CIPS Exam L4M3 Topic 5 Question 32 Discussion

Actual exam question for CIPS's L4M3 exam

Question #: 32
Topic #: 5

[All L4M3 Questions]

Cleveland Insurance (Cleveland) offers a range of insurance services. The main software used in the call centre is a customer relationship management (CRM) system. Cleveland perceived an urgent need to replace the existing CRM system to deal with the increasing number of customers and services.

Urgent Digital Ltd (Digital) is one of the bidders of Cleveland's ITT for designing, building and managing the new CRM system. Its bid team is led by Hank Irvine, its technical director. Hank realises that winning the Cleveland contract (valued at approximately 50M) will enhance his career. During discussions with Cleveland, Hank offers certain assurances regarding timescales for the project. He has not carried out any investigations into the viability of the timescales. Hank has little idea whether the timescales can be met.

Cleveland decides that Digital's bid meets with its requirements, especially given the assurances in timescale offered by Hank, and decides to proceed with it, subject to a formal contract. Eventually, a formal contract is signed by both parties. The initial assurances given by Hank about the timing of the project are never going to be achieved and are at best grossly exaggerated.

Cleveland brought the case to the court and sought rescission of contract with Digital. Is Cleveland's claim appropriate in this case?

AYes, because Cleveland needs to seek rescission first before claiming for damages

BYes, because both parties agreed with rescission of their contract

CNo, because the work had been carried out which could not be returned

DNo, because the contract does not include any provision on rescission

Show Suggested Answer

Suggested Answer: A

When a party takes on a contractual obligation, they are legally required to perform the obligation.

That same contracting party is still entitled to subcontract out the work to another service provider, unless the contract:

- is a contract for personal services, such an employment contract

- contains an express term preventing subcontracting out the work, or an implied term

Subcontracting clauses are written to control whether the contractor is entitled to subcontract, and how purchaser shall control that subcontracting process.

- Subcontracting clauses (delegation of contractual obligations to third parties)

- CIPS study guide page 153-157

LO 3, AC 3.2

by Beth at Apr 20, 2024, 09:52 PM

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Lenora

2 days ago

I agree with the first candidate. If the assurances were false, then Cleveland should be able to rescind the contract. Can't blame them for wanting to get out of this deal.

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Theola

15 days ago

Haha, Hank really seems to have pulled a fast one on Cleveland. Exaggerating timescales to win the contract? That's a bold move, cotton.

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27 days ago

I think Cleveland's claim is appropriate in this case.

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