Reference no: EM132108096
BACKGROUND INFORMATION:
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 three years. The contract will also include a product description that all paints are zero-VOC.
Recently, PI owners have learned that although some of Naturals paint products are zero-VOC, most Naturals paint contains 1-5% VOCs, and thus, is 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 PI owners are concerned about possible liabilities for PI if it uses Naturals' products under the new contract. PI has again come to BCA for advice.
SCENARIO:
Discontinue contract negotiations with Naturals and opt to purchase similarly-priced paints from a manufacturer in Mexico. The Mexico company is a new company and one with which PI has no experience. The Mexico company claims all its paint are zero-VOC and its paint supplies are chemical-free.
A. Analyze and discuss the pros and cons of Choice 3 for PI from a business perspective.
B. Analyze and discuss all the specific potential legal risks and liabilities associated with this choice. Be very specific.