CIPS L4m3 Commercial Contracting · Free Practice Question Easy
Question 1
A procurement professional is drafting payment terms for a business contract. He wants to specify what will happen if the delivered products are defective. Which of the following should be included in the payment terms?
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A
Remedies for late payment
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B
Pay-less notice
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C
Retention clause
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D
Invoice preparation
Reveal correct answer
Correct answer: C
Explanation
Retention money is the payment for a service or product that is withheld pending the completion of some specified condition. For example, buyer may withhold the amount due until the supplier replace all defective goods.
Pay-less notice is the notice under a contract which states that the invoice will only be partially paid because of some issues such as supplier has to pay the damages.
Remedies for late payment are remedies that supplier may seek when a buyer pay it later than the stated payment terms. Normally, the buyer will be charged an interest rate.
Reference: CIPS study guide page 190-191
LO 3, AC 3.3
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