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CPSM Contract Management & Negotiation Flashcards

7 cards from real CPSM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 CPSM Contract Management & Negotiation flashcards as text

  1. Which contract type places the GREATEST cost risk on the contractor/supplier?

    Answer: Firm-fixed-price (FFP)

    Under a firm-fixed-price contract, the supplier bears all cost risk because the price does not adjust regardless of actual costs incurred.

  2. A buyer is negotiating with a sole-source supplier. Which strategy BEST improves the buyer's negotiating position?

    Answer: Threatening to develop an alternate source or bring production in-house

    Credibly threatening to develop competition or insource production shifts the balance of power by reducing the supplier's monopoly leverage.

  3. Under the parol evidence rule, extrinsic evidence of prior oral agreements is generally INADMISSIBLE to:

    Answer: Contradict or vary the terms of a fully integrated written contract

    The parol evidence rule bars use of prior oral or written negotiations to contradict or supplement an integrated written agreement, though exceptions exist for ambiguity, fraud, and conditions.

  4. A contract's indemnification clause states the supplier will hold the buyer harmless for 'any and all claims.' What risk should the buyer be aware of?

    Answer: The clause may not protect the buyer against its own negligence in some jurisdictions

    Many jurisdictions require explicit language to extend indemnification to the indemnitee's own negligence; vague 'any and all' clauses may not achieve this.

  5. When negotiating payment terms, a buyer negotiates Net 60 instead of the supplier's standard Net 30. What is the PRIMARY financial benefit to the buyer?

    Answer: Improved Days Payable Outstanding (DPO), conserving working capital longer

    Extended payment terms increase Days Payable Outstanding, allowing the buyer to retain cash longer and improve working capital and cash flow.

  6. A contract includes a 'limitation of liability' clause capping damages at the total contract value. Which type of damages would this clause MOST LIKELY be intended to exclude?

    Answer: Consequential damages such as lost profits

    Limitation of liability clauses are primarily designed to cap or exclude consequential damages, which can far exceed the contract value.

  7. In a multi-round negotiation, a buyer reveals its BATNA (Best Alternative to a Negotiated Agreement) to the supplier. What is the MOST LIKELY outcome?

    Answer: The buyer weakens its negotiating position by exposing its reservation point

    Disclosing your BATNA reveals your walk-away point, giving the supplier the ability to anchor offers just above it, weakening the buyer's position.