Quiz CIPS Commercial Contracting

FIDIC is the International Federation of Consulting Engineers (or FØdØration Internationale des
IngØnieurs Conseils in French). FIDIC has produced many publications, including the model form
contracts, best practice guidances, research on sustainability, integrity and risk management. FIDIC
model form contracts have been developed by this organisation since 1999, now they consist of
several different books which are marked by colours. Thus, FIDIC model contracts also have the
nickname "Rainbow suite of contracts". Basically, the "Rainbow Suite" include the following books:
* Yellow book: Plant and Design-Build Contract (2 editions: 1999 and 2017)
* Silver book: EPC/Turnkey Contract (2 editions: 1999 and 2017)
* Red book: Construction Contracts (2 editions: 1999 and 2017)
* Emerald book: Conditions of Contract for Underground Works (1st Ed 2019)
* Blue-Green book: Dredgers Contract (2 editions: 2006 and 2016)
* Gold book: Design, Build and Operate Contract Guide
* Pink book: Construction Contract Multilateral Development Bank Harmonised Ed (2 editions: 2005
and 2010)
This type of model contract is commonly used around the world because its author, International
Federation of Consulting Engineers, collaborates closely with development banks such as World
Bank, Africa Development Bank, Asia Development Bank, etc. Every construction project that is
financed by these institutions must adopt the FIDIC contracts.
The Joint Contracts Tribunal, also known as the JCT, produces standard forms of contract for
construction, guidance notes and other standard documentation for use in the construction industry
in the United Kingdom. From its establishment in 1931, JCT has expanded the number of
contributing organisations.
ITC (International Trade Centre) produces contracts specifically designed for small companies doing
international business, covering the sale of goods, distribution, services and joint ventures. Many
small companies are now engaged in international trade, but don’t have access to the necessary
contract forms to protect themselves. ITC and leading legal experts developed eight generic contract
templates that incorporate internationally recognized standards and laws for most small business
situations.
CIPS has several model forms of contract designed specifically for IT buying and servicing.
Reference: CIPS study guide page 142
LO 3, AC 3.1

There are two main types of specification: performance specification and conformance specification
(sometimes called prescriptive or technical specifications).
Performance specifications have following features:
- Focus on outputs
- Set out result to be achieved
- The 'what', not the 'how'
- Give supplier flexibility to present solutions that the buyer may not have considered
Reference: CIPS study guide page 8-10
LO 1, AC 1.1

Service level agreement often sets out the minimum quality standards of the services provided,
remedies if that standards are not met, consequences if the targets are exceeded. Penalty clauses
and service credits are remedies that are often used in conjunction with service level agreement to
ensure the performance and to compensate the purchaser if targets are not met.
Reference: CIPS study guide page 110
LO 2, AC 2.2

Implementation is a substantive requirement which covers the following areas:
- Will there be a need to train the staff to use the equipment?
- Are there integration requirements with other systems or processes?
- How will this work?
- What are the timescales?
- Are detailed method statements required?
Consultation requirements regards to explicitness of compliance with any national or local legal
requirements
Reference: CIPS study guide page 90-92
LO 2, AC 2.1

In common law (the legal system in which most rules come from case law or precedents, such as UK,
US, Australia, etc), the contract is legally binding if it has the following requirements:
- Offer
- Acceptance
- Certainty & Intention to Create Legal Relations
- Consideration & Promissory Estoppel
- Legal capacity
According to these rules, 'Blanket order', 'One-off purchase', and 'Hire purchase agreement' are
contractually binding. One of the reason is that they have consideration.
However, there is a type of legal instruments that does not need consideration to be legally binding.
They are called 'Deeds'. A deed (anciently "an evidence") is any legal instrument in writing which
passes, affirms or confirms an interest, right, or property and that is signed, attested, delivered, and
in some jurisdictions, sealed. It is commonly associated with transferring (conveyancing) title to
property. At common law, to be valid and enforceable, a deed must meet several requirements:
- It must state on its face that it is a deed, using wording like "This Deed..." or "executed as a deed".
- It must indicate that the instrument itself conveys some privilege or thing to someone.
- The grantor must have the legal ability to grant the thing or privilege, and the grantee must have
the legal capacity to receive it.
- It must be executed by the grantor in presence of the prescribed number of witnesses, known as
instrumentary witnesses (this is known as being in solemn form).
- In some jurisdictions, a seal must be affixed to it. Originally, affixing seals made persons parties to
the deed and signatures optional, but seals are now outdated in most jurisdictions, so the signatures
of the grantor and witnesses are primary.
- It must be delivered to (delivery) and, in some jurisdictions, accepted by the grantee (acceptance).
Reference:
- Deed - Wikipedia
- Formation of the contract
- CIPS study guide page 40
LO 1, AC 1.2

If a service level agreement is used as a schedule to a contract, it will generally have the following
contents:
- Service definitions. If the service information is provided by the specification, SLA should only refer
to the specification to avoid any inconsistencies.
- Details on how to measure KPIs, who will measure KPIs
- Minimum requirements or targets
- Remedies if the minimum requirements are not met
...
Since SLA often lists out the KPI targets, consequences for not meeting the KPI targets and remedies
to situation of poor performance, it is a part of performance management.
Reference: CIPS study guide page 110-116
LO 2, AC 2.2

According to the scenario, customers' demand changes regularly but the construction project
commencement often delays. If the contractor and the customer mutually sign a legally binding
contract too soon long before the commencement, the contractor may suffer poor cash flow (it must
buy the materials first but has to wait for long time to be paid). A framework agreement may help
both parties.
A framework agreement is a formal agreement between two organisations that is intended to
become legally binding in the event that a contract is created.
A framework agreement could benefit the both parties in the following ways:
- At the time of signing, the framework agreement has not yet become a legally binding contract. The
contractor and client only agree on the principles of future contracts (such as whether the work can
be subcontracted or how payment will be proceeded). A well structured framework agreement will
allow both parties to apply changes before contract commencement, especially regarding price and
quality.
- The framework agreement assures a certainty between the contractor and client.
- The administrative works is reduced under a framework agreement.
Reference:
- CIPS study guide page 60-62
- Framework Agreements: Practice and Pitfalls
LO 1, AC 1.3

A quotation and a tender are both firm offers which have legal standing to the offeror. Tenders are
more detailed than quotations and will include quality aspects as well as prices.
LO 1, AC 1.1 & AC 1.2

Quantum meruit means "the amount he deserves" or "as much as he has earned". In most cases it
denotes a claim for a reasonable sum in respect of services or goods supplied to the defendant.
An action in quantum meruit is available to recover money for services or goods supplied to a
defendant in circumstances where the claimant is not recompensed by performing his obligations or
supplying the goods. The claimant must usually show that the defendant expressly or impliedly
requested or freely accepted the services or goods in question. Depending on the facts, the claimant
might find it difficult to prove how much the claimant is entitled to receive under the principle of
quantum meruit.
A claim for quantum meruit cannot arise if the parties have a contract to pay an agreed sum. In such
circumstances, the parties' relationship is governed by the law of contract. However, a claim for
quantum meruit may arise where the parties:
- Have not agreed a contract, or there is a so-called quasi-contract. For example, the parties may
have agreed some of the contractual terms, but may have failed to reach an agreement on an
essential term, such as price.
- Have not fixed a price for the services or goods supplied.
- Have an agreement to pay a reasonable sum for the services or goods supplied.
- Have agreed a scope of work under the original contract and the work carried out falls outside that
scope.
Reference: Quantum meruit
LO 3, AC 3.1

According to CIPS, there are two main types of specification:
- Conformance specification – is more output driven as it outlines the product details exactly which
may include the material, dimensions, tolerances, source, ingredients, packaging, storage of the part
or material.
- Performance specification – is more output driven in terms of what the part or material must
achieve.
Among the four options, only 2. 'Description of the operating environments' and 3. 'Chemical
formulae' are possible components of a conformance specification. Brand names can be a part of a
performance specification, according to a document published by CIPS and NIGP.

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Reference:
- CIPS study guide page 8-10
- Knowledge Byte - Specification Development
- Principles and Practices of Public Procurement: Specifications
LO 1, AC 1.1