Posted: September 8th, 2015

LEGAL FOUNDATIONS FOR ACCOUNTANTS.

Mike operates a business, painting offices and other commercial buildings. Over the past year he has bought paint once a month from Bob, a local paint manufacturer.

Recently, Mike bought 100 cans of paint from Bob, which Mike then put in his storeroom together with some valuable equipment. Over the next week, Mike used 20 cans of the paint on one of his jobs, but because of negligent manufacture by Bob the paint was of poor quality and caused damage to the client’s building. Mike had to pay $10,000 compensation to the client.

Later, 50 of the other cans exploded in the storeroom and damaged Mike’s valuable equipment. This happened because Amy, one of Bob’s employees, had a personal grievance against Mike and deliberately put the wrong substance into those 50 cans. The damage to the equipment is worth $25,000.

Mike has demanded compensation from Bob. However, there is a notice on the receipt Bob gave Mike at the time of purchase stating:

“Bob is not liable for any loss or damage caused by the paint, however such loss or damage may be caused.”

The same words appear on a small sign on the counter of Bob’s sales area.

Bob is refusing to pay compensation, saying he is protected by the words on the receipt and the sign.

Mike has never read either the notice on the receipt or the sign.

Do the words on the receipt or the sign mean that Mike cannot successfully demand compensation from Bob?
Would it make any difference to your answer if Mike had read the sign at the time of buying the paint, had asked what it meant and been told by Bob’s salesman that it excluded Bob for liability only if the paint fumes affected people with an allergy to those fumes?

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