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NEW QUESTION 44
Tutu Incorporated has a contract with a software company to provide their IT software. They want to ensure that the supplier pays compensation if there are any issues with service (e.g. the software doesn't work for a day). Which two items would Tutu Incorporated need to include in the contract?

  • A. service level agreement
  • B. insurance
  • C. service credit
  • D. letter of credit
  • E. unliquidated damages

Answer: A,C

Explanation:
They should include service credits and a service level agreement. Service Credits allow the buyer to claim back if the service drops below an agreed standard. That standard needs to be clearly out-lined in an SLA. See p.31 for more details

 

NEW QUESTION 45
Which of the following situations would be considered a minor breach of a contract? Select TWO:

  • A. A supplier delivers a lorry-load of produce six hours late due to a burst tyre.
  • B. a zoo orders three baby lions and is given three baby tigers
  • C. a consultant has given bad advice
  • D. a painter is contracted to paint a room white but paints it magnolia as there was no white paint available
  • E. a supplier has breached a non-disclosure agreement

Answer: D,E

Explanation:
The correct answers are: 1) the painter using magnolia instead of white, and 5) the supplier who was late on his delivery. These are considered minor breaches because the contract was still fulfilled and it didn't affect the contract in any significant way. In this type of question you have to use logic to deduce the right answer; 2) A consultant giving bad advice would be a major breach - it would be a huge issue, particularly if that advice led to an accident or death. Think about an Architect advising on a type of pillar, and it turns out that pillar can't support the weight of the building. That would be bad. 3) Lions and Tigers are not the same thing - so that would be a pretty fundamental mistake in a contract. 4) Breaching a non-disclosure agreement is usually considered a major breach of a contract (this is mentioned in chapter 2.1). See p. 48 for more information on minor breaches.

 

NEW QUESTION 46
Which of the following would constitute an offer? Select TWO:

  • A. a price proposal that is valid for 14 days
  • B. a display in a shop window
  • C. an auction
  • D. a bid on an auction
  • E. an advert on a website

Answer: A,D

Explanation:
Offers include bids on an auction and a price proposal that is valid for 14 days. The other three options are Invitations to Treat. See p.3 for the full list of what constitutes an Invitation to Treat. The tricky thing here is that an auction is an invitation to treat but a bid on an auction is an offer. An auction is an ITT because you're encouraging people to make an offer to you. A bid on the auction is the offer (you offer to buy something at a price you propose).

 

NEW QUESTION 47
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?

  • A. claim on insurance
  • B. subcontract the manufacturing of the flipflops to a third party
  • C. nothing- there is no written contract in place
  • D. sue for damages as the flip flops have already been made and this incurred costs

Answer: D

Explanation:
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.

 

NEW QUESTION 48
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