It sounds like you're an attorney in over his head in a copyright matter.
The general rule is that absent a written agreement from an independant contractor artist to a hiring party that assigns to the hiring party the copyright in a copyrightable work, the artist retains the copyright in the work and all the rights that go along with it.
EXCEPT when, as in this case, the facts support the conclusion that the artist granted the hiring party a license to use the copyrightable work. This case is easy because the artist was paid money -- not in exchange for the copyright, but for the license. The factual inquiry required is to determine the scope of that license.
If, as you say, the artist was hired to produce a logo for "promoting" the hiring party's business then it seems VERY clear to me that the license granted authorizes the hiring party to use the logo on darn near anything that is customarily used to promote a business. Such as shirts, key chains, bumper stickers, hats -- that is, on ANY "promotional items" [which is a term of art in the trademark world].
The above is general information ONLY and is not legal advice, does not form an attorney-client relationship, and should NOT be relied upon to take or refrain from taking any action. I am not your attorney. You should seek the advice of competent counsel before taking any action related to your inquiry.
Because there was no written assignment agreement, the artist owns the copyright to the artwork, and the business has a license with respect to the artwork.
The problem, however, is that there apparently was no express agreement concerning the scope of that license - where and how the artwork may be used, whether derivative works may be made, etc.
It would be best for the parties to negotiate a mutually-acceptable resolution of this matter. if they can't, then a court will have to render a decision concerning the scope of the license. Please see the post at the link below.
This information does not constitute legal advice and does not establish an attorney-client relationship.
We don't have enough facts here to say much: what the relationship was between the parties, what money was exchanged, whether they had done business before and many others. Someone feels wronged, but it isn't cut and dried that the artist always retains copyrights. For example, the facts could indicate a work for hire situation, transferring title and copyrights to the purchaser. If this really bugs your friend, have him consult with a copyright/contract specialist who has some experience with art/graphics transactions.