A warranty is a minor term of a contract. Is this TRUE?
The correct answer is 1. The statement is True so the answer needs to start with 'yes'. Therefore options 3 and 4 should be discounted. Option 2 is incorrect a warranty does NOT affect the prime benefit of the contract. See p. 126 for more details on Contractual Warranties and Conditions
Sam is a factory manager and has purchased a new fixed asset on a loan purchase agreement. There is a forbearance agreement between the Factory and the provider. What does this mean?
1 is the correct answer. This is a direct quote from p. 104 of the study guide.
GoGo Ltd has contracted Reny Manufacturing to produce a bespoke piece of equipment for them. It is an asset and costs a significant amount of money. A contract is drawn up which states that GoGo Ltd has the right to terminate the contract at any time for any reason. Halfway through production of the asset, GoGo Ltd calls Reny Manufacturing to cancel the order. Reny Manufacturing has incurred many costs already. Can GoGo Ltd cancel the order?
The correct answer is 3 - 'yes there is a termination clause in the contract'. In this scenario it would be immoral for GoGo Ltd to cancel, but it wouldn't be illegal. They have the right to use the clause that's been put into the contract. It's possible that Reny might sue for damages, but this doesn't prevent GoGo Ltd from cancelling the order (they might be okay with paying the damages). There is a very similar question to this in the exam. Termination clauses are discussed on p.134 - I recommend brushing up on this topic before the exam.
Which of these statements about Guarantees are TRUE? Select 2
'A Guarantee is a secondary obligation of a contract' and 'A guarantor's responsibility cannot be higher than the Principle' are the correct answers. Guarantees are explained on p.28. Be careful not to confuse this with Warranty. A promise to repair or replace an item within a defined period of time is the definition of a warranty. That was put in there to trick you. Sorry. Remember a Guaran-tee is to do something when the Principle of the contract fails to do it. It's most common in leasing agreements- if you're a young person, you'll often need a responsible adult / parent to sign the lease as your Guarantor. As a Guarantor, they promise to pay the rent if you're unable to. Legally they can't be asked to do any more than you are assigned to do in the contract. So if your rent is 500 a month, that's all they can be asked to pay if you don't pay it. The primary obligation is between you and the landlord. The secondary obligation is between the guarantor and you.
Which of the following will you put into box 1?
The correct answers are as follows:
The answer is avoid because they have postponed a meeting.
Which of the following will you put into box 6?
The correct answers are as follows:
This is mediation because 1) it's private and 2) there's a third party present
Which of the following will you put into box 1?
The correct answers are as follows:
This is an anticipatory breach as the breach hasn't happened yet- it's about what will happen to the future summer order.
Restitution damages are often calculated before contracts are signed and are clearly stated within a contract. Which of the following statements is not true?
'restitution damages cannot be mitigated by the actions of the innocent party' is the untrue state-ment out of these four. The general principle of Restitution Damages is that the innocent party is expected to be proactive in mitigating the consequences of any breach and should not allow costs to spiral out of control. See p. 124
What is the purpose of a limitation on liability clause?
A limitation of liability caps a company's exposure to risk. In SOME cases this may mean that the responsibility passes to the other party- but not always. For this reason option 2 is correct and 4 isn't. Option 1 is the definition of liquidated damages and 3 is just a made-up answer. See p.20 for more information on Liability
Which of the following statements are TRUE about negotiation? Select THREE
The correct answers are 1, 4 and 5. Negotiation does NOT involve a third party and the outcome is private / confidential. See p.63 for more information on negotiation
