APP Business Law, Ethics & International Trade 3 — Questions and Answers
Question 1: When a supplier fails to deliver goods on the agreed date without legal excuse, the buyer's legal remedy of 'cover' under the UCC means:
- The buyer cancels the contract and seeks no further remedy
- The buyer purchases substitute goods and recovers the price difference from the breaching seller (Correct answer)
- The buyer holds the goods and reduces the purchase price
- The buyer files for specific performance
Correct answer: The buyer purchases substitute goods and recovers the price difference from the breaching seller
Under UCC §2-712, cover allows the buyer to purchase reasonable substitute goods and recover the difference between the cover price and the contract price from the seller.
Question 2: The ethical principle of 'conflict of interest' in purchasing is BEST described as a situation where:
- A supplier and buyer disagree on contract terms
- A purchasing professional's personal interests could improperly influence their professional decisions (Correct answer)
- Two suppliers compete for the same contract
- A buyer prefers one product specification over another
Correct answer: A purchasing professional's personal interests could improperly influence their professional decisions
A conflict of interest arises when a purchasing professional has personal, financial, or other interests that could bias their procurement decisions.
Question 3: Under CISG (UN Convention on Contracts for the International Sale of Goods), an offer becomes irrevocable when:
- It is signed by both parties
- It states it is firm or the offeree reasonably relied on it being irrevocable (Correct answer)
- It is sent by registered mail
- The offeree acknowledges receipt
Correct answer: It states it is firm or the offeree reasonably relied on it being irrevocable
Under CISG Article 16, an offer cannot be revoked if it indicates it is firm or if the offeree reasonably acted in reliance on its irrevocability.
Question 4: A purchasing professional who accepts kickbacks from suppliers in exchange for contract awards may face liability under which U.S. federal law?
- Sarbanes-Oxley Act
- Sherman Antitrust Act
- Anti-Kickback Act (Correct answer)
- Fair Labor Standards Act
Correct answer: Anti-Kickback Act
The Anti-Kickback Act prohibits the solicitation or acceptance of kickbacks in government contracting and can result in criminal penalties.
Question 5: A tariff-rate quota (TRQ) in international trade allows:
- Unlimited imports from any country at zero duty
- A specified quantity of imports at a lower duty rate, with higher duties applied to imports above that quantity (Correct answer)
- An absolute ban on imports above a set quantity
- Preferential treatment for developing nations only
Correct answer: A specified quantity of imports at a lower duty rate, with higher duties applied to imports above that quantity
A TRQ sets a lower in-quota tariff rate up to a specified import volume and applies a higher out-of-quota tariff on additional imports.
Question 6: Which contract clause allocates risk for events beyond either party's control, such as natural disasters or pandemics?
- Liquidated damages
- Penalty clause
- Force majeure (Correct answer)
- Consequential damages waiver
Correct answer: Force majeure
A force majeure clause excuses a party's non-performance when extraordinary events beyond their control prevent contract fulfillment.
Question 7: In international purchasing, 'dumping' refers to:
- Illegal disposal of hazardous materials across borders
- Selling goods in a foreign market at prices below the home market or below cost (Correct answer)
- Flooding a market with counterfeit products
- Overstocking a supplier's warehouse
Correct answer: Selling goods in a foreign market at prices below the home market or below cost
Dumping occurs when a company exports goods at prices lower than those charged in its home market or below production cost, potentially harming domestic industries.
APP Business Law, Ethics & International Trade 3
When a supplier fails to deliver goods on the agreed date without legal excuse, the buyer's legal remedy of 'cover' under the UCC means: