A cost reimbursable contract (sometimes called a cost plus contract) is one in which the contractor is reimbursed the actual costs they incur in carrying out the works, plus an additional fee. Option E of the NEC3 Engineering and Construction Contract (ECC) is an example of a cost reimbursable contract. Reference: - CIPS study guide page 176-179 - Cost reimbursable contract LO 3, AC 3.3
Question 52
Which of the following is the type of insurance that cover the liabilities of service provider such as legal advice, accountancy, technical designs, etc?
Correct Answer: A
The most usual forms of insurance cover are as below: - Employer's liability: Employers' liability insurance, sometimes known as employment practices liability insurance (EPLI), protects employers from financial loss if a worker has a job-related injury or illness not covered by workers' compensation. Employers' liability insurance can be packaged with workers' compensation insurance to further protect companies against the costs associated with workplace injuries, illnesses, and deaths. Employers' liability insurance is also called "part 2" of a workers' compensation policy. - Public/product liability: Public liability insurance covers you against any claims made against your business - for example if you were held legally liable for personal injury, or for damage done to property. The insurance will also cover you for any legal costs associated with defending claims against your business. - Professional indemnity insurance (PII): Professional indemnity or liability insurance offers such coverage to professional advice or service providing individuals and companies ensuring protection against any legal costs and damages awarded as a result of claims relating to negligence. Whereas more general forms of liability insurance focus on direct forms of harm such as sustaining injuries, professional indemnity insurance provides a far more detailed and comprehensive form of coverage. The cover protects a firm or individual's liability relating to any financial loss caused by errors or omissions in the service provided as well as any alleged failure to perform on behalf of a client. - Goods in transit coverage: Goods in transit insurance, sometimes referred to as GIT, covers goods against loss or damage while being moved from one place to another. These goods can be being carried by individuals in their own vehicle, self employed drivers or contractors or by third party carriers. The insurance can cover both domestic and international trips, with specific add-ons available for insurance within Europe. Reference: LO 3, AC 3.2
Question 53
Express terms in a contract are stated in which of the following? Select TWO that apply
Correct Answer: A,D
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. Reference: - Contracts: Express and Implied Terms - CIPS study guide page 126-132 LO 3, AC 3.1
Question 54
A buyer and a supplier plan to sign a contract with cost-plus arrangement. If the cost base is $350 and the markup component is 11% then the invoice price will be...
Correct Answer: B
Markup is the percentage between the profit and costs. The cost is $350, markup is 11%. So final price is: 350 + 350x0.11 = 388.5 Reference: LO 3, AC 3.3
Question 55
A purchase order can become a contract between supplier and purchaser if it is...?
Correct Answer: B
A purchase order is a document sent from a buyer to a seller, with a request to order a product. The purchase order often has its number, description and quantity of the goods, unit prices and total price, name of issuer, time of delivery, standard terms and conditions, etc. It is effectively an offer to supplier. The purchase order will become a formal contract if supplier accepted it by written notice or by performance (such as deliver the goods to the buyer's premise). Reference: LO 1, AC 1.2
