The Seller’s Contract Includes an “As Is” Disclaimer – Now What?

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Foster Swift Collins & Smith

Before a horse sale concludes, the seller asks the buyer to sign a written sale contract that includes an “as is” disclaimer. Should the buyer sign the contract? And if the seller refuses to negotiate a removal of that disclaimer, should the buyer walk away from the transaction? Not necessarily.

The “As Is" Disclaimer

“As is” disclaimers can be found within a wide variety of sale contracts, and equine contracts are no exception. Many sellers (several of our clients included) routinely insist on them for all transactions. State law sometimes dictates other state-specific language that a contract should include to legally disclaim warranties. These types of clauses, assuming that they are legally valid in the jurisdiction, place buyers on notice that they are about to engage in a “buyer beware" arrangement.

Options for Responding to these Disclaimers

When a seller presents an equine sale contract with an “as is” disclaimer, the buyer need not back out of the transaction as long as he or she is willing to examine the horse carefully, ask the right questions, and sometimes seek out opinions of experts such as veterinarians and equine industry professionals. For example:

  • Investigate. The buyer can conduct a careful, thorough pre-purchase investigation of the horse. Assuming that the contract allows the buyer a period of time to investigate, the buyer can hire an independent veterinarian (who does not work with the seller and has not worked with the horse) to conduct a pre-purchase examination and a drug screen. If the buyer cannot attend the examination in person, he or she can consider arranging to have the exam videotaped. Also, if the examination is being performed a considerable distance from the buyer, the buyer can ask the veterinarian performing the examination to send the x-ray films to his or her local veterinarian for a second opinion before making the purchase.
  • Seek disclosures. The buyer can ask the seller to include in the contract certain disclosures about the horse’s history and condition such as the horse’s health, vices, and training. Even if the seller has made these disclosures verbally, the buyer can insist that they be included in writing within the contract. The buyer can also demand assurances in writing that the horse has transferable registration papers.
  • Demand a warranty of title from the seller. Although state law might allow the sales contract to disclaim certain warranties (such as a warranty of merchantability or fitness for a particular purpose), the buyer certainly can insist on a warranty that the seller owns the horse and can sell it to the buyer free and clear of liens and encumbrances.
  • Hire an equine industry professional. The buyer can see the horse in person or hire an equine industry professional to do this. Also, if the buyer has a use for the horse in mind, such as showing in certain disciplines, it might make sense to hire a reputable equine industry professional for an opinion as to the horse’s suitability.
  • Seek legal counsel. Before the transaction concludes, the buyer can hire a lawyer to draft or review the sale contract and advise whether its provisions, such as the “as-is” disclaimer, comply with the applicable state’s law. A lawyer can explain risks and offer suggestions for negotiating the contract’s terms. As a lawyer can explain, under the law of several states, “as-is” clauses cannot prevent the buyer’s claims of sales fraud.
  • Before the sale concludes, the buyer (or the buyer’s lawyer) can always try to negotiate the contract’s terms.

Sales contracts are important documents. Buyers and sellers should hire their own knowledgeable lawyer to assist with contracts and transactions. The cost to prevent a lawsuit is usually a small fraction of the cost to resolve one.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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