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Selling As Is...What Does It Mean?

By Michael W. Dunagan
TIADA General Counsel

What does it mean to sell a product (be it a motor vehicle or any other object) “as is”?  There has been much confusion over what exactly it means to use the as-is term in conjunction with a sale.   Section 2.316 of the Texas Business and Commerce Code (the Texas version of the Uniform Commercial Code) provides that there are no warranties given to the buyer if language is included such as “as is” or “with all faults.” 
 
Also, the federal Magnuson-Moss Warranty Act authorizes “as is” sales.  The Federal Trade Commission specifically includes the term “as is” on its Buyer's Guides, which may be checked to indicate no warranties are offered.

What often serves as a source of confusion for sellers is the relationship of the Texas Deceptive Trade Practices Act (DTPA) to “as is” sales.  It is not uncommon to receive an inquiry from a dealer who has received a demand letter from an attorney alleging violations of the DTPA involving the sale of a vehicle to the attorney's client.  The dealer's inquiry often begins: “But I sold it ‘as is'.  How can they threaten to sue me?”

The answer lies in the fact that selling “as is” disclaims warranties.  The DTPA claim is for misrepresentation, not breach of warranty.  Thus, selling “as is” doesn't prevent a DTPA claim.  Further, the DTPA has a provision that prohibits sellers from seeking to disclaim rights under the DTPA.

Still, sellers who wish to exclude warranties should make it very clear at the time of sale that no warranties are given.  In addition to checking the “as is” box on the Buyer's Guide, sellers should include a separate warranty disclaimer form at closing that spells out what “as is” means and specifically disclaims implied warranties (such a form is available from Burrell Printing).  Also, care should be taken that oral statements are not made that might contradict the fact that no warranties are given.

See “Questions and Answers About Selling 'As Is'" in the September 2016 edition of Texas Dealer for a fuller discussion of these issues.

Michael W.Dunagan will be a featured presenter at the TIADA Annual Conference & Expo taking place from July 23 - 25 in San Antonio. Reserve your spot and REGISTER TODAY.

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