Deck 15: Purchasing Law and Ethics

Question 1

The purchasing manager/buyer is typically considered to be a general agent for the buying firm (the principal).

Answer 1

True

Question 2

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.

Answer 2

False

Question 3

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

Answer 3

False

Question 4

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

Question 5

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

Question 6

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 7

From a legal perspective,purchasing managers have no fiduciary obligation to act in the best interests of their employer.

Question 8

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

Question 9

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

Question 10

When the terms of an order and acceptance conflict,the conflicting terms are simply disregarded and are not part of the resulting contract.

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

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.

Question 13

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

Question 14

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

Question 15

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

Question 16

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

Question 17

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 18

Purchasing managers cannot be held personally liable for their damaging and illegal activities even if they perform them without the authority of their firm.

Question 19

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

Question 20

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.

Question 21

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

Question 22

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

Question 23

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

Question 24

Contractual mistakes are covered under the UCC.

Question 25

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

Question 26

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

Question 27

The
F.O.B. term also defines which party is responsible for filing any freight claims.

Question 28

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 29

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

Question 30

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

Question 31

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

Question 32

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

Question 33

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

Question 34

Purchasers have a legitimate right to inspect contracted goods before accepting or rejecting them.

Question 35

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

Question 36

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 37

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

Question 38

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

Question 39

Copyright is automatically assumed.

Question 40

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

Question 41

____ 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 42

The ____ is typically considered a/an ____ for the organization.

A) purchasing manager/buyer.....general agent
B) sales representative.....general agent
C) buyer.....special agent
D) All of these choices.
E) None of these choices.

Question 43

____ 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

Question 44

____ refers the standard terms and conditions that 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 these choices.

Question 45

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 46

A firm should never encourage suppliers to report instances of unethical behavior by anyone within the buying firm.

Question 47

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

Question 48

Accepting a supplier's outside gifts and favors in exchange for special treatment is a form of corruption.

Question 49

____ 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 these choices.
E) None of these choices.

Question 50

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

Question 51

Suppliers seldom attempt to influence the decisions of supply professionals.

Question 52

____ 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 these choices.

Question 53

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 these choices.

Question 54

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 these choices.

Question 55

____ 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 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/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 58

____ 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 these choices.

Question 59

____ 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 these choices.

Question 60

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

Question 61

The ____ describes the origin of the shipment,provides specific directions for the carrier,delineates the transportation contract terms,and functions as a receipt for the shipment.

A) bill of lading
B) implied warranty of transportation
C) freight bill
D) acknowledgment
E) implied warranty of merchantability

Question 62

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 63

____ 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 64

Which of the following is false regarding 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 supplier's rights always supercede the purchaser's rights.
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 65

On ____,the freight bill is presented on the effective day of the shipment.

A) FOB origin shipments
B) collect shipments
C) prepaid shipments
D) FOB destination shipments
E) None of these choices.

Question 66

____ 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 67

____ 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 these choices.

Question 68

____ essentially indicates that the supplier warrants that it has ownership of the goods and that they are not stolen or subject to any security interest or liens.

A) Warranty of infringement
B) Implied warranty of merchantability
C) Implied warranty of fitness for use
D) Warranty of title
E) None of these choices.

Question 69

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 these choices.

Question 70

In its most basic form,a ____ is defined as a promise of representation made by the seller,which,if necessary,can be legally enforced.

A) statement of fact
B) verbal agreement
C) seller's right
D) warranty
E) buyer's right

Question 71

Which of the following is a category of contract cancellation?

A) Cancellation for default.
B) Cancellation for convenience of the purchaser.
C) Cancellation by mutual assent.
D) Anticipatory breach.
E) All of these choices.

Question 72

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 rights before or after the point of acceptance.

Question 73

The ____ means when the seller at the time of contracting has reason to know of any particular purpose for which the goods are required,and the buyer is relying on the seller's skill or judgment to select or furnish suitable goods.

A) implied warranty of fitness for use
B) implied warranty of merchantability
C) express warranty
D) general warranty
E) warranty of infringement

Question 74

According to the UCC,any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates a/an ____ that the goods shall conform to the affirmation or promise.

A) implied warranty
B) express warranty
C) general warranty
D) warranty of merchantability
E) warranty of title

Question 75

____ refers to the supplier's guarantee that the goods being exchanged do not illegally violate another party's patent protection.

A) Warranty of title
B) Express warranty
C) Warranty of infringement
D) Implied warranty of fitness for use
E) Implied warranty of merchantability

Question 76

____ 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 these choices.

Question 77

____ 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 these choices.

Question 78

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

A) Reliance
B) Restitution
C) Remediation
D) Expectancy
E) None of these choices.

Question 79

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 80

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

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