by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
VENDOR/PURCHASER; MISREPRESENTATION; "AS IS" CLAUSE: Statement in purchase agreement stating that buyer is not relying upon any oral representations does not waive right to claim for fraudulent misrepresentation. Lance v. Bowe, 648 N.E.2d 60 (Ohio App. 9th Dist. 1994). In response to a specific question the seller represented that a portion of the basement occasionally flooded, but that most of the basement remained dry. In fact the entire basement flooded with every rain. Purchaser had not waived this claim and was not estopped although purchaser had signed a form provided by seller indicating that there were no oral representations upon which they were relying.
Note: The defendants argued forcefully that the contract language was not "mere boilerplate." It contained a space where buyers could indicate those specific representations upon which they were relying. Buyers had handwritten "none" in that space and had initialled it. Buyers also signed a written contract indicating that they had made necessary inspections and were satisfied with the condition of the house. (It is unclear whether the defect could be characterized as "latent," but sellers had told buyers that existing leakage problems were the result of clogged drainpipes, so they disguised the reality of the situation.)
Comment 1: Although the court's discussion does not limit its holding to the residential context, this is clearly the context in which the reasoning should have the most force. In the tug and pull of a residential sale, buyers frequently are asked to sign outrageous waivers of various rights without any real opportunity to evaluate their meaning. The buyers trust the integrity of those with whom they deal, and lack the experience or bargaining power to behave otherwise.
Comment 2: What if the borrowers had been represented by counsel in connection with the contract containing the "as is" clause. Should they still be able to collect for fraud? It's a close call, but the editor feels that the answer is "yes" as to latent defects but "no" as to discoverable defects. If a buyer chooses not to inspect for certain conditions because he has been reassured by the seller or others concerning those conditions, then the well advised buyer should not execute documents providing otherwise, and if the attorney doesn't warn buyer about this, then the buyer's claim is against the attorney.
Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last five years, these Reports annually have been collated, updated, indexed and bound into the Annual Survey of Developments in Real Estate Law, volumes 1-5, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Laprica Mims at the ABA. (312) 988 6233.
Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.