analyze contractual rights, obligations, liabilities, and remedies in the business environment
analyze tort rights, obligations, liabilities, and remedies in the business environment
Background: Things have been moving quickly for the PI owners. They are almost ready to open operations. An important next step is to finalize negotiations to contract with Naturals to purchase paint and paint supplies. PI wants a clause in the contract with Naturals that PI would buy paint and paint products exclusively from Naturals for 3 years. The contract will also include a product description that all paints are zero-VOC.
Recently, PI owners learned that although some of Naturals paint products are zero-VOC, most Naturals paint contains 1-5% VOCs, and thus, are not actually zero-VOC.
Under state and federal regulations, paint products that contain less than 8% VOCs can legally be categorized as a zero-VOC green product. However, PI has already begun advertising and marketing its business and paint as zero-VOC.
Naturals paint products are 15-20% less expensive than other equivalent paint products on the market. PI is unsure whether to continue its plan to contract with Naturals for use of Naturals' paint. The owners are concerned about possible liabilities for PI if it uses Naturals’ products knowing the products are not zero-VOC paints. PI has again come to BCA for advice.
The PI owners believe they have 2 options regarding purchase of paint products and supplies.
The options are:
Option 1: Continue PI’s plan to sign a contract with Naturals, use Naturals paint under a 3-year exclusive contract, and advertise and market the paint as zero-VOC paint because Naturals paint legally can be categorized as zero-VOC paint under state and federal regulations.
Option 2: Discontinue contract negotiations with Naturals and opt to contract and purchase similarly-priced paints from New Green, Inc., a manufacturer in Mexico. New Green is a new company and one with which PI has no experience. The Mexico company guarantees all its paint are zero-VOC and its paint supplies are chemical-free.
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