What “As Is” Clauses Can and Can’t Do For Your Business

Depending on whether you own a business or you are a consumer, or whether you’re a buyer or a seller, the two little words “as is,” can have significantly different impacts on you. Whether the words are your friend or foe, it’s important to understand the impact these words have on commercial transactions, and to understand how including them in your contracts and business documents can protect you.

What As Is Means

On the surface, as is means that a consumer takes an item or product as they see it. The seller is disclaiming all warranties on a product. This can be a huge help to a seller because all products come with some level of implied warranty, even if not stated.

For example, if you sell a pen, even without a written warranty, a legal warranty still exists that ensures that the pen does what a pen is supposed to do. In other words, to some extent, a seller is warranting everything they sell.

An as is clause allows a seller to avoid those implied legal warranties. If the pen comes out of the box without ink, it is the consumer’s problem, so long as the as is clause was clearly disclosed.

Limits to As Is Clauses

But there is a limit to how far an as is clause will go. An as is clause will certainly protect against anything that is promised orally in writing. If somebody says a car will run, and you buy it as is, you are bound to the as is clause, regardless of what was said to you previously. The terms of the written agreement will govern over anything said to you beforehand.

But an as is clause cannot protect you from fraud. Fraud is a separate, independent claim from breach of contract that has to do with the state of mind of the parties. It is a knowingly fraudulent statement made to induce somebody into signing an agreement. Fraud is not simply a breach of a contract, which can be shown often regardless of what the other party was thinking or what they intended.

If a seller tells you a car’s brakes are fine, and you purchase the car with an as is clause, and it turns out the seller always knew the brakes were faulty but purposely and knowingly hid that fact, the as is clause won’t protect the seller.

As you can imagine, when trying to prove fraud, a party must show the subjective intent of the seller. Showing that a seller had the intent to deceive, or made statements which they knew were false, can be a tough burden.

But if proven, a seller can’t hide behind the as is clause. So although helpful to a seller to avoid straight breach of contract actions and to disclaim any basic warranties, as is clauses are not a license to lie or deceive.

Make sure your business is protected and your agreements say what you need them to. Contact Tampa business attorney David Toback to discuss a comprehensive business document review plan.

Resource:

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