Written
The five stages of forming a contract - CORRECT ANSWER - 1. Intention
2. Capacity
3. Offer
4. Consideration
5. Acceptance
Stages of a contract: 1.Intention - CORRECT ANSWER - the contracting parties must
intend to enter into a legal contract. If there is no intention to create a legal relationship, the
contract is not legally binding
,Stages of a contract: 2. Capacity - CORRECT ANSWER - all parties should be of sound
mind and fully aware of their contractual obligations
Stages of a contract: 3. Offer - CORRECT ANSWER - the promise in exchange for
performance from the other party
Stages of a contract: 4. Consideration - CORRECT ANSWER - the exchange of one thing
for another within an agreement
Stages of a contract: 5. Acceptance - CORRECT ANSWER - the point where the offeree
accepts the proposal from the offeror. Offers can be accepted by body language, a formal letter or
email or by paying for the goods/services
Invitation to treat - CORRECT ANSWER - an expression of willingness to negotiate with
the intention of forming a contract
Implied terms - CORRECT ANSWER - are always present in a contract in a contract and
are set by national law. The do not have to be written or verbally agreed: they always exist
Express terms are - CORRECT ANSWER - terms that are negotiated and created rather
than being automatically included. They are agreed between the parties negotiating the contract
Examples of Implied terms - CORRECT ANSWER - - Sale of Goods Act
- Goods being fit for purpose
- Negligence
- Confidential breaches
Examples of Express terms - CORRECT ANSWER - - Payment terms
- Specification
- Delivery details
, - Quantities
Standard term contract - CORRECT ANSWER - A pre-written contract that leaves little or
no room for negotiation on terms between the parties
Standard term, or model, contracts include the following elements - CORRECT
ANSWER - - Definitions
- General terms
- Commercial provisions: payment terms, liability, performance and delivery details
- Secondary commercial provisions: confidentiality and intellectual property rights
- Standard clauses: force majeure and the law of the country to be followed
Advantages of standard/model contracts - CORRECT ANSWER - - Saves time
- Saves money
- Industry standard contracts are widely accepted and understood by both buyers and suppliers
Disadvantages of standard/model contracts - CORRECT ANSWER - - Bespoke terms may
not be included
- Better terms could be negotiated
- Buyers do not get experience in creating contracts
Express terms include the following - CORRECT ANSWER - - Price
- Specification
- Payment terms
- Warranties
- Conditions
- Retention of title
- Damages
- Exclusion clauses
