Q1 - CIPS

INFORMATION FOR CANDIDATES

The senior assessor’s report is written in order to provide candidates with feedback relating to the examination. It is designed as a tool for candidates - both those who have sat the examination and those who wish to use as part of their revision for future examinations.

Candidates are advised to refer to the Examination Techniques Guide (see the following link: http://www.cips.org/en-GB/Qualifications/study-support/ ) as well as this senior assessor’s report.

The senior assessor’s report aims to provide the following information:

An indication of how to approach the examination question

An indication of the points the answer should include

An indication of candidate performance for the examination question

Each question has a syllabus reference which highlights the learning objectives of the syllabus unit content that the question is testing. The unit content guides are available to download at the following link: http://www.cips.org/Qualifications/About-CIPS-Qualifications/cipsqualifications/

ADDITIONAL SOURCES OF INFORMATION

The Supply Management magazine is a useful source of information and candidates are advised to include it in their reading during their study. Please see the following link to the

Supply Management website: http://www.supplymanagement.com/

L6-10/SA report/November 12 series 2

SECTION A

Q1 Assess whether a contract exists between Mist and Shade.

Analysis of the Question

(25 marks)

This question was to test the candidate’s knowledge of formation of a contract and apply their knowledge to the scenario presented.

The question required the candidates to identify the requirements to form a contract with the main emphasis being on offer and acceptance.

Planning the answer

The case study was challenging and different evaluations would receive credit providing they were legally sound. The main areas to be explained included all elements of formation of a contract rather than the Battle of the forms scenario. Explanations should include invitations to treat, offers, counter-offers and whether a contract has been formed all with reference to underpinning relevant case law.

Analysis of the answer

Answers should identify the requirements to form a contract with the main emphasis being on offer and acceptance. The case study is difficult and different evaluations should receive credit providing they are legally sound.

Candidates might mention invitations to treat but difficult to see where this might be. The first email might be construed as such but a detailed quotation is an offer ( Butler Machine

Tool) , be it a conditional offer. Some candidates might suggest this is the case and therefore conclude a counter-offer took place on 5 th

January. However the offer may have lapsed through time ( Ramsgate Hotel V Montefiore ) and is no longer open. This would make the 5 th

January email an offer. Answers might support counter-offers with recognised cases e.g. Hyde V Wrench. Both approaches should receive credit

Either way an offer has been made. The immediate response might be viewed as conditional acceptance and therefore no acceptance. Candidates should explain that acceptance should not only be communicated but should be unequivocal and unconditional. . Legal acceptance may have taken place on 9 th

January through the subsequent email.

However there should be some discussion of the reference to a formal contract and to gain high marks, this needs to be addressed. This is a difficult legal point. Some candidates might argue the signature on the formal contract is required for a contract to exist, other might argue the formal contract is mere confirmation of what has already been agreed.

Either approach is acceptable. Case law suggests the courts would probably conclude the formal contract is mere confirmation in this case and therefore a contract does exist on 9 th

January.

This question relates to contract formation rather than the Battle of the forms. An answer that focuses on the Battle of the Forms is not an appropriate response for this question since only one party had standard terms.


15 marks for explaining and applying the rules applicable to contract formation (offers, invitations to treat, lapse of time, counter-offer, unconditional acceptance) and 10 marks for discussion of alternative conclusions and the more difficult issue of the reference to a formal contract.

Exam Question Summary

On the whole this question was answered fairly well but for some across the centres it proved challenging. Such candidates failed to explain all elements of contract formation with some only providing bullet points on the elements with little further explanation. They also failed to identify the relevant case law. Those who did identify the underpinning case law of

Butler and recognised Hyde V Wrench answers were good. Few candidates identified the

Ramsgate case relating to lapse of time.

It did not necessarily appear to be obvious from lack of detailed information that the poorer candidates had not studied the topic but more that they were unable to identify that the question required answers to provide detail on formation of contract and the relevant cases.

There is still an inability by some candidates to apply their knowledge it to the case scenario.

Q2 (a) Assess how the courts might approach Shade’s compensation claim.

(15 marks)


The question required the candidates to recognise the rules set out by Hadley V Baxendale case; to test the candidate’s knowledge of contractual damages and knowledge of limitations on claiming damages and to apply their knowledge to the scenario presented.


The main content of the answer should include identifying the Hadley V Baxendale case and the rules set out by this case but also applying these rules in a relevant, appropriate manner using further case law such as Victoria Laundry.


Reference to the contract and any liquidated damages clause it may contain. Discussion should be kept to a minimum since the case study does not suggest this. Other answers might suggest there is no contract so Shade will be restricted to a quantum meruit claim.

( 3 marks )

The main content of the answer should include the Hadley V Baxendale case and rules i.e. a claim can only be made based on what arises naturally from the breach (direct losses) or those losses that could have been contemplated by the parties when they agreed the contract. (indirect or consequential losses) ( 5 marks )

Applying these rules, the storage charge is direct loss and could be claimed but this is likely to be for four months rather than six because of the effect of the counter-offer. The negotiating costs are not recoverable since they are not legally part of the contract costs and would probably be already built into the cost of storage. Losses from a potential lucrative contract would probably not be recoverable ( Victoria Laundry case). Exceptional answers


will also refer to the obligation on Shade to mitigate its loss by trying to find an alternative customer ( Brace V Calder ). ( 7 marks)



There were some good answers across centres with those candidates identifying the relevant cases such as Hadley and Victoria therefore being able to provide relevant appropriate answers. However there were quite a number of candidates across centres who did not recognise the topic of this question and answered by repeating the wording in the case study of the three areas being claimed. Other poor answers were because candidates provided irrelevant information on dispute resolution methods such as arbitration and litigation indicating a lack of understanding of the question or lack of knowledge of the topic.

Once again candidates do find case study questions challenging and did not apply their knowledge to the scenario presented.

Q2 (b) Applying the law of agency, assess whether Mist has a valid legal claim against the oil agent.


(10 marks)

This question was to test the candidate’s knowledge of agency law and their knowledge of an agent’s duties to his principal and too apply that knowledge to the scenario presented.

It required candidates to explain the duties of an agent towards his principal.


The candidates required to apply their knowledge of the law of agency to the scenario presented. Relevant answers should concentrate on the duties of an agent to his principal.


The principal – agent relationship is based on trust which places a number of duties of the agent An explanation of the duties owed by agents to the principal would be appropriate.

These duties include exercising reasonable care and skill, to act in good faith, to respect confidentiality, to avoid conflicts of interest. Strong candidate might also refer to the duties to keep proper accounts, not to delegate any duties and not to make a secret profit.

Stronger answers will refer to supporting case law to demonstrate these duties. Examples of relevant case law might include the Anton Pillar case or Boston Deep Sea Fishing V

Ansell.

The agent has failed to act in good faith, acted in his own interest and made a secret profit.

Mist could sue for recovery of the commissions paid, sue for breach of duty and terminate the contract with the agent.

Exceptional answers might discuss that Mist was an undisclosed principal which would allow Mist to take over the contract providing it was subject to English law.


This question proved challenging for quite a number of candidates across centres. It appeared that the reason for this was a lack of knowledge of the topic and thereby being unable to answer in-depth. Indeed some candidates didn’t attempt the question. Those who did not achieve good marks failed to focus on agent’s duties and provide some information, albeit vague, on the principal’s duties.

Those candidates who had studied the law of agency provided relevant in-depth answers with some referring to relevant case law.


This is an area which is included in the syllabus and should be studied but it seemed that candidates did not expect this topic to be included in a Section A question.

Candidates do find case study questions challenging. Candidates should not be selective in their studies and should be prepared for any topic included in the syllabus to be questioned within the case study of Section A as well as a topic of Section B.

It is good practice to undertake answering a selection of case study type questions from past examination papers which would mean that candidates may be able to provide relevant indepth appropriate answers. Candidates must remember that case study questions do not always raise the same topic and it is important to read the case study and identify the relevant issues in the scenario.

SECTION B

Q3 (a) Outline the main statutory provisions that may apply if a purchaser is in receipt of:

(a) Defective or inaccurately described goods.

(b) An overcharged, delayed or poor quality service.


(15 marks)

(10 marks)

This question was to test the candidate’s knowledge of the implied terms in Sale of Goods

Act 1979 (as amended) and the implied terms in the Supply of Goods and Services Act

1982.


The candidates were required to outline the provisions of the Sale of Goods Act 1979 in part (a) and the provisions of the Sale of Goods and Services Act 1982 in part (b).

Candidates should identify the relevant sections of each Act and outline each appropriately.


An answer which suggests looking at the contract provisions goes some way to address the question and will receive some credit. An answer which suggests expressed terms may exclude or overrule statutory terms (subject to UCTA) should receive some credit. (

3 marks)

The bulk of the answer is likely to concentrate on S13, S14 (2) and S14 (3) of the Sale

of Goods Act 1979 (as amended). Each section needs to be explained fully with good answers using supporting case law. This should include definitions of satisfactory quality and the factors that help determine satisfactory quality, including for example, freedom from minor defects, durability etc. Strong answers will explain what a sale ‘in the course of a business’ means. 3 marks each for S13, S14 (3), 6 marks for S14 (2).

(12 marks)


(b) The second part of the question concerns defective services. Answers might again suggest the first place to look for a solution is the contract itself in terms of any price agreed, delivery dates or level of service. Good answers might mention a possible price variation provision. (4 marks)

The bulk of the answer should refer to part two of the Supply of Goods and Services

Act 1982. S13 (reasonable care and skill) S14 (service must be carried out in a reasonable time) and S15 (at a reasonable price). Some case law required for maximum marks . (6 marks)


This question was popular across all centres and overall was answered well by most candidates.

Some candidates did not identify the relevant sections of the Acts but still managed to provide relevant information on the content of the sections for which they were given credit.

This topic is covered in the syllabus and previous examination papers so it is one that should be studied and understood by all candidates. Very good candidates identified and addressed the relevant sections and that expressed terms may exclude or overrule statutory terms even referring to the UCTA.

Q4 (a) Explain the collateral legal obligations that arise from a tendering process


(10 marks)

This question was to test the candidate’s knowledge of collateral tendering obligations.


The question required the candidates to explain the collateral obligations in the tendering process and include supporting relevant case law.


(a) The collateral obligations such as the duty to consider all complaint tenders, equal and timely access to information, equal treatment, good faith, obligation to keep the bid

open if requested. ( 6 marks)

Supporting case law like Blackpool Aero Club V Blackpool Borough Council and R V

National Lottery Commission ex parte Camelot would enhance an answer. ( 4 marks)


This was a popular question in some centres but not in others.

Where candidates did choose this question good answers were provided for part (a) showing a good knowledge of the topic area with most identifying the relevant case law.


Q4 (b) Assess the meaning of the following on the context of competition law:

(i) Concerted practice

(ii) Abuse of a dominant market position

(iii) Enforcement powers of the Office of Fair Trading


(5 marks)

(5 marks)

(5 marks)

This question was to test the candidate’s knowledge of UK and EU competition law.


The question required the candidates to assess each of the areas required with reference to relevant part of the law with supporting case law.


(b) (i) Concerted practice – This term is used in Article 81 and Chapter One of

Competition Act. This is action(s) that fall short of an agreement. It is an informal understanding between competing undertakings, where they have knowingly substituted practical co-operation for the risk of competition.

Evidence is usually gained from observing the behaviour of the undertaking in the market place. Case law such as ICI V Commission would enhance an answer. (5 marks)

(b) (ii) Abuse of a dominant market position – Reference should be made to either

Article 82 EC Treaty or Chapter Two of the Competition Act 1998. It is defined as a position of economic strength, which gives it the power to behave to an appreciable extent independently of its competitors, customers and ultimately its consumers. Candidates may provide examples of abuse. (5 marks)

(b) (iii) Enforcement powers of the Office of Fair Trading – The OFT has the power to order production of documents. It can carry out dawn raids with or without a warrant which allow it to search both manual and computer files. It is a criminal offence to obstruct investigating officers or to destroy or conceal documents. The OFT can fine 10% of worldwide turnover for a maximum of three years. (5 marks)


Question 4 was quite a popular question but it seemed more because of part (a) than part

(b).

Candidates do seem to think that choosing a question divided into smaller sections will be easier to answer whether they have knowledge or not. This becomes apparent with lack of relevant information in each of the areas of question 4 (b).

Those candidates who had studied UK and EU competition law provided appropriate answers by referring to the relevant Articles and case law. However those who achieved poorer marks showed a lack of knowledge of the topic and provided answers that were either vague or merely referred generally to competition law.

Q5 (a) The doctrine of privity of contract means a purchaser cannot normally sue a third party such as a subcontractor. Assess the circumstances when the law will allow a purchaser to sue a third party, either in contract or negligence and the limitations the law places on such rights to sue.

(20 marks)



This question was to test the candidate’s knowledge of privity of contract and apply their knowledge to the scenario presented; and to test their knowledge of the methods of circumventing the privity of contract doctrine.


The candidates were required to define privity of contract and explain in detail while applying their knowledge to the scenario presented.


Privity of contract should be defined and explained. One way of circumventing the privity rule is through a collateral contract, which should be explained. Supporting case law such as Shanklin Pier V Detel V would gain credit. Full marks should only be awarded if candidates explain the need for strong representations to be made.

(6 marks)

Another method is through negligence. The elements of negligence should be explained. e.g. duty of care is owed, breach of duty, resultant damage. The facts and principles (e.g. neighbour test) of Donoghue V Stevenson should be explained fully. An exceptional answer might refer to the limitations on negligence claims where the loss is purely financial as demonstrated in cases such as Simaan V Pilkington Glass .

(9 marks)

Strong candidates might explain other methods such as expressed collateral warranties, agency arrangements and indemnity clauses. (5 marks)


This was not a popular question in some centres but popular in others. Some candidates provided excellent answers showing a good knowledge of privity of contract and identifying the relevant case law.

However there were a few candidates who despite choosing the question showed a lack of knowledge of privity of contract and failing to identify the relevant underpinning case law.

Once again being a mini case study some candidates found it challenging to apply their knowledge to the scenario. However credit was given to appropriate relevant information on privity.

Q5 (b) Briefly outline the reforms made to privity of contract by the

Contract (Rights of Third parties) Act 1999.


(5 marks)

This question was to test the candidate’s knowledge of the 1999 Act whereby a third party can enforce a contract.


The candidates are required to outline the provisions of the 1999 Act.



The Act makes it possible for a third party to enforce a contract. A brief outline is required which should refer to where the third party is expressly named in the contract or where the contract was designed to confer some benefit on the third party. (5 marks)


Part (b) for many candidates was not answered as well as part (a) of this question. Those who did achieved good marks referred to the appropriate requirements of the 1999 Act namely third party being expressly named in the contract or conferring benefit on the third party.

Candidates should ensure that when they choose a question they have appropriate knowledge of the topic to answer all parts of the question. Fortunately part (a) was answered well and therefore candidates were not let down by not answering part (b) with the appropriate relevant information.

Q6 (a) Assess the different types of clauses that a supplier would wish to include in a contract to protect itself against:

(a) Non payment for goods supplied

(b) Its own failure to perform the contract


(10 marks)

(15 marks)

This question was to test the candidate’s knowledge of retention of title clauses and the specific types of contractual clauses.


The candidates are required to assess the different types of clauses particularly retention of title clauses and their legal validity with supporting relevant case law and for part (b) force majeure clauses as well as exclusion and limitation clauses.


For part (a) Reference to retention of title clauses and their legal validity. Answers might discuss the purpose of such clauses and refer to the Romalpa case. Stronger answers will provide the facts of the case and possibly explain S17 and S19 Sale of Goods Act which supports the use of such clauses. Exceptional answers are likely to discuss the limitations of such clauses especially when the goods become mixed and lose their identity. Also if the goods are perishable, there is less value is having a Romalpatype clause since the goods become impossible to recover. Supporting case law such as Borden V Scottish Timber Re:

Peachdart

(10 marks) or other suitable cases should receive credit.

For part (b) a number of clauses could be discussed here and most should be fully discussed to attain high marks. Such clauses to be discussed include exclusion or limitation clauses as well as those referring to Force Majeure clauses. Answers are likely to refer to

Force Majeure clauses. These would be a good choice but the limitations should be discussed including fully coverage of the actual events anticipated, the contra proferentum


rule and the restrictions laid down by the Unfair Contract Terms Act 1977. (the reasonableness test). (12 marks)

Answers might also suggest the use of indemnity clauses or limited warranties. (3 marks)


This was a popular question in some centres but not in others. This is a topic that is within the syllabus and should be studied. However candidates who did not achieve good marks were let down by part (a) by failing to identify the retention of title clause and the Romalpa case merely providing information on ‘any’ clauses which might be included in a contract or focusing on how contracts can be terminated. Part (b) was answered slightly better with candidates referring to exclusion clauses but some failing to mention the UCTA 1977.

It seemed that candidates who did not achieve good marks had not fully read or understood the question particularly for part (b) namely the meaning of ‘its own’ that is - the supplier protecting themselves if they fail to perform the contract.


APPENDIX:

Syllabus matrix indicating the learning objectives of the syllabus unit content that each question is testing

L6-10 LEGAL ASPECTS IN PURCHASING AND SUPPLY

SYLLABUS MATRIX

Nov-12

Paper Ref MIST Author

Instructions: Complete a matrix grid for each question paper by inserting marks value against the appropriate learning objective for each part of the question. For example, if question 1 part (a) is worth 5 marks and corresponds to learning objective 1.3, place 5 in the appropriate box. Each question total should be 25 marks, as calculated by the row at the foot of this page. Please submit to CIPS electronically as a MS Excel document with the question paper and marking scheme.

Question No.

Learning

Objective

1

1.1

1.2

1.3

1.4

1.5

2

2.1

2.5

3

3.1

3.2

2.2

2.3

2.4

3.3

3.4

3.5

4

4.1

4.2

Total marks allocated to question a

1 b

Contract law x

SECTION A c a x x

Specific UK and EU Regulations affecting the purchasing funtion x

Intellectual property rights

0

2 b

0 c a

3 b

0 c a

4 b x

0

SECTION B c a

Sale and supply of goods and services, including third party rights and obligations x x x

5 b

0 c a

6 b c

Marks distribution by section x x

0 x x x


Q1 - CIPS

3 marks)

(12 marks)

L6-10 LEGAL ASPECTS IN PURCHASING AND SUPPLY

SYLLABUS MATRIX

Nov-12

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Q1 - CIPS

3 marks)

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SYLLABUS MATRIX

Nov-12

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