A supermarket purchases a new batch of house cleaner from new supplier. The supermarket is concerned about possible damage that the house cleaner may cause to consumers' floor. What type of insurance must they cover?
Correct Answer: B
Product Liability Insurance is a form of general liability insurance meant to protect a business from financial and legal consequences as a result of bodily injury or property damage due to the use of the business's sold goods or products. Situations that are typically covered by Product Liability Insurance may include: - A customer harms herself because of the faulty packaging on one of your products - A drapery set that a customer purchased from your business was highly flammable and caught on fire, eventually damaging her entire kitchen - A customer with a severe allergy finds trace amounts of tree nuts in your homemade gourmet muffins - A homemade house cleaner that you sell damaged one of your customer's entire hardwood floor - A customer becomes sick with food poisoning after eating old shellfish at your restaurant, goes to the hospital, and incurs medical costs caused by your contaminated food products - A customer's pet becomes ill from ingesting some lining in a pet toy product that you sell In the scenario above, the supermarket is purchasing and reselling house cleaner, which can be covered by product liability insurance. Public liability insurance is a type of business insurance that covers the cost of claims made by the public that happen in connection with the business activities. Professional indemnity (PI) insurance is a commercial policy designed to protect business owners, freelancers and the self-employed if clients claim a service is inadequate. Reference: LO 3, AC 3.2
L4M3 Exam Question 37
Which of the following is set down in statute as a liability that exists without any need to prove fault?
Correct Answer: A
- Strict liability, sometimes called absolute liability, is the legal responsibility for damages, or injury, even if the person found strictly liable was not at fault or negligent. Strict liability has been applied to certain activities in tort, such as holding an employer absolutely liable for the torts of her employees, but today it is most commonly associated with defectively manufactured products. In addition, for reasons of public policy, certain activities may be conducted only if the person conducting them is willing to insure others against the harm that results from the risks the activities create. - Current liabilities are a company's short-term financial obligations that are due within one year or within a normal operating cycle. - Non-current liabilities, also called long-term liabilities or long-term debts, are long-term financial obligations listed on a company's balance sheet - Contingent liability is a potential liability that may occur, depending on the outcome of an uncertain future event. Reference: LO 3, AC 3.2
L4M3 Exam Question 38
A purchase order can become a contract between supplier and purchaser if it is...?
Correct Answer: B
A purchase order is a document sent from a buyer to a seller, with a request to order a product. The purchase order often has its number, description and quantity of the goods, unit prices and total price, name of issuer, time of delivery, standard terms and conditions, etc. It is effectively an offer to supplier. The purchase order will become a formal contract if supplier accepted it by written notice or by performance (such as deliver the goods to the buyer's premise). Reference: LO 1, AC 1.2
L4M3 Exam Question 39
CISG will be most likely to apply to which of the following transactions?
Correct Answer: C
Article 2 of CISG states that: This Convention does not apply to sales: (a) of goods bought for personal, family or household use, unless the seller, at any time before or at the conclusion of the contract, neither knew nor ought to have known that the goods were bought for any such use; (b) by auction; (c) on execution or otherwise by authority of law; (d) of stocks, shares, investment securities, negotiable instruments or money; (e) of ships, vessels, hovercraft or aircraft; (f) of electricity. LO 1, AC 1.2
L4M3 Exam Question 40
You are to do the KPIs and targets for international supplier and the following was done 1. Delivery in an hour 2. Return orders in an hour Is that a good thing or not?
Correct Answer: C
KPIs and the targets for supplier should be SMART: - Specific: What exactly do you want to achieve? - Measurable: How will you identify that you have achieved your goal? - Achievable: Is your goal really attainable? - Relevant: Is it relevant to you or, in other words, does it align with where you want to be? - Time-bound (or timely): When will you deliver your goal, and what are the key milestones? The two KPIs (Delivery in one hour, Return orders in one hour) are not realistic and achievable for international suppliers. Therefore, you should not put such high targets for supplier. Reference: - What Are SMART KPIs? (Spoiler: They Don't Really Exist!) - CIPS study guide page 107-108 LO 2, AC 2.2
