Esmerelda Company $($EC$)$ manufactures a cleaning solution for furniture and soft goods. Recently, a customer sued EC because the cleaning solution ruined their sofa, claiming that it did so even though they followed the directions $"$to the letter". The lawyer believes that the lawsuit is meritless and is confident that the lawsuit will be thrown out.

How should EC handle this?

A good response will list the criteria for both $($i$.$e$.,$ provisions and contingent liabilities$),$ evaluate each criterion with information provided in the question, and where needed, make reasonable assumptions to assess the criteria if no information is available, and then provide a conclusion based on the analysis of both the provision and the contingent liabilities. No "fence sitting" allowed $-$ this means that it cannot be both, and the decision should not be left up to the client. Therefore, you will have to make a decision as to how it should be handled.