Daily Development for
Friday, February 12, 1999

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

VENDOR/PURCHASER; WARRANTY; "FIT' CONDITION: Premises are not in a "fit" condition if they are infested by termites, so seller is responsible for infestation, notwithstanding that buyers, who took possession without inspection, agreed by contract that their taking possession constituted an acknowledgment that premises were in "a good state of repair and sanitary condition"

McDuffie v. Argroves, 497 S.E.2d 5 (Ga.App. 1998).

Tenants instituted an action for breach of contract under a leasepurchase agreement concerning commercial property. The agreement required the landlords to deliver the property in "fit condition," and the landlords represented in the leasepurchase agreement that the premises were in fit condition for use by the tenants. The tenants claimed that the premises had termite damage and active infestation when they leased, and when they purchased, and that the premises, therefore, were not "fit."

The leasepurchase agreement further provided that acceptance of the premises by the tenants would be construed as recognition that the premises were in "a good state of repair and sanitary condition." The landlords made no other representations regarding the premises, and the tenants did not inspect the premises even though they had the opportunity to do so.

The leasepurchase agreement required the tenants to maintain a termite protection contract on the premises, and they entered into a contract with a pest control company to treat the property. The pest control company advised certain repairs that were necessary to eradicate the termites, but the tenant/buyers refused to undertake those repairs.

In finding that the landlords were not entitled to summary judgment, the court concluded that (a) a warranty that the premises were "fit" was a promise that the premises were free of termite damage and infestation; (b) "a good state of repair and sanitary condition," on the other hand, did not include being free of termites, so that buyer's waiver was immaterial, and the tenants did not waive their claim because they closed on the purchase after learning of the termite infestation and damage. The provisions of the leasepurchase agreement required the tenants to purchase the premises at the end of the lease term.

There was evidence in the case that the sellers knew of termite damage some time prior to entering into this contract, but the case is not based upon fraud or affirmative misrepresentation, but appears to be a warranty case.

Comment 1: The court is quite emphatic that the term "fit" indicated that there were no termites or termite damage, while the term "in a good state of repair" did not. It is difficult for the editor to credit this construction as the contractual understanding of the parties. It would appear rather that the parties intended to impose upon buyer the obligation to inspect the premises prior to taking possession and upon seller the obligation to make any needed repairs identified in that inspection.

The court makes much of the fact that the seller's counsel drafted the agreement, and indulges in the presumption that the contract should be construed against the drafter. The editor notes his own disagreement with this rubric, at least in the commercial context. Both parties should read, understand, and accept responsibility for the language in their contracts. Neither should bear special responsibility because language accepted by both parties first emanated from one party's pen.

Comment 2: The case reverses summary judgment for sellers, so we have not yet reached the issue of whether the buyers will be found to have failed to mitigate damages when they discovered the termite infestation and did not take steps to correct fully the danger of further injury.

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