APP Business Law, Ethics & International Trade 2 — Questions and Answers
Question 1: Under the Uniform Commercial Code (UCC), when does title to goods typically pass from seller to buyer in a shipment contract?
- When the buyer pays for the goods
- When the seller delivers goods to the carrier (Correct answer)
- When the buyer receives and inspects the goods
- When the contract is signed
Correct answer: When the seller delivers goods to the carrier
In a shipment contract under the UCC, title passes to the buyer when the seller delivers the goods to the carrier.
Question 2: A purchasing professional discovers that a supplier has offered a gift exceeding company policy limits. The BEST ethical course of action is to:
- Accept the gift and report it after the fact
- Decline the gift and document the incident (Correct answer)
- Accept the gift but donate it to charity
- Ignore the offer since no contract is pending
Correct answer: Decline the gift and document the incident
Declining and documenting the gift maintains integrity and creates a record that protects the professional and the organization.
Question 3: Which international trade term (Incoterm) makes the seller responsible for all costs and risks until goods are delivered to the buyer's named destination?
- EXW (Ex Works)
- FOB (Free On Board)
- DDP (Delivered Duty Paid) (Correct answer)
- CIF (Cost, Insurance, Freight)
Correct answer: DDP (Delivered Duty Paid)
DDP places maximum responsibility on the seller, who bears all costs and risks including import duties until delivery at the named destination.
Question 4: A contract clause that limits a party's liability for consequential damages is called a:
- Liquidated damages clause
- Limitation of liability clause (Correct answer)
- Force majeure clause
- Indemnification clause
Correct answer: Limitation of liability clause
A limitation of liability clause contractually caps or excludes certain types of damages, such as consequential or indirect damages.
Question 5: The World Trade Organization's Agreement on Government Procurement (GPA) primarily requires member countries to:
- Use competitive bidding for all government purchases above threshold values (Correct answer)
- Source all goods domestically
- Apply tariffs uniformly to all imports
- Eliminate all procurement regulations
Correct answer: Use competitive bidding for all government purchases above threshold values
The GPA requires signatory governments to open their procurement markets above specified thresholds to international competitive bidding.
Question 6: Which legal concept holds that a contract modification is not enforceable unless both parties provide new consideration?
- Promissory estoppel
- Pre-existing duty rule (Correct answer)
- Quantum meruit
- Unjust enrichment
Correct answer: Pre-existing duty rule
The pre-existing duty rule states that performing an existing legal obligation does not constitute new consideration to support a contract modification.
Question 7: Anti-bribery laws such as the U.S. Foreign Corrupt Practices Act (FCPA) apply to:
- Only U.S. government procurement
- Payments to foreign government officials to obtain business (Correct answer)
- Domestic commercial bribes only
- All international tariff violations
Correct answer: Payments to foreign government officials to obtain business
The FCPA prohibits U.S. persons and companies from paying bribes to foreign government officials to gain or retain business.
APP Business Law, Ethics & International Trade 2
Under the Uniform Commercial Code (UCC), when does title to goods typically pass from seller to buyer in a shipment contract?