CCNP Risk Allocation 2

Question 1

A contractor proposes a 'shared savings' clause where cost underruns are split 50/50 with the owner. This arrangement primarily shifts which type of risk?

Accepted Answer

Cost overrun risk to the contractor

Answer

Shared savings arrangements incentivize the contractor to control costs, effectively shifting cost overrun risk to the contractor who bears the consequences of inefficiency.

Question 2

Under a Fixed-Price Incentive Firm (FPIF) contract, the 'point of total assumption' (PTA) represents:

Accepted Answer

The cost level above which the contractor bears 100% of additional costs

Answer

The PTA is the cost level beyond which the contractor absorbs all additional costs because the price is capped at the ceiling price.

Question 3

Which indemnification clause structure best protects a service provider against claims arising from a client's pre-existing IP infringement?

Accepted Answer

Mutual indemnification with carve-outs for pre-existing conditions

Answer

Mutual indemnification with carve-outs for pre-existing conditions ensures each party bears responsibility for risks within their own control.

Question 4

A force majeure clause that lists 'pandemics' explicitly as a covered event differs from a general catch-all force majeure provision primarily because:

Accepted Answer

Specific listings create certainty but may exclude unlisted extraordinary events

Answer

Specific enumeration of events provides contractual certainty and ease of invocation but may leave gaps for unenumerated extraordinary events.

Question 5

In construction contracts, a 'differing site conditions' clause primarily allocates what risk from the contractor to the owner?

Accepted Answer

Subsurface or latent physical conditions differing from contract representations

Answer

Differing site conditions clauses transfer the risk of unforeseen subsurface or hidden physical conditions to the owner, who has superior knowledge of site history.

(CCNP) Certified Contract Negotiation Professional Practice Test

(CCNP) Certified Contract Negotiation Professional Practice Test

CCNP Risk Allocation 2