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CIPS L5M3 Exam Questions
- Topic 1: Understand the legal and process issues relating to the formation of contracts: Implications of contractual documentation on overall risk and the formation of contracts and associated risks are covered in this topic of the CIPS Managing Contractual Risk test. Procurement and supply chain professionals get knowledge about legal issues in contract formation in this topic.
- Topic 2: Understand the impacts of breach of contract and coping strategies and provisions that are available: Procurement professionals who attempt the CIPS Level 5 Advanced Diploma in Procurement and Supply exam cover different levels of contract breach, their impact, and tools for resolution in this topic. It focuses on concepts that are essential for supply chain professionals for effective management of contractual relationships.
- Topic 3: Understand the legal implications of contractual nonconformance in procurement and supply: This topic delves into the remedies available for non-performance in a procurement context, as well as the legal implications that may arise from the termination of contractual relationships. The CIPS L5M3 exam comprehensively tests abilities of procurement professionals to analyze and compare these critical aspects of contract management.
Free CIPS L5M3 Exam Actual Questions
Note: Premium Questions for L5M3 were last updated On Apr. 09, 2025 (see below)
Verity Fashion is a clothing manufacturer and has an order to create 10,000 pairs of flipflops for a retailer for the summer. The order was placed over the phone in February. The order has been completed and has been boxed up ready for delivery. The retailer calls Verity Fashion in June and says that the order is no longer required. What action can Verity Fashion take?
Verity can sue for damages. The order was placed over the phone meaning that there was a verbal contract in place. Contracts do not need to be written to be enforceable so option 2 is incorrect. There is no termination clause mentioned in the question so you can assume that there isn't one. This means that the retailer is committing a breach of the verbal contract by cancelling the order. Verity could therefore apply for damages. (Whether or not they'd be awarded is a different matter!). This question tests your understanding of when contracts can be terminated and remedies for breaches. See p. 134.
Which of the following will you put into box 8?
The correct answers are as follows:
This is arbitration as it involves a panel.
Mark is a consultant who works with building managers and advises them on how to make their buildings safer. What type of insurance should Mark have?
Mark needs professional indemnity insurance. Types of insurance is a known exam topic and the study guide does not cover this particularly well. Types of insurance is mentioned on p.25 but Pro-fessional Indemnity Insurance isn't really explained and this does come up in the exam. Professional Indemnity Insurance is needed when your job is to give advice to people (like as a Consultant). It's used for if the advice you give turns out to be bad. For example, if Mark told the building manager he should get ABC Fire Alarm installed, and actually this Fire Alarm doesn't meet the necessary Health and Safety standards, he could get sued by the building manager. He could then claim on his Professional Indemnity Insurance.
An agreement in which an organisation is not accountable for any damages that occur during a contract is known as what?
This is a Hold Harmless Agreement and the definition is given on p. 26. A Waiver of Subrogation is a related term which stops an insurance firm claiming money back from someone in the contract - see p.26 for more info.
When drafting a liability clause in a contract, which of the following statements are TRUE? Select THREE
The correct answers are 1, 3 and 5: exclusions should be narrowly defined and clearly state which types of liabilities are excluded, liability is a legal responsibility and liability cannot be excluded for injury resulting from negligence. These are all explained on p. 22. Liability is never there to publish anyone (this is a red herring answer that CIPS like to put into different questions and it's usually the wrong answer - no one should look to publish anyone else). The option 'Liability can only be limited where there is valid insurance' is not true. A contract can state any limitations on liability so long as it's agreed by both parties, they're fair and don't contradict any laws. The thing about not being able to exclude liability regarding personal injury is a Law in the UK.
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