2025 L4M3: CIPS Commercial Contracting Latest Preparation

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CIPS L4M3 exam is a crucial milestone for procurement professionals who want to excel in the field of commercial contracting. L4M3 exam is designed to test the candidates’ knowledge and skills in drafting, negotiating and managing commercial contracts. It is a level 4 exam, which means that it is ideal for procurement professionals who have some experience in the field and are looking to advance their careers.

CIPS L4M3 Exam is an essential qualification for procurement professionals who want to enhance their knowledge and skills in commercial contracting. By passing the exam, candidates will be equipped with the tools they need to manage contracts effectively and mitigate risks, ensuring that their organization is getting the best value from its supplier relationships.

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2025 L4M3 Preparation - CIPS CIPS Commercial Contracting - Trustable Test L4M3 Assessment

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CIPS L4M3 exam is a challenging certification exam that requires candidates to have a thorough understanding of commercial contracting principles and practices. Successful completion of L4M3 exam demonstrates that an individual has the knowledge and skills to manage commercial contracts effectively, which is essential for any procurement professional. The CIPS L4M3 Certification is recognized globally, and those who obtain this certification are highly sought after by employers in the procurement industry.

CIPS Commercial Contracting Sample Questions (Q35-Q40):

NEW QUESTION # 35
A supermarket purchases a new batch of house cleaner from new supplier. The supermarket is concerned about possible damage that the house cleaner may cause to consumers' floor. What type of insurance must they cover?

A. Product liability insurance
B. Public liability insurance
C. Fire and explosion insurance
D. Professional indemnity insurance

Answer: A

Explanation:
Product Liability Insurance is a form of general liability insurance meant to protect a business from financial and legal consequences as a result of bodily injury or property damage due to the use of the business's sold goods or products. Situations that are typically covered by Product Liability Insurance may include:
- A customer harms herself because of the faulty packaging on one of your products
- A drapery set that a customer purchased from your business was highly flammable and caught on fire, eventually damaging her entire kitchen
- A customer with a severe allergy finds trace amounts of tree nuts in your homemade gourmet muffins
- A homemade house cleaner that you sell damaged one of your customer's entire hardwood floor
- A customer becomes sick with food poisoning after eating old shellfish at your restaurant, goes to the hospital, and incurs medical costs caused by your contaminated food products
- A customer's pet becomes ill from ingesting some lining in a pet toy product that you sell In the scenario above, the supermarket is purchasing and reselling house cleaner, which can be covered by product liability insurance.
Public liability insurance is a type of business insurance that covers the cost of claims made by the public that happen in connection with the business activities.
Professional indemnity (PI) insurance is a commercial policy designed to protect business owners, freelancers and the self-employed if clients claim a service is inadequate.
Reference: CIPS study guide page 150-153
LO 3, AC 3.2

NEW QUESTION # 36
What is the pricing method that incentivises the supplier to control their costs?

A. Target Costing
B. Penetration pricing
C. Cost-plus pricing
D. Skimming pricing

Answer: A

Explanation:
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: CIPS study guide page 185 LO 3, AC 3.3

NEW QUESTION # 37
In order to monitor supplier's performance, an organization decides to draft performance management frameworks. Which of the following are the components of a performance management framework? Select THREE that apply:

A. Force majeure
B. Indemnity
C. Targets
D. KPIs
E. Consequences
F. Justification

Answer: C,D,E

Explanation:
There are three key components of a performance management framework:
- Key performance indicators (KPIs) - What you are measuring
- Targets - the performance level to be achieved
- Consequences - what happens if the measures are not achieved and/or if they are exceeded Reference: CIPS study guide page 11-14 LO 1, AC 1.1

NEW QUESTION # 38
When a supplier signs an insurance policy with an insurance company, which of the following is transferred to insurance company?

A. Right
B. Contractual obligation
C. Risk
D. Legal responsibility

Answer: C

Explanation:
An insurance policy transfers a specific set of risks such as the fire and flood risk for a particular asset.
The legal liability does not transfer to the insurance company (known as insurer).
Reference: CIPS study guide page 150
LO 3, AC 3.2

NEW QUESTION # 39
John Powers is the managing director of ACC Trading Ltd, which provides components to the automotive industry. His company has been providing number plates to Elite Motors Ltd for many years. As John Powers and Peter Ellis, the MD of Elite, have been friends for a long time, there has never been a formal contract agreed between the companies. Following a downturn in the market, Elite Motors Ltd has now been placed in administration. ACC recently delivered 200 number plates but have not received payment. As the number plates have been fitted to some vehicles, the administrators are being very slow to return them. Which clause in a formal agreement would have helped John?

A. Liquidated Damages
B. Penalty Clause
C. Force Majeure
D. Retention of Title (Romalpa)

Answer: D

Explanation:
A Retention of Title clause allows the seller to retain ownership of goods until full payment is received. If included in a contract, this clause would have enabled ACC to claim ownership of the number plates and potentially recover them from Elite Motors Ltd, even in administration. It protects suppliers against buyer insolvency.
Reference:CIPS L4M3 Commercial Contracting Study Guide, Chapter 3, Section 3.2.1 - Retention of Title clauses.

NEW QUESTION # 40
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2025 L4M3: CIPS Commercial Contracting Latest Preparation

2025 L4M3 Preparation - CIPS CIPS Commercial Contracting - Trustable Test L4M3 Assessment

CIPS Commercial Contracting Sample Questions (Q35-Q40):

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