L5M3 Questions and Answers

Explanation

No - There is no consideration. For a document to be considered a contract there must be consideration. This means something of value must be exchanged. In this example John gives Larry something but Larry doesn't give John anything. Therefore there is no consideration and this is not a contract. See p.12

Explanation

Exporters prefer advance payment - this puts the risk with the importer / buyer. There's a table of these four terms on p.36. An importer would prefer an open account arrangements. The other two options are in the middle and the risk is more equally split between the two parties.

Explanation

The correct answers are as follows:

This is a contract variation as they are changing the number of staff and their hours

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

Explanation

Intention, Consideration and Capacity are the correct answers. A contract must contain 5 elements to be legally binding. As well as these three, the other two factors are offer and acceptance. P.2 of the study guide.

Explanation

The correct answers are as follows:

Table Description automatically generated

This is a condition as it is fundamental to the contract.

Explanation

The correct answers are as follows:

Table Description automatically generated

This is mediation - there's a third party with no powers. The answer can't be negotiation as negotiation doesn't have a third party. The answer can't be litigation or arbitration as the third party here does have decision making power.

Explanation

The correct answers are as follows:

Table Description automatically generated

This is consequential loss. Brian Air is going to lose the profits from the sales of the flights it had sold. Now those flights won't go ahead Brian Air can claim for consequential loss which would help balance the books.

Explanation

This is #4. This exact definition is given on p.116 under the section 'Giving Notice'

Explanation

The correct answers are as follows:

Table Description automatically generated

This is consequential loss. Brian Air is going to lose the profits from the sales of the flights it had sold. Now those flights won't go ahead Brian Air can claim for consequential loss which would help balance the books.

Explanation

The correct answers are as follows:

Table Description automatically generated

This is payment terms. The scenario mentions processing invoices, which is to do with paying the supplier

Explanation

A Time is of the Essence Clause should be included. This stresses the importance of obligations being completed on time, with any delays (e.g. in delivery of ingredients) being treated as a breach of a condition. The other three options are probably important to have in a contract, but don't relate specifically to this example. See p.45 for more information on Time is of the Essence Clauses

Explanation

Litigation is the correct answer. This is not a way in which a contract can end- it is a conflict resolution method. The three ways in which a contract can end are; performance, agreement and breach. See p. 42 for more details on how contracts end