Module 3 Business Law

installment contract

A contract that requires or authorizes delivery in two or more separate lots to be accepted and paid for separately.

Precise Parts, Inc., and Quality Auto stores enter into a contract for a sale of auto parts that meet certain specifications. Precise Parts ships goods that do not comply. Quality Auto....

CAN REJECT THE ENTIRE SHIPMENT

The Fraud Reduction and Data Analytics Act to prevent, detect, and respond to fraud in federal programs institutionalizes ...

ETHICAL RIGHTS AND DUTIES

Corporate stocks and bonds meet the requirements to be among the items of property characterized as goods under the UCC. T/F

FALSE

Decision makers need to consider what they can and will do before they consider what they should do. T/F

FALSE

If a seller fails to deliver the goods, the buyer can purchase other goods to substitute for those due under the contract, but cannot then sue for consequential damages.T/F

FALSE

conforming goods

Goods that conform to contract specifications.

intangible property

Property that cannot be seen or touched but exists only conceptually, such as corporate stocks. Such property is not governed by Article 2 of the UCC.

Outcome-based ethics determines what is ethical by looking at the potential benefits and harms of a given action. T/F

TRUE

The effectiveness of an industry code of ethics is partly determined by the commitment of the industry or company leadership to enforce it. T/F

TRUE

The parties to a sales contract can limit or exclude consequential damages for any commercial loss—such as a business's lost profits or property damage. T/F

TRUE

cure

The right of a party who tenders nonconforming performance to correct that performance within the contract period.

lease

Under Article 2A of the UCC, a transfer of the right to possess and use goods for a period of time in exchange for payment.

"Be honest and treat people fairly." With respect to business ethics, implementing this motto is.....

VERY IMPORTANT

lessee

a person who acquires the right to the possession and use of another's goods in exchange for rental payments

lessor

a person who transfers the right to the possession and use of goods to another in exchange for rental payments

Implied Warranty of Fitness for a Particular Purpose

a warranty that goods sold or eased are fit for the particular purpose for which the buyer or lessee will use the goods

Ethics has to do with how a businessperson making business decisions applies a. legal doctrine. b. corporate policy. c. financial priorities. d. moral principles.

d. moral principles.

Pine Mills Inc. agrees to sell a certain quantity of plywood to Quality Lumber Company under a destination contract. Pine Mills must...

deliver the plywood to a particular destination.

fungible goods

goods that are alike by physical nature, agreement, or trade usage

Jake offers to sell Kyle a collection of baseball cards. To qualify as a sale under the UCC, Kyle's payment for the cards must be...

in cash, or its equivalent, or in other goods or services.

Minerals Ltd. contracts to provide several manufacturers with tin. When a cartel of tin-producing countries suddenly embargoes future shipments of tin to Minerals so that it cannot fulfill its contracts, the distributor....

is excused from the performance of its contracts.

Viaduct Corporation used untested and risky construction techniques to build a bridge under budget. The techniques were legal but the bridge collapsed, killing several people. Viaduct's actions were .....

unethical and may result in legislation to ensure it does not happen again.

insurable interest

A property interest in goods being sold or leased that is sufficiently substantial to permit a party to insure against damage to the goods.

cover

A remedy that allows the buyer or lessee, on the seller's or lessor's breach, to obtain substitute goods from another seller or lessor.

tender of delivery

A seller's or lessor's act of placing conforming goods at the disposal of the buyer or lessee and providing whatever notification is reasonably necessary to enable the buyer or lessee to take delivery.

express warranty

A seller's or lessor's promise as to the quality, condition, description, or performance of the goods being sold or leased.

bailment

A situation in which the personal property of one person (a bailor) is entrusted to another (a bailee), who is obligated to return the bailed property to the bailor or dispose of it as directed.

predominant-factor test

A test courts use to determine whether a contract is primarily for the sale of goods or for the sale of services.

implied warranty

A warranty that arises by law because of the circumstances of a sale rather than by the seller's express promise.

Implied Warranty of Merchantability

A warranty that goods being sold or leased are reasonably fit for the ordinary purpose for which they are sold or leased, are properly packaged and labeled, and are of fair quality.

Product Sales Inc. adheres strictly to the goal of maximizing profits. Even so, Product Sales will benefit from ethical behavior A. if customer service is good. B. If it efficiently allocates its scarce resources. C. if its owners are happy with the revenue. D. under no circumstances.

A. IF CUSTOMER SERVICE IS GOOD

When making decisions that are ethical under either profit maximization or corporate citizenship theories, a business should include all of the following steps except........ A. publicize the options you rejected with your reasons. B. reflect on the outcome of the decision once it is made. C. apply ethical theories to reasonable alternatives. D. recognize that there is an ethical issue in the decision.

A. publicize the options you rejected with your reasons.

Owen and other managers employed by Pastry Bakeries are most likely to find that unethical behavior in the workplace can be deterred by A. taking immediate action in response to unethical conduct. B. ignoring small breaches of company rules. C. imposing sanctions disproportionate to misconduct. D. distributing rewards without regard to ethics.

A. taking immediate action in response to unethical conduct.

replevin

An action that can be used by a buyer or lessee to recover identified goods from a third party, such as a bailee, who is wrongfully withholding them.

requirements contract

An agreement in which a buyer agrees to purchase and the seller agrees to sell all or up to a stated amount of what the buyer needs or requires.

output contract

An agreement in which a seller agrees to sell and a buyer agrees to buy all or up to a stated amount of what the seller produces.

lease agreement

An agreement in which one person (the lessor) agrees to transfer the right to the possession and use of property to another person (the lessee) in exchange for rental payments.

lien

An encumbrance on a property to satisfy a debt or protect a claim for payment of a debt.

firm offer

An offer (by a merchant) that is irrevocable without necessity of consideration for a stated period of time or, if no definite period is states, for a reasonable time (neither period to exceed three months)

An ethical code of conduct is not A. a set of rules that the company can enforce. B. law. C. an outline of the company's policies. D. a guide for decision makers facing ethical questions.

B. LAW

Life Products Inc. enters into a contract to sell medical supplies to Med Clinic, which later sells some of the items to Nina, a patient and consumer. Article 2 of the UCC applies to...

BOTH TRANSACTIONS

A bar of soap is unmerchantable if stepping on it would cause its user to slip and fall. T/F

FALSE

A buyer is required to cover and a failure to do so will bar the buyer from using any other remedies available under the UCC. T/F

FALSE

A merchant who is in the business of selling certain goods makes an implied warranty of merchantability every time she sells any type of merchandise. T/F

FALSE

Because it may be unclear how a court will interpret and apply a law, companies can ensure decisions are viewed as ethical by documenting their own interpretation of the law. T/F

FALSE

Because social media is so widespread, it is legal and ethical for a company to have social media policies limiting employees from criticizing the company. T/F

FALSE

Conduct that is legal is ethically unquestionable. T/F

FALSE

Congress does not pass laws based on ethics. T/F

FALSE

If the acceptance to a sales contract between non-merchants includes terms different from those in the offer, no contract is formed under the UCC. T/F

FALSE

Making ethical decisions is most often best done by analyzing objective standards (such as profit or number of people fired) instead of subjective impacts on stakeholders. T/F

FALSE

Outcome-based ethics deals with traditional standards of behavior. T/F

FALSE

Rationalization is the process of making a logical decision based in evidence and an analysis of the ethical dimensions of the decision. T/F

FALSE

T/F The term moral minimum is best defined as the highest degree of ethical behavior expected of a firm.

FALSE

T/F When profit maximization is the goal, a company does not benefit from ethical behavior.

FALSE

The Uniform Commercial Code requires parties to form sales and lease contracts with the same formality used in forming other types of contracts. T/F

FALSE

Under the "stakeholder view," no group ever has a greater stake in company decisions than the shareholders do. T/F

FALSE

When a buyer breaches a sales contract, the risk of loss remains with the seller to the extent of any deficiency in the buyer's insurance coverage. T/F

FALSE

When a sales contract contemplates shipment of the goods but does not specify the arrangements, either party can make those arrangements. T/F

FALSE

Business Rents LLC and Cartage Trucking Inc. enter into a contract for a lease of ten hydraulic lifts. Under the perfect tender rule, Business Rents must ship or tender lifts to Cartage that, with regard to the contract specifications, conform .....

IN EVERY WAY

indentification

In a sale of goods, the express designation of the goods provided for in the contract.

ABC Hardware Store orders one hundred power hand-drills from Best Tools Inc. When the hand-drills are delivered, they are all missing pieces. ABC rejects the shipment. To exercise a right to cure, Best Tools must....

PROMPTLY NOTIFY ABC OF THE INTENT TO CURE

document of title

Paper exchanged in the regular course of business that evidences the right to possession of goods (for example, a bill of lading or a warehouse receipt).

course of dealing

Prior conduct between parties to a contract that establishes a common basis for their understanding.

tangible property

Property that has physical existence and can be distinguished by the senses of touch and sight.

With respect to what society will tolerate, a company's compliance with the law, and no more, is...

THE LOWEST ETHICAL LEVEL

A seller who tenders nonconforming goods has reasonable grounds to believe that the buyer will accept the tender if it includes a price allowance. T/F

TRUE

Acceptance of an offer to lease goods can be made by any means reasonable under the circumstances, including a prompt shipment of the goods. T/F

TRUE

An implied warranty can arise as a result of a well-recognized trade custom that a court could infer the parties intended to apply to their contract. T/F

TRUE

As part of the IDDR approach as described in the text, it is important to list many possible actions and analyze them using several different ethical theories. T/F

TRUE

Congress enacted the Sarbanes-Oxley Act to help reduce unethical management decisions. T/F

TRUE

Corporate "citizenship" involves making decisions beyond just maximizing profits and dividends. T/F

TRUE

Corporate social responsibility links the responsibility of citizenship with the strategy and key principles of a business. T/F

TRUE

Corporate social responsibility may increase a business's reputation or goodwill. T/F

TRUE

Duty-based ethics is based in the idea that every business has certain duties to others. T/F

TRUE

Global businesses need to be conscious of the impact of different religious principles on ethics. T/F

TRUE

If a court determines that a contract involving both goods and services is primarily a goods contract, any dispute over the deal will be decided under the UCC. T/F

TRUE

If a party to a contract has reasonable grounds to believe that the other party will not perform, he or she can demand in writing assurance of performance. T/F

TRUE

If a person buys cattle at a livestock auction, title will pass to the buyer when the cattle are physically delivered unless the parties agree otherwise. T/F

TRUE

If a sales contract prohibits any changes unless they are in a signed writing, then only those changes agreed to in a signed writing are enforceable. T/F

TRUE

If a seller supplies ten white dishwashers in response to an order for ten black washing machines—"F.O.B. the seller's warehouse"—and the goods are damaged in transit to the buyer's store, the loss falls on the seller. T/F

TRUE

In a sales contract, the passage of risk of loss from a seller to a buyer gives the buyer the right to insure the goods and the right to recover from third parties who damage them. T/F

TRUE

In response to an order for a hundred baseballs, the shipment of a hundred basketballs is both an acceptance of the offer and a breach of the contract. T/F

TRUE

It can be difficult to predict with certainty how a court will apply a given law to a particular action. T/F

TRUE

One view of the role of business in society is the perceived duty of a company only to generate revenue for its owners. T/F

TRUE

To the extent that it has not been modified by the UCC, the common law of contracts applies to sales contracts. T/F

TRUE

Under the perfect tender rule, a buyer or lessee has the right to insist on goods that conform to their contract in every detail. T/F

TRUE

Warranties of title arise automatically in most sales contracts and a thief breaches the warranty by selling stolen goods. T.F

TRUE

Warranties of title arise automatically in most sales contracts and a thief breaches the warranty by selling stolen goods. T/F

TRUE

course of performance

The conduct that occurs under the terms of a particular agreement; such conduct indicates what the parties to an agreement intended it to mean.

perfect tender rule

The legal right of a buyer or lessee of goods to insist on perfect tender by the seller or lessor. can accept , reject, accept part and reject part of the goods tendered

seasonably

Within a specified time period or, if no period is specified, within a reasonable time.

destination contract

a sales contract in which the seller is required or authorized to ship the goods by a carrier and tender delivery of the goods at a particular destination. seller assumes liability for any loss/damage to the goods until they are tendered at the destination specified in contract

shipment contract

a sales contract in which the seller is required or authorized to ship the goods by carrier. the seller assumes liability for any losses or damage to the goods until they are delivered to the carrier

usage of trade

any practice or method of dealing that is so regularly observed in a place, vocation, or trade that parties justifiably expect it will be observed in their transaction

Ethics is important because laws may not always be easy to interpret or apply. This is because ....

laws represent the will of the people and that will is often changing.

Lucy is a business manager for Manufacturing Company. Ethical issues that Lucy is not likely to encounter include determining .....

protocols for company meetings.

merechant

under the UCC, a person who deals in goods of the kind involved in the sales contract or who holds herself or himself out as having kill or knowledge peculiar to the practices or goods being purchased or sold