Understanding the “As Is” Clause in a Contract to Purchase Property

Most people, at one point in their lives, have signed a contract to purchase either real property or personal property from an individual or a retailer. Some contracts, such as for the sale of a used car, contain an “as is” clause. But what does an “as is” clause actually mean? An “as is” clause is typically misunderstood to mean that a buyer is purchasing an item as it exists, despite any imperfections. However, an “as is” clause actually operates for the buyer to disclaim any potential implied warranties for the purchased property. Additionally, an “as is” clause is not absolute, and can be bypassed under certain circumstances. The Illinois Commercial Code provides the basis for determining when an “as is” clause may be bypassed. Section 5/2-316(3)(a) of the Code states:

“Notwithstanding subsection (2)(a) unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like “as is,” “with all faults” or other language which in common understanding calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty.”

There are three important clauses in this provision: (1) “unless the circumstances indicate otherwise;” (2) “common understanding;” and (3) “makes plain.” An “as is” clause is only effective when it complies with these three phrases in the statute. If a seller violates any of these phrases, the implied warranties for the property may be reinstated.

“Unless The Circumstances Indicate Otherwise”

The circumstances surrounding a sale of property may negate the effectiveness of an “as is” clause. For example, let’s say that a buyer is in the market for a used car. A salesman at a used car dealership shows the buyer a car, and the buyer is interested. The salesman insists that the car has a fine motor and will run for at least 100,000 more miles. The buyer purchases the car, and the motor breaks down after 500 miles. Even though the buyer signed a contract to purchase the car “as is,” the buyer may still have a valid argument that the circumstances of the sale indicated that the car would run for much longer than it actually did.

“Common Understanding”

There are different phrases that can have the same effect as “as is.” For example, as stated above in the statute, “with all faults” is another option that can be used to disclaim implied warranties. However, the phrase ultimately used in the contract must be commonly understood to mean that the buyer is disclaiming all implied warranties. This prevents a seller from using ambiguous or complicated language in order to confuse the buyer.

“Makes Plain”

A contract containing an “as is” clause must be plain and consistent with the rest of the contract. However, the clause may be modified or rendered invalid by conflicting language elsewhere in the contract or through future actions by the seller. For instance, going back to the used car example from above, an “as is” clause is arguably not plain if the contract also contains a service agreement for the car. Additionally, if the used car dealership decides to make free repairs after the buyer has bought the car, the “as is” clause is arguably waived by the seller.

If You’ve Been Affected By An “As Is” Clause, Sherwood Law Group Can Help

Of course, other factors in these type of situations may complicate a potential legal claim. Regardless, if you feel that you have been taken advantage of by an “as is” clause, contact Sherwood Law Group today for a free consultation. The above clauses are in place to protect the buyer and to prevent a seller from profiting off of defective property. The attorneys at the Sherwood Law Group will use their experience and expertise to fight for your rights as a consumer and work to make you whole again.

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