Deck 17: Contract Formation and Legal Issues

Question 1

F.O.B.origin shipment designates that the buying firm becomes owner when the material is loaded into the carrier's vehicle.

Answer 1

True

Question 2

Daily activities of supply managers are subject to two major areas of the law: 1.Law of Agency where supply professionals act as agents for their firms and 2.Law of Contracts.

Answer 2

True

Question 3

A buyer operates under two types of authority: actual authority and apparent authority.

Answer 3

True

Question 4

The best way to deal with legal disputes is to avoid them in the first place!

Question 5

From a legal point of view,the question of which party has title to purchased materials is normally answered by a court of law.

Question 6

F.O.B.origin designates that the supplier owns the material until it is off-loaded at the buyer's receiving dock.

Question 7

Supply managers need to possess and utilize knowledge of legal issues and considerations.Such knowledge must be coupled with the wisdom to communicate and interact with legal professionals and suppliers proactively in efforts to develop and maintain relationships between supply chain members that minimize conflict and maximize opportunities for collaborative success.

Question 8

The most powerful tool a supply professional has to avoid legal problems is skill in selecting sound,reliable suppliers.

Question 9

The law gives a patent holder the exclusive right to manufacture,sell,and use the patented device for a specified number of years.A buying firm who engages in any of these activities during the period of patent protection,without permission from the patent holder,is guilty of patent infringement and can be sued for damages by the patent holder.

Question 10

From a legal point of view,the question of which party has title to purchased materials is normally answered by defining the F.O.B.point of purchase.

Question 11

A buyer operates under two types of authority: true authority and inherent authority.

Question 12

Supply managers need not possess and utilize knowledge of legal issues and considerations,but need to know where to find someone who has knowledge of legal issues and considerations.

Question 13

F.O.B.destination designates that the supplier owns the material until it is off-loaded at the buyer's receiving dock.

Question 14

The best way to deal with legal disputes is to utilize litigation.

Question 15

Most disputes are best resolved through negotiation and compromise.

Question 16

A mistake in drawing up a contract usually must be made by both parties for the contract to be voided.

Question 17

Daily activities of supply managers are subject to two major areas of the law: 1.Civil Law and 2.Criminal Law.

Question 18

A mistake in drawing up a contract by the selling firm can always be voided by the selling firm without the consent of the buying firm.

Question 19

F.O.B.origin shipment designates that the buying firm becomes owner when the material is delivered onto the buyer's receiving dock.

Question 20

Most disputes are best resolved through mediation and litigation.

Question 21

Which of the following is not true of litigation?

A) Litigation should be attempted before arbitration
B) Some maintain that if a commercial dispute reaches litigation, the disputants -- regardless of the outcome -- have already lost
C) In litigation, costs tend to be maximized
D) Litigation usually requires the greatest amount of time versus other dispute resolution methods.
E) Litigation can damage the relationship between the buying and supplying firm

Question 22

The "Bottom Line" in deciding if there is a contract is:

A) The written word
B) Do the parties act as if they have a contract
C) What the UCC says
D) Determined by litigation
E) Settled by arbitration

Question 23

Which of the following is not true of rejection requirements?

A) The buying firm can not reject a replacement shipment
B) Notification of rejection must be sent to the supplier
C) The nature of the defect or default must be specified
D) The buying firm is not legally bound to return the material
E) The buying firm is obligated to protect and care for the material in a reasonable manner

Question 24

The most powerful tool a supply professional has to avoid legal problems is skill in developing watertight,legally constrained contracts.

Question 25

Which of the following is not one of the four categories of actions that exist to resolve a dispute?

A) Negotiation
B) Mediation
C) Situation
D) Arbitration
E) Litigation

Question 26

Which of the following is not true of mediation?

A) If negotiation fails, the disputants can consider mediation
B) Mediation involves introducing a third-party into the discussion
C) Mediation always results in the two parties ceasing all business dealings
D) The mediator's role is to listen, sympathize, empathize, coax, cajole and persuade
E) One thing the mediator may not do is decide anything

Question 27

Evergreen Contracts are:

A) For environmental issues
B) Long term contracts
C) "Open" contracts regarding certain terms
D) Perpetual contracts
E) Renewable contracts

Question 28

Which of the following issues are not addressed by the Contracts for the International Sale of Goods (CISG)?

A) Acceptance of an offer
B) Contract price
C) Revocation of an offer
D) Language used in a written contract
E) Oral contracts

Question 29

Which of the following is not one of the reasons why most business firms utilize litigation only as a last resort?

A) Litigation creates a public relations problem
B) Contractual disputes are usually resolved more effectively using negotiation
C) A lawsuit almost always alienates a good supplier
D) The outcome of any court case is usually uncertain
E) Litigation is expensive

Question 30

A purchase contract must have certain considerations to be legal.Which of the following is not one of these considerations?

A) Agreement
B) Signers must be over 21
C) Consideration, or mutual obligation
D) Competent parties
E) Lawful purpose

Question 31

The UCC was written for "goods" and not services,while the UCC might be used for services,generally

A) The National Service Act will be used
B) Each State's Common Law of Contracting will apply
C) The CISG will apply
D) Cancellation Rights are the same
E) The "Battle of the Forms" can decide when services are included

Question 32

Which of the following is not true about the status of an agent?

A) Agent - a person who, by express or implied agreement, is authorized to act for someone else in business dealings with a third party
B) A "purchasing agent" is not a legal party to his or hers business transactions, but rather serves as an intermediary.
C) Law requires the agent to be loyal to the employer
D) Law permits the employer to hold its purchasing agent(s) personally liable for any secret advantages
E) An agent represents the firm in personal dealings, as well as official

Question 33

Letters of intent are:

A) The same as contracts
B) Pre-negotiations guides
C) A form of pre-contracting
D) Blanket orders
E) Used in dispute resolution

Question 34

Which of the following is not true of inspection and rejection rights with respect to material?

A) The law gives a reasonable period to inspect material after it is received.
B) If the buying firm raises no objection to the material within a reasonable period of time, he or she is deemed to have accepted it.
C) Industry practice usually sets the standard for "reasonable" time
D) A buying firm has the right to reject material that does not conform to the terms of the contract.
E) A supplying firm has the right to force a buyer to accept material that is an overshipment.