Deck 15: Purchasing Law and Ethics

Question 1

The use of force or coercion to reach an agreement is acceptable in signing a contract, because both parties do not have to enter into the agreement on their own free will.

Answer 1

False

Question 2

Contracts between two or more parties do not allow the shifting of risk between the entities and do not constitute the foundation and fabric for every type of supply chain relationship.

Answer 2

False

Question 3

If the terms of the buyer's purchase order and the supplier's acceptance or acknowledgement conflict, all of the terms of both the purchase order and the acceptance become part of the resulting contract including the conflicting terms and conditions.

Answer 3

False

Question 4

Exceeding both actual and apparent authority can have dire consequences; an individual may be held directly liable by the supplier or other third party.

Question 5

A contract can exist only when there is an agreement resulting from both an offer and an acceptance.

Question 6

In most cases, the sales representative is a general agent who can solicit orders and change price, terms, or conditions as well.

Question 7

When the contract is reduced to writing, the written document itself is the actual contract and not simply hard evidence of the existence of the underlying contractual relationship.

Question 8

Cancellation by mutual consent indicates that the cancellation of a previously agreed-upon contract automatically leads to legal action.

Question 9

A purchase order can be an offer, acceptance, or counteroffer, depending on the circumstances.

Question 10

The purchasing agent is a general agent with broad authority to change prices, terms, and conditions.

Question 11

If the primary purpose of the contract is legal, but some terms contained within the contract are not, then the contract may or may not itself be illegal depending on the seriousness of the illegal terms and the degree to which the legal and illegal terms can be separated.

Question 12

From a legal perspective, purchasing managers do not have a fiduciary obligation to act in the best interests of their employer.

Question 13

The laws of contracts are concerned with governing the relationship of principals and agents.

Question 14

Since people make agreements every day, every agreement can be considered a contract.

Question 15

Either buyers or sellers can arbitrarily cancel or default on their contracts with impunity.

Question 16

In agreeing to perform the purchasing duties for the employer, purchasing managers imply that they will never make a mistake.

Question 17

Purchasing managers cannot be held personally liable for their damaging and illegal activities even if they perform them with the authority of their firm.

Question 18

Purchasing activities are concerned with the laws regarding contracts and the laws regarding agency, the majority of which concern contract laws.

Question 19

The purchasing agency relationship is created between the employer and employee when the company hires an individual to perform the purchasing job.

Question 20

A good rule of thumb is to remember that purchasers must always act in the best interests of their employer.

Question 21

Because the UCC calls for full compensation for a party that is a victim of breach of contract, attorneys' fees are collectible.

Question 22

Copyright law requires a formal application, as does patent law.

Question 23

Generally, honest mistakes by a single party to the contract will void the contract.

Question 24

Buyers should avoid the practice of routinely tolerating suppliers that breach purchase contracts because doing so may result in the buyer forfeiting the right to legal action.

Question 25

The costs and penalties for patent infringement are so mild that most standard purchasing agreements do not contain an appropriate patent indemnification clause.

Question 26

For the most part, the UCC is a "gap filler" and is only pertinent if the parties themselves do not supply a contract term, or the term is left open.

Question 27

Copyright is automatically assumed.

Question 28

Unless the parties specify differently, the term "FOB" delineates the point at which the supplier is responsible for freight charges and where the purchaser assumes title to the shipment.

Question 29

Inventors seeking to expand their patent protection to other countries must file appropriate patent applications in each country in which protection is desired.

Question 30

Contractual mistakes are covered under the UCC.

Question 31

In order for a firm to recover lost profits in a breach of contract, the firm must produce credible evidence that it would have made such profits.

Question 32

The UCC allows the purchaser to only reject the entire shipment for cause.

Question 33

Under the UCC, the risk of loss is with the buyer until the title passes to the seller.

Question 34

Acceptance of the contracted goods by the purchaser means that ownership of the goods has been transferred.

Question 35

When the goods delivered by the supplier are actually rejected by the purchaser because of nonconformance, the purchaser must provide notice to the supplier within 24 hours.

Question 36

Resources as diverse as formulas, supplier and customer lists, procedures, and training programs could all be regarded as trade secrets.

Question 37

It is illegal for sellers to exaggerate the merits of their products during their sales pitch.

Question 38

If both parties mutually agree to terminate the contract, then they have, in effect, created another contract with the intent of nullifying the first agreement.

Question 39

A breach of contract may entitle the offended party to certain remedies or damages.

Question 40

The concept of damages in the UCC is based on the remedy of a party being "made whole."

Question 41

Price fixing, dividing territories among competitors, and agreements that limit the supply of a commodity are violations of the Foreign Corrupt Practices Act.

Question 42

_____ essentially determines the nature of agreements that are enforceable and create legal rights between the parties.

A) Agency law
B) Contract law
C) Civil law
D) Litigation
E) None of the above.

Question 43

_____ is defined as that body of the law that refers to how business firms (parties) enter into contracts with each other, execute contracts, and remedy problems that arise in the process.

A) Civil law
B) Agency law
C) Commercial law
D) All of the above.
E) None of the above.

Question 44

_____ stems from the instructions and granting of authority to the purchasing manager via the job description provided by the employer.

A) Apparent authority
B) Fiduciary responsibility
C) Mutual assent
D) Personal liability
E) Actual authority

Question 45

Executive management sets the ethical code of behavior within a firm.

Question 46

Accepting a supplier's outside gifts and favors in exchange for special treatment is not a form of corruption.

Question 47

A/An _____ is a proposal or expression by one person that he or she is willing to do something for certain terms.

A) consideration
B) habeas corpus
C) acceptance
D) clause
E) offer

Question 48

Which of the following is not one of the essential elements to an enforceable contract?

A) Offer.
B) Acceptance.
C) Consideration.
D) Due diligence.
E) None of the above.

Question 49

_____ is that level of authority perceived by the seller to be available to the purchasing manager.

A) Actual authority
B) Apparent authority
C) Consideration
D) Personal liability
E) Transparent authority

Question 50

A/An _____ is a set of promises between two or more parties the performance of which the law expects, the breach of which the law provides remedies.

A) offer
B) agreement
C) acceptance
D) contract
E) breach

Question 51

When a non-agent, such as a maintenance supervisor, engineer, or finance analyst makes a commitment with a supplier, this is termed _____.

A) implied authority
B) actual authority
C) apparent authority
D) limited authority
E) None of the above.

Question 52

_____ deals with the role of managers as individual representatives acting on behalf of their organizations.

A) Contract law
B) Civil law
C) Mediation
D) Agency law
E) None of the above.

Question 53

The Federal Trade Commission Act makes price discrimination illegal and prohibits sellers from exclusive arrangements with purchasers or product distributors.

Question 54

Suppliers seldom attempt to influence the decisions of supply professionals.

Question 55

Betty goes into Mimi's Wholesale Video Store and says to Mimi, "I want to buy 500 DVDs of the Last Vegas movie from you. I will pay you $10 for each DVD." This is an example of [a/an] _____.

A) acceptance
B) breach
C) offer
D) due diligence
E) conditional offer

Question 56

Ethics have their basis in the field of philosophy and identify common principles associated with appropriate versus inappropriate actions, moral duty, and obligation.

Question 57

A firm should not encourage suppliers to report instances of unethical behavior by anyone within the buying firm.

Question 58

A/An _____ is a person or entity who has been authorized to act on behalf of some other person or entity.

A) principal
B) manager
C) agent
D) employee
E) sales representative

Question 59

Accepting gifts and favors from a supplier is the most common ethical infraction involving buyers.

Question 60

The _____ is typically considered a _____ for the buying firm.

A) purchasing manager/buyer…..general agent
B) sales representative…..general agent
C) purchasing manager/buyer…..special agent
D) All of the above.
E) None of the above.

Question 61

Under the UCC, [the] _____ applies to contracts for goods worth more than $500 or any contract that cannot be fully performed in one year.

A) Statute of Frauds
B) FCPA
C) Clayton Act
D) boilerplate
E) CISG

Question 62

_____ are equal to the difference between the value of the purchased goods at the time of delivery and the goods' value at the time of specified delivery.

A) General damages
B) Consequential damages
C) Liquidated damages
D) Incidental damages
E) Specified damages

Question 63

Which of the following is Falseregarding the acceptance and rejection of goods?

A) Once the purchaser accepts the goods, there is only one recourse - to make a claim against the supplier.
B) The purchaser has the right to send the rejected goods back even if the supplier does not consent to this action.
C) The UCC specifies that the purchaser does not have the legal right to withhold payment from the supplier once acceptance has been made.
D) Purchasers have a legitimate right to inspect contracted goods before accepting or rejecting them.
E) A purchaser may revoke a prior acceptance if a problem is discovered that substantially impairs the value of the goods.

Question 64

A/An _____ provision stipulates the mechanism to be used in determining any costs and damages to the injured party in the event of a breach of contract.

A) mutual assent
B) restitution
C) liquidated damages
D) reliance
E) expectancy

Question 65

The doctrine of _____ holds that if one or more parties made a promise, even orally, he or she cannot renege on that promise if the other party acted on reliance on the promise.

A) caveat emptor
B) promissory estoppel
C) anticipatory breach
D) consideration
E) None of the above.

Question 66

_____ are those expenses incurred by the purchaser because the goods were not delivered when expected or as specified.

A) Incidental damages
B) General damages
C) Consequential damages
D) Specific damages
E) None of the above.

Question 67

_____ is money the plaintiff lost because he or she was relying on the contract, depending on the defendant to live up to his or her obligations under the contract.

A) Expectancy
B) Restitution
C) Due diligence
D) Mutual assent
E) Reliance

Question 68

_____ is money the plaintiff was hoping to gain from the contract.

A) Reliance
B) Restitution
C) Restitution
D) Expectancy
E) None of the above.

Question 69

_____ include expenses reasonably incurred in inspection, receipt, transportation, and the care and custody of goods appropriately rejected by the purchaser.

A) General damages
B) Consequential damages
C) Specified damages
D) Freight claims
E) Incidental damages

Question 70

_____ is money the plaintiff actually paid to the defendant in connection with the contract.

A) Reliance
B) Restitution
C) Expectancy
D) Due diligence
E) None of the above.

Question 71

_____ takes place when the offeree incurs a legal detriment in response to the offeror's offer.

A) Consideration
B) Acceptance
C) Rejection
D) Anticipatory breach
E) None of the above.

Question 72

Which of the following is not one of the benefits that the UCC provides to buyers?

A) If a seller makes an offer in writing, the seller has to live up to it for the period of time stated.
B) Verbal agreements, when confirmed in writing and if no objection is made, are valid.
C) The conflict between a buyer's purchase order terms and a seller's acknowledgement terms will generally be resolved according to the two firms' prior conduct.
D) As far as warranties are concerned, the purchasing manager can legally rely on the supplier to provide the item needed to do the job.
E) None of the above.

Question 73

Rather than change existing contract law, in 1999 the _____ adapted existing "paper and pencil" concepts to the electronic age, meaning that it makes electronic records equivalent to written documents and electronic signatures similar to handwritten signatures for legal purposes.

A) UCC
B) Supreme Court
C) HSPD-12
D) RFI
E) UETA

Question 74

_____ refers the standard terms and conditions that are usually preprinted on the back of forms used by the purchaser (and the seller).

A) RFQ
B) PO
C) RFI
D) Boilerplate
E) None of the above.

Question 75

_____ occur[s] when either party fails to perform the obligations due under the contract (without a valid or legal justification).

A) Damages
B) Cancellation
C) Restitution
D) Expectancy
E) Breach of contract

Question 76

_____ can be defined as failure of one of the parties to live up to the terms and conditions of the contract.

A) Cancellation for default
B) Cancellation for convenience of the seller
C) Cancellation for convenience of the purchaser
D) Cancellation by mutual assent
E) None of the above.

Question 77

_____ are those that result if the terms of the contract are not fulfilled and must be defined prior to the breach under the terms of the contract.

A) Consequential damages
B) General damages
C) Incidental damages
D) Reliance damages
E) Liquidated damages

Question 78

Which of the following is not a category of contract cancellation?

A) Cancellation for default.
B) Cancellation for convenience of the purchaser.
C) Cancellation by mutual assent.
D) Liquidated damages.
E) Liquidated damages.

Question 79

After the point of acceptance, the supplier's rights _____ and the purchaser's rights _____.

A) increase….decrease
B) increase….increase
C) decrease….increase
D) decrease….decrease
E) There is no change in either sets of rights before or after the point of acceptance.

Question 80

_____ is something of value in the formation of the contract that gives it legal validity.

A) Apparent authority
B) Actual authority
C) Implied authority
D) Acceptance
E) Consideration