Potential Legal Risks and Liabilities
Part 1 Question A
Reduction in production cost: If PI chooses to collaborate with Naturals; they will be able to enjoy reduced cost because of the reduced price of paint. Natural’s products are cheaper by a margin of 15-20%, which means that less cost will be incurred in purchasing the product. Cost reduction is possible since the seller is willing to offer great discounts to PI.
Increased profit margins: PI will be able to enjoy increased profit because of the reduced cost of purchasing the paints. If the company is to sell the paints at the normal prices in the market, it will gain more profit placing it in a better position of gaining a competitive advantage over its clients. PI has a great potential of making more profits if it considers sourcing Naturals paint products (Luntz et al., 2017).
Enhanced marketing: PI can be able to market the product due to the assurance of Naturals that the products contain zero-VOC. The company will be able to market the product directly by quoting the details of the product to consumers as directed by its manufacturers.
Improved brand image: The brand of the company will be able to improve by selling quality products to its clients. The reduced cost means that the company will be able to provide quality services at an affordable price.
Potential legal liabilities from clients: The fact that the company is aware that the products supplied by Naturals contain 1-5% of VOC yet it is labelled zero might pose legal liabilities to the company. If customers sue PI for misinformation, it is likely to face enormous challenges.
Risk of unethical advertising: PI could potentially face the risk of unethical face, which would eventually attract a penalty. The products contain a percentage of VOC, and false advertisements will likely attract significant penalties (Luntz et al., 2017).
Damaged brand image: If clients make complaints about the contents of the paints sold by PI, the reputation and the image of the company is likely damaged. The impact could be far-reaching as the company might lose its market share.
Health risks of the products
Paints used by PI could pose health risks to its clients. The fact that the pint purchased from Naturals have some percentage of VOC means that the products could turn out to be harmful to human health. Clients could develop health complications, which could see the company being sued for negligence (Zipursky, 2014).
New regulations on VOC products
Due to the limited content of VOC in the paints sold by PI, complaints from the public could see the government coming up with new regulations on VOC based paints. The rules could force firms to manufacture VOC free paints and provide honest information on the quality of products offered to customers (Abbott & Tyler, 2017).
Lawsuits from consumer protection groups
Consumer protection groups could file a petition against PI on the paints they are offering in the market. Consumer protection groups fight on behalf of customers by ensuring that products sold to clients are safe. The safety of the products should ensure that the customers do not develop health complications because of using the products (Zipursky, 2014).
If the company chooses to purchase from Naturals, it will face two potential legal risks and liabilities.
The health risk that the company is potentially going to face is the impact of the products towards the health of its clients and employees. Since the products contain certain levels of VOC, employees who will be working in the warehouse and painting client’s premises could likely contract illnesses. The company would end up being liable for health complications, which will see it compensate all the affected parties (Allee, Mayer & Patryk, 2017).
Product safety liability
Relevant agencies might review the product on the risks it exposes the public. Possible liabilities could arise due to the failure of the company to provide sufficient warning of the dangers of the product. The warning should also include safety measures that should be followed to avoid potential risks (Owen, 2014).
Part II Question A
Elimination of potential risks: If PI chooses to purchase paints from Mejor, which has claimed that the products have zero-VOC, the company will be free from any potential liability arising from the product. If the product meets the described qualities, then the company will avoid any potential legal liability.
Overall reduction of cost: Since the products are safe and are priced equally, the company is likely to enjoy the overall reduction in cost as due to the elimination of potential legal liabilities. It is unlikely that the company will be sue for the risk the products exposes to the public. As such, all the resources that could have been used for compensation and legal suits could be diverted to other meaningful activities (Luntz et al., 2017).
Reduced government interference: The government will not find a reason to re-regulate the product since it will observe all the quality standards. The fact that there will be no complaints from the public means that the government will be satisfied fully with the product.
The claims could turn out to be false: The assurance provided by the new company could be false, and the company will face enormous liabilities if it is realized that the paints are harmful. The company should first move to ascertain if the products meet the quality claimed before making choices on entering into a contract with the company (Luntz et al., 2017).
Potential increase cost: If the products end up causing health complications to the public, the company could end up compensating its clients which will see the overall cost rising. The high cost is only subject to false claims that the product is zero-VOC.
Possible damage to the brand: Brand values rely on honest advertising. Customers tend to shift from using a product once they realize that it fails to meet the quality standards claimed in the advert. The move by PI could either enhance its image or damage its reputation depending on the genuine quality of the products supplied by Mejor.
A move to purchase products from Mehor expose PI to potential liabilities. These liabilities include;
Lawsuits from consumer protection
Consumer protection groups could potentially file lawsuits on the breach of advertisement policies by the company. The groups would have no otherwise but sue the company (Abbott & Tyler, 2017).
In a bid to curb the issue from escalating, the government could take a legal action to regulate paint business. The regulation could affect the business suppose the government makes it mandatory for all the paints to meet zero-VOC levels (Zipursky, 2014).
Health liability could arise if the product purchased from Mejor exposes the customers and employees to health risk. If the product results in health complications, the company will be liable for the complications developed by employees and clients (Owen, 2014).
A few individuals own PI, and as such, their decisions have an impact on the investment. If the product purchased ends up affecting the operations of the business, which could be shut down. If the business is shut due to the purchase of products that are later rejected in the market, investor funds will be at a loss, and the business will be held liable (Allee, Mayer & Patryk, 2017).
The company should enter into a contract with Naturals because it has been able to establish a better relationship with the company. PI is fully aware of the products supplied by Naturals that they contain a limited percentage of VOC. The fact that government regulations have approved such products to be labeled as zero-VOC provides a relief to PI. Any potential liability in which PI faces can be redirected to Naturals who are the manufacturers of the product in question. The company should purchase the products by Naturals but should consider amending the contract to include potential issues that could arise in the event of legal liabilities from its clients.
Allee, J. S., Mayer, T. V., & Patryk, R. W. (2017). Product liability. Law Journal Press.
Abbott, H., & Tyler, M. (2017). Safer by Design: A guide to the management and law of designing for product safety. Taylor & Francis.
Luntz, H., Hambly, D., Burns, K., Dietrich, J., Foster, N., Grant, G., & Harder, S. (2017). Torts: cases and commentary. LexisNexis Butterworths.
Owen, D. (2014). Products Liability Law, 3d (Hornbook Series). West Academic.
Zipursky, B. C. (2014). Reasonableness in and out of Negligence Law. U. Pa. L. Rev., 163, 2131.