Tuesday, 17 August 2010 11:35

Horses and the Law WHAT DOES "AS IS" REALLY MEAN?

Written by  Kenneth C. Sandoe, Attorney-at-Law
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Disclaimer - This article is intended as general discussion and information on the topic covered, and is not to be construed as rendering legal advice. If legal advice is needed, you should contact an attorney. This article may not be reprinted or reproduced in any manner without prior written permission of the author.

“It depends on the definition of is.” William Jefferson Clinton (42nd President of the United States)

An important decision has been recently handed down by the Pennsylvania Superior Court and the case should be understood by anyone who buys or sells horses. The decision in Morningstar v. Hallett, PA Super. Ct., 2004 WL 1909394, discusses the issue of selling a horse “as is.”

Ms. Morningstar decided to sell her horse and placed an ad in the local newspaper. The ad read in pertinent part, “...lovely 11-year-old Thoroughbred mare...Reasonable offer considered to right home.”

The buyer, Hallett, contacted the seller after reading the ad and visited the farm where the horse was kept. The buyer noticed the horse was lame when she trotted. The buyer then returned to the farm a second time to inspect the horse and decided to buy the horse for the sum of $2,950. The parties entered into a contract by signing a written sales agreement.

The written sales agreement contained the following language: “Age: 11 years. There are no other warranties expressed or implied, including fitness for certain purposes. The buyer is buying the horse ‘as is.’ The seller has the right to refuse refund for any reason.”

The buyer gave the seller a check for $2,950 and took possession of the horse. A short time later, the buyer stopped payment on the check and attempted to return the horse. The seller refused to take the horse back and filed a lawsuit against the buyer for breach of contract.

The buyer, in response to the breach of contract lawsuit, filed a counterclaim alleging fraud, misrepresentation, unfair trade practices and mutual mistake. The buyer argued that the actual age of the horse was 16, not 11, and that the horse’s condition, including eyesight problems and a heart murmur, made it incapable of performing.

The trial court held in favor of the seller holding that “due to the unambiguous ‘as is’ language in the contract as well as the ‘right to refuse’ language, the buyer cannot prevail on her fraud, misrepresentation, unfair trade practices or mistake claims.” The buyer also proposed to present the testimony of a veterinarian on the age of the horse but the trial court would not permit the vet’s testimony since the vet exam occurred after the date of the contract.

The buyer appealed. The Appellate Court analyzed the facts and noted that the sales agreement specifically stated that the horse was 11-years-old. The Court also reviewed the “as is” language pursuant to the Pennsylvania Uniform Commercial Code and noted that the “as is” disclaimer applied to implied warranties. The Court again noted that the sales agreement specifically indicated that the horse was 11-years-old, thereby creating an express warranty. Thus, the “as is” language was insufficient to disclaim the express warranty that the horse was 11-years-old.

The Appellate Court also found that the age of the horse was part of the bargain and constituted an express warranty or affirmation inducing the buyer to purchase the horse. Thus, to the extent the trial court relied on the “as is” clause in finding that the seller did not breach the contract, it committed error as the Appellate Court concluded that the “as is” clause is inconsistent with the express warranty created by the description of the horse in the ad and sales agreement. The “as is” language will not protect the seller and is insufficient to disclaim the express warranty that the horse was 11-years-old.

The Appellate Court also held that the trial court reliance on the language of the sales agreement which indicated that the seller had the right to refuse a refund for any reason was also insufficient as a disclaimer to the express warranty created by the description of the horse as 11-years-old.

The next issue to be determined by the Court was whether or not the trial court erred in refusing to allow the buyer to proceed with her claims of fraud, misrepresentation, unfair trade practices and mistake. The trial court held “due to the unambiguous ‘as is’ language in the contract as well as the ‘right to refuse refund’ language, buyer will not be permitted to proceed with her claims.

However, the Appellate Court held that a jury could render a verdict for the buyer despite an “as is” clause if it found that the seller had misrepresented the facts and that the buyer had relied on this misrepresentation. Thus, the “as is” language contained in the sales agreement does not necessarily preclude an action by the buyer for fraud, misrepresentation, deceptive trade practices or mistake. The Appellate Court reinstated the buyer’s counterclaim and held that the claims needed to be decided by jury.

Finally, the Appellate Court looked at the trial court’s decision in not permitting the veterinarian testimony because the examination had been done after the date of the contract. The Appellate Court held that there was no legal support for such a proposition and that the testimony was directly relevant to the buyer’s counterclaim. The Appellate Court held that the buyer should be permitted to introduce the veterinarian’s expert testimony to the extent it supports the buyer’s claim regarding the seller’s failure to deliver a horse of the age specified in the sale agreement.

The Appellate Court sent the case back to the trial court for a jury trial on all of the issues presented by the parties.

As can be seen, express warranties contained in a contract are not viewed lightly by the Courts. Even though disclaimer language may appear in a contract, such as “as is, no refund,” etc., this generic disclaimer language can be voided by express warranties given by the seller. If the express warranty is false and a material element of the deal, the disclaimer language will be defeated.

In the case reviewed above, the contract may be avoided by a five year discrepancy in the age of the horse. The moral being–honesty is always the best policy.

Enough legal talk—it’s time to hitch horses!

Ken is a practicing attorney in Myerstown, Pennsylvania, where a good bit of his practice involves negligence cases. Ken and his wife, Karen, own Sunny Hill Farm Belgians, and they have been exhibiting their six horse hitch for the past few years at most major shows in the east.

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