Which of the following is the reason why liquidated damage clauses are embedded into a contract?
Correct Answer: C
Liquidated damages are an amount of money, agreed upon by the parties at the time of the contract signing, that establishes the damages that can be recovered in the event a party breaches the contract. The amount is supposed to reflect the best estimate of actual damages when the parties sign the contract. These usually apply to a specific type of breach, and in construction, it is frequently the failure to complete work on time. Liquidated damages clauses are usually written as some sort of formula, for example: Total Contract Price - [(X amount of $ per day) x (number of days late)] Including a liquidated damages clause can provide many benefits, the most important of which is predictability. When setting a predetermined amount of damages, it allows both parties a chance to negotiate and settle on a number they both feel is fair and reasonable. From the owner's perspective, this acts like a cheap form of insurance against your contractors. In the event of a breach, the owner can immediately calculate the damages without going through the trouble of proving actual damages. Proving actual damages can be a complicated, lengthy, and costly process. From a contractor perspective, this allows them to analyze the level of risk involved, and schedule appropriately. It also allows them the opportunity to limit the damage claims of the owner. Reference: - Construction Contract Clauses: What Is a Liquidated Damages Clause? - CIPS study guide page 158-159 LO 3, AC 3.2
Question 32
Which of the following are the 'fundamental' labour standards laid down by the International Labour Organisation? 1. Elimination of child labour 2. Payment of a minimum wage 3. The right to collective bargaining 4. Abolition of forced labor
Correct Answer: C
ILO Declaration on Fundamental Principles and Rights at Work was adopted in 1948. The Declaration commits Member States to respect and promote principles and rights in four categories, whether or not they have ratified the relevant Conventions. These categories are: freedom of association and the effective recognition of the right to collective bargaining, the elimination of forced or compulsory labour, the abolition of child labour and the elimination of discrimination in respect of employment and occupation. Reference: - ILO Declaration on Fundamental Principles and Rights at Work - CIPS study guide page 161-163 LO 3, AC 3.2
Question 33
What is the pricing method that incentivises the supplier to control their costs?
Correct Answer: C
Penetration pricing is a marketing strategy used by businesses to attract customers to a new product or service by offering a lower price during its initial offering. The lower price helps a new product or service penetrate the market and attract customers away from competitors. Price skimming is a product pricing strategy by which a firm charges the highest initial price that customers will pay and then lowers it over time. As the demand of the first customers is satisfied and competition enters the market, the firm lowers the price to attract another, more price-sensitive segment of the population. The skimming strategy gets its name from "skimming" successive layers of cream, or customer segments, as prices are lowered over time. Incentive contracts allow sharing of the risks between the contractor and the client. The contractor is reimbursed all its justifiable costs in addition to a calculated fee. Target costing is an element of incentive contracts. Cost-plus pricing is also known as markup pricing. It's a pricing method where a fixed percentage is added on top of the cost to produce Reference: LO 3, AC 3.3
Question 34
Information assurance protects information systems and...?
Correct Answer: B
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." Reference: - What is Information Assurance (IA)? - CIPS study guide page 99-100 LO 2, AC 2.1
Question 35
Which of the following clauses addresses fraud, bribery and corruption? The Company has undertaken commercially reasonable efforts to eliminate Conflict Minerals from each Company Product and any products currently proposed to be manufactured by the Company or on its behalf in the future. "Conflict Minerals" means columbite-tantalite (coltan), cassiterite, gold, wolframite, or their derivatives, which originate in the Democratic Republic of the Congo or other country the exploitation and trade of which is determined by the United States to be financing conflict in the Democratic Republic of the Congo or other country.
Correct Answer: D
This question is intended to let students know about how contractual clauses regarding ethical issues is constructed. The exam paper may not ask about this. "Each Party hereby undertakes that, at the date of the entering into force of the Contract, itself, its directors, officers or employees have not offered, promised, given, authorized, solicited or accepted any undue pecuniary or other advantage of any kind in any way connected with the Contract and that it has taken reasonable measures to prevent subcontractors, agents or any other third parties, subject to its control or determining influence, from doing so.": This is a clause addressing fraud, bribery and corruption. It is created to prevent any undue act by contracting parties. You may find other anti-corruption clause samples in this document. "Nothing in this Agreement shall prevent a Party from utilizing the services of any subcontractor as it deems appropriate to perform its obligations under this Agreement; provided, however, that each Party shall require its subcontractors to comply with all applicable terms and conditions of this Agreement in providing such services and each Party shall remain primarily liable to the other Party for the performance of such subcontractor.": This clause is used to control the subcontracting and subcontractors. "Customer will be responsible for and shall ensure that while Service Provider employees, agents or contractors are on Customer's premises, all proper and legal health and safety precautions are in place and fully operational to protect such persons.": This clause is used to ensure health and safety standards. "The Company has undertaken commercially reasonable efforts to eliminate Conflict Minerals from each Company Product and any products currently proposed to be manufactured by the Company or on its behalf in the future. "Conflict Minerals" means columbite-tantalite (coltan), cassiterite, gold, wolframite, or their derivatives, which originate in the Democratic Republic of the Congo or other country the exploitation and trade of which is determined by the United States to be financing conflict in the Democratic Republic of the Congo or other country.": This is a clause addressing conflict minerals. Reference: LO 3, AC 3.2
