CPP Contract Negotiation & Management 2

Question 1

During contract negotiations, a supplier insists on including a 'most favored customer' clause. What does this clause typically guarantee the buyer?

Accepted Answer

The buyer will receive pricing no worse than the supplier's best price offered to any other customer

Answer

A most favored customer (MFC) clause guarantees the buyer will receive pricing at least as good as the best price the supplier offers to any other customer.

Question 2

Which contract type shifts the MOST financial risk to the supplier?

Accepted Answer

Firm fixed-price (FFP)

Answer

Under a firm fixed-price contract, the supplier bears all cost risk because the price is set regardless of actual costs incurred.

Question 3

A buyer discovers mid-contract that a supplier has subcontracted 40% of the work without prior approval, violating contract terms. The BEST immediate action is to:

Accepted Answer

Issue a cure notice requiring the supplier to remedy the breach within a specified period

Answer

A cure notice formally notifies the supplier of the breach and gives them an opportunity to correct it before escalating to termination.

Question 4

In contract law, what does the term 'consideration' refer to?

Accepted Answer

Something of value exchanged between parties that makes a contract legally binding

Answer

Consideration is a fundamental element of contract law — it is the exchange of something of value (money, goods, services, or a promise) that makes the agreement legally enforceable.

Question 5

A liquidated damages clause in a contract serves primarily to:

Accepted Answer

Pre-establish the compensation amount for specific contract breaches

Answer

Liquidated damages clauses pre-establish a specific dollar amount owed for certain breaches, avoiding disputes over actual damages when they are difficult to calculate.

(CPP) Certified Purchasing Professional Practice Test

(CPP) Certified Purchasing Professional Practice Test

CPP Contract Negotiation & Management 2