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Chapter 14--Contract ManagementStudent: ___________________________________________________________________________1. In global commerce, people assume that the terms of one market are acceptable in another and do not recognize cultural or legal landmines. True False2. Once a contract has been negotiated and signed, the real work is over. 3. It is often easy to go back and negotiate what contractual terms actually mean once the contract has been signed and a period of time has passed. 4. The assignment and contracting clause of a contract stipulates whether the supplier can assign its rights described in the agreement to another party and whether subcontracting is permissible. 5. Most commonly used contracts are developed from earlier contracts that are subsequently modified to fit the situation at hand. True False6. The least appropriate method of drafting a new contract is to start with a general form and samples of past contracts for similar situations. 7. It is always a good idea to double-check all attachments to the contract because many of the technical details are included here.
8. Technical sections of the contract are the least likely source of misinterpretation of terms and conditions. 9. In the firm fixed price contract, the price stated in the agreement does not change, regardless of fluctuations in general overall economic conditions, industry competition, levels of supply, market prices, or other environmental changes. True False10. Fixed price contracts are the most complex and difficult for supply management to manage because there is a need for extensive auditing and additional input from the purchasing side. 11. In a firm fixed price contract, if the supplier increases its contract price in anticipation of rising costs, and the anticipated conditions do not occur, then the purchaser has paid too high a price for the good or service. 12. Escalation clauses allow only increases in the base price. 13. In a fixed price contract with escalation, all contractual price changes should be keyed to a third-party price index, preferably to a well-established, widely published index. True False14. Cost-based contracts are inappropriate for situations in which there is a risk that a large contingency fee might be included.