Patrick (P) entered into a contract to buy a house from Richey (D).
P did not know that D had experienced problems with black sediment coming through the well system.
Prior to making an offer, P asked real estate agent how the water was. The agent told them only that the water was hard.
The contract for the purchase of the house stated that if no inspections are required by the purchaser, then the purchaser accepts the property in its entirety in "as is, where is" condition without any implied or express warranty by seller or agent.
P did not do any inspections on the property.
After closing, P discovered black sediment problems and had to install a new filtration system.
P sued D for damages and to rescind the contract.
Procedural History:
Lower court found for P, damages and contract rescission.
WY Supreme Court reversed, found for D.
Issues:
Does a contract containing an "as is" clause protect the seller from claims of negligent nondisclosure?
Holding/Rule:
A contract which contains an "as is" clause bars any claims for nondisclosure absent the existence of fraud or misrepresentation.
Reasoning:
There was no fraud in this case; the lower court found there was negligence, which specifically precludes fraud since fraud requires intent while negligence is, by definition, not intentional.
Negligent misrepresentation does not apply since that requires "supplying false information", and D did not supply any information.
Any finding must be under the category of negligent nondisclosure.
If the parties expressly or impliedly place the risk as to the existence of a fact on one or party, then the other party has no duty of disclosure.
This applies only to negligent nondisclosure. Remedies would be available for actual misrepresentation or fraud.
Absent fraud or actual misrepresentation of the condition of a house sold "as is", caveat emptor applies.
The burden of discovery was placed on the P under the contract, so they are barred from seeking relief based on negligent nondisclosure.
Dissent:
D was aware of an ongoing problem and the steps necessary to keep the problem from recurring. D had a duty to disclose. P could reasonably expect disclosure, especially since P inquired about the water.
It is equally wrong for sellers to fail to mention a known problem as it is for them to fraudulently or negligently misrepresent that such a problem does not exist. (it is as wrong to fail to tell the truth as it is to tell and untruth)
Notes:
Still many courts that are not wild about the duty to disclose.
