Buyers Beware of Goods "Sold As Is"

Over the past several years I have written a number of posts on this blog discussing the importance of reading contracts before signing them.  The wisdom of this practice is obvious.  Nevertheless, many people, including sophisticated businesspersons, routinely sign contracts before reading their terms.  This blog post addresses a particular issue that reinforces the need to read the terms of a contract:  the “as is” clause.

The “as is” clause turns up regularly in purchase contracts involving pre-owned goods; for example, used vehicles.  The meaning of the term is relatively self-explanatory.  The buyer assumes the entire risk as to the value and condition of the goods received.  This January the Kentucky Court of Appeals addressed the enforceability of an “as is” clause amidst allegations of fraud.

In Roberts v. Lanigan Auto Sales, 2010-CA-000950-MR, Roberts purchased a used vehicle from Lanigan through a written purchase contract containing a “sold as is” clause.  After the purchase, Roberts learned that the vehicle had previously suffered damage to the undercarriage.  He sued Lanigan for fraud and violation of the Kentucky Consumer Protection Act alleging that the auto dealer concealed the vehicle’s accident and damage history.

Lanigan filed a motion to dismiss Roberts’ lawsuit based on the “sold as is” clause in the contract.  Roberts argued that the written contract did not bar his fraud claim.  The trial court agreed with Lanigan and dismissed Roberts’ suit, and the Court of Appeals affirmed.  The courts concluded that Roberts was unable to prove that Lanigan’s representations caused him harm.  They based this conclusion on the fact that Roberts assumed the risk as to the condition of the vehicle by signing the contract with the “as is” clause.

The recent decision in the Roberts case showcases the need to read contracts before signing them.  Courts will uphold these clauses.  Therefore, one cannot rely on the oral statements of another party to an agreement.  Instead, “trust but verify” by reviewing the contract for potentially problematic terms like the “as is” clause.

If you would like to know more about these issues, please contact Ryan McLane, a Northern Kentucky associate in the Medical Malpractice, Construction, Administrative Law, and Civil Litigation Practice Groups at Dressman Benzinger LaVelle psc.  Ryan can be reached at (859) 426-2143 or via email at rmclane@dbllaw.com.