SCM CH 15 Questions with 100%
Correct Answers
T/F: Purchasing activities are concerned with the laws regarding contracts and
the laws regarding agency, the majority of which concern contract laws.
Correct Answer: true
T/F: 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. Correct Answer: false
T/F: The laws of contracts are concerned with governing the relationship of
principals and agents Correct Answer: false
T/F: In most cases, the sales representative is a general agent who can solicit
orders and change price, terms, or conditions as well. Correct Answer: false
T/F: The purchasing agent is a general agent with broad authority to change
prices, terms, and conditions. Correct Answer: true
T/F: The purchasing agency relationship is created between the employer and
employee when the company hires an individual to perform the purchasing job.
Correct Answer: true
T/F: From a legal perspective, purchasing managers do not have a fiduciary
obligation to act in the best interests of their employer. Correct Answer: false
T/F: In agreeing to perform the purchasing duties for the employer, purchasing
managers imply that they will never make a mistake. Correct Answer: false
,T/F: Exceeding both actual and apparent authority can have dire
consequences; an individual may be held directly liable by the supplier or other
third party. Correct Answer: true
T/F: Purchasing managers cannot be held personally liable for their damaging
and illegal activities even if they perform them with the authority of their firm.
Correct Answer: false
T/F: A good rule of thumb is to remember that purchasers must always act in the
best interests of their employer. Correct Answer: true
T/F: Since people make agreements every day, every agreement can be
considered a contract. Correct Answer: false
T/F: A contract can exist only when there is an agreement resulting from both an
offer and an acceptance. Correct Answer: true
T/F: 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. Correct Answer: false
T/F: 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. Correct Answer: false
T/F: 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. Correct Answer: true
T/F: A purchase order can be an offer, acceptance, or counteroffer, depending
on the circumstances. Correct Answer: true
,T/F: 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. Correct Answer: false
T/F: Either buyers or sellers can arbitrarily cancel or default on their contracts
with impunity Correct Answer: false
T/F: Cancellation by mutual consent indicates that the cancellation of a
previously agreed-upon contract automatically leads to legal action. Correct
Answer: false
T/F: 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.
Correct Answer: true
T/F: A breach of contract may entitle the offended party to certain remedies or
damages Correct Answer: true
T/F: 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. Correct Answer: true
T/F: The concept of damages in the UCC is based on the remedy of a party
being "made whole." Correct Answer: true
T/F: 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. Correct
Answer: true
T/F: Because the UCC calls for full compensation for a party that is a victim of
breach of contract, attorneys' fees are collectible. Correct Answer: false
, T/F: The UCC allows the purchaser to only reject the entire shipment for cause.
Correct Answer: false
T/F: 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. Correct Answer: false
T/F: Acceptance of the contracted goods by the purchaser means that
ownership of the goods has been transferred Correct Answer: true
T/F: Generally, honest mistakes by a single party to the contract will void the
contract. Correct Answer: false
T/F: Contractual mistakes are covered under the UCC. Correct Answer: false
T/F: 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. Correct
Answer: true
T/F: It is illegal for sellers to exaggerate the merits of their products during their
sales pitch. Correct Answer: false
T/F: The costs and penalties for patent infringement are so mild that most
standard purchasing agreements do not contain an appropriate patent
indemnification clause. Correct Answer: false
T/F: Under the UCC, the risk of loss is with the buyer until the title passes to the
seller. Correct Answer: false
T/F: 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. Correct Answer: true
Correct Answers
T/F: Purchasing activities are concerned with the laws regarding contracts and
the laws regarding agency, the majority of which concern contract laws.
Correct Answer: true
T/F: 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. Correct Answer: false
T/F: The laws of contracts are concerned with governing the relationship of
principals and agents Correct Answer: false
T/F: In most cases, the sales representative is a general agent who can solicit
orders and change price, terms, or conditions as well. Correct Answer: false
T/F: The purchasing agent is a general agent with broad authority to change
prices, terms, and conditions. Correct Answer: true
T/F: The purchasing agency relationship is created between the employer and
employee when the company hires an individual to perform the purchasing job.
Correct Answer: true
T/F: From a legal perspective, purchasing managers do not have a fiduciary
obligation to act in the best interests of their employer. Correct Answer: false
T/F: In agreeing to perform the purchasing duties for the employer, purchasing
managers imply that they will never make a mistake. Correct Answer: false
,T/F: Exceeding both actual and apparent authority can have dire
consequences; an individual may be held directly liable by the supplier or other
third party. Correct Answer: true
T/F: Purchasing managers cannot be held personally liable for their damaging
and illegal activities even if they perform them with the authority of their firm.
Correct Answer: false
T/F: A good rule of thumb is to remember that purchasers must always act in the
best interests of their employer. Correct Answer: true
T/F: Since people make agreements every day, every agreement can be
considered a contract. Correct Answer: false
T/F: A contract can exist only when there is an agreement resulting from both an
offer and an acceptance. Correct Answer: true
T/F: 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. Correct Answer: false
T/F: 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. Correct Answer: false
T/F: 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. Correct Answer: true
T/F: A purchase order can be an offer, acceptance, or counteroffer, depending
on the circumstances. Correct Answer: true
,T/F: 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. Correct Answer: false
T/F: Either buyers or sellers can arbitrarily cancel or default on their contracts
with impunity Correct Answer: false
T/F: Cancellation by mutual consent indicates that the cancellation of a
previously agreed-upon contract automatically leads to legal action. Correct
Answer: false
T/F: 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.
Correct Answer: true
T/F: A breach of contract may entitle the offended party to certain remedies or
damages Correct Answer: true
T/F: 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. Correct Answer: true
T/F: The concept of damages in the UCC is based on the remedy of a party
being "made whole." Correct Answer: true
T/F: 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. Correct
Answer: true
T/F: Because the UCC calls for full compensation for a party that is a victim of
breach of contract, attorneys' fees are collectible. Correct Answer: false
, T/F: The UCC allows the purchaser to only reject the entire shipment for cause.
Correct Answer: false
T/F: 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. Correct Answer: false
T/F: Acceptance of the contracted goods by the purchaser means that
ownership of the goods has been transferred Correct Answer: true
T/F: Generally, honest mistakes by a single party to the contract will void the
contract. Correct Answer: false
T/F: Contractual mistakes are covered under the UCC. Correct Answer: false
T/F: 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. Correct
Answer: true
T/F: It is illegal for sellers to exaggerate the merits of their products during their
sales pitch. Correct Answer: false
T/F: The costs and penalties for patent infringement are so mild that most
standard purchasing agreements do not contain an appropriate patent
indemnification clause. Correct Answer: false
T/F: Under the UCC, the risk of loss is with the buyer until the title passes to the
seller. Correct Answer: false
T/F: 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. Correct Answer: true
