As Is

As Is Buyer Agreement Goods Delivery Inspection Damaged Goods Defective Goods Latent Defects Commercial Terms
Commercial term denoting agreement that buyer shall accept delivery of goods in the condition in which they are found on inspection prior to purchase, even if they are damaged or defective. Latent defects are generally excepted.
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As Is

As Is is a commercial term that signifies an agreement where the buyer agrees to accept delivery of goods in their current condition, based on an inspection conducted before purchase. This term is crucial in transactions where items may be sold with no guarantee of quality or functionality. Latent defects—defects not discoverable by reasonable inspection—are typically excluded from the “As Is” condition.

Examples

  1. Real Estate Sales: A property might be sold “As Is,” meaning the buyer accepts the current state of the property, including any visible damage or defects.
  2. Car Sales: Used car dealerships often sell vehicles “As Is,” indicating that no warranties or guarantees are provided for the car’s condition once purchased.
  3. Auction Sales: Items sold via auction are frequently sold “As Is,” with buyers acknowledging they take these items in their inspected state.

Frequently Asked Questions

1. Are sellers still liable for hidden defects in an “As Is” sale?

  • No, sellers are not liable for defects that are visible or discoverable upon reasonable inspection. However, sellers might still be liable for latent defects.

2. Can a buyer negotiate for repairs in an “As Is” agreement?

  • While an “As Is” clause generally means no repairs or modifications will be made by the seller, the buyer can still negotiate the terms before finalizing the sale.

3. Does “As Is” apply to both new and used goods?

  • The term can apply to both, but it is more common in transactions involving used or previously owned goods.

4. What happens if an “As Is” item is found to be significantly defective after purchase?

  • The buyer has limited recourse and typically cannot demand a refund or replacement except in cases of fraud or significant misrepresentation by the seller.

5. Is it advisable to buy something “As Is”?

  • It depends on the risk tolerance of the buyer and the due diligence conducted before the purchase. Buyers should thoroughly inspect the item and consider potential future costs for repairs or replacements.
  • Latent Defects: Flaws or imperfections hidden within an item that are not easily discoverable upon a normal inspection.
  • Warranty: A guarantee provided by the seller regarding the condition or functionality of the item for a specific period post-purchase.
  • Inspection: The process by which a buyer examines and evaluates the condition of an item before completing a purchase.
  • Due Diligence: The investigation or steps taken by a potential buyer before entering into a transaction to avoid an unforeseen risk.

Online References

Suggested Books for Further Studies

  • As Is: Legal Contracts and Risks by James R. Cox
  • Business Transactions and As Is Clauses by Sandra L. Beckwith
  • Commercial Law: Text, Cases, and Materials by M. Davis

Fundamentals of As Is: Business Law Basics Quiz

### What does the term "As Is" imply in a sales transaction? - [x] The buyer agrees to accept the goods in their current condition. - [ ] The seller will repair any defects before delivery. - [ ] The goods come with a full warranty. - [ ] The buyer has the right to return the goods within 30 days. > **Explanation:** "As Is" implies that the buyer accepts the goods in their current condition without any warranties or guarantees from the seller. ### Are latent defects covered in an "As Is" sale? - [ ] Yes, all defects are covered. - [x] No, latent defects are generally excepted. - [ ] Only visible defects are covered. - [ ] Both latent and visible defects are covered. > **Explanation:** Latent defects, which are not discoverable by a reasonable inspection, are generally excepted from the "As Is" condition. ### In an "As Is" agreement, who is responsible for the condition of the goods? - [x] The buyer accepts the responsibility. - [ ] The seller guarantees the condition. - [ ] Both parties share the responsibility. - [ ] The inspector guarantees the condition. > **Explanation:** In an "As Is" agreement, the buyer accepts the goods' condition and takes responsibility for any discrepancies found after the purchase. ### Can a buyer request repairs after purchasing "As Is"? - [ ] Always, as part of the contract. - [ ] Only within 30 days. - [ ] Yes, but at the seller's discretion. - [x] No, repairs are generally not included in an "As Is" agreement. > **Explanation:** Under an "As Is" agreement, the seller is not obligated to make any repairs. The buyer accepts the goods as they are. ### What type of defect is NOT typically discoverable by a normal inspection and thus excepted in an "As Is" term? - [ ] Visible defect - [ ] Cosmetic defect - [ ] Mechanical defect - [x] Latent defect > **Explanation:** Latent defects are hidden flaws that are not readily apparent and are typically excepted from "As Is" agreements. ### In which type of sales is the "As Is" clause most commonly found? - [ ] New electronic sales - [ ] Fresh produce sales - [ ] Certified pre-owned vehicle sales - [x] Used vehicle and real estate sales > **Explanation:** "As Is" clauses are most commonly found in used vehicle and real estate sales where items may have varying conditions and warranty exclusions. ### If a defect is found post-purchase in an "As Is" transaction, who typically bears the cost of repairs? - [ ] The seller - [ ] The manufacturer - [ ] An insurance provider - [x] The buyer > **Explanation:** In an "As Is" transaction, the buyer bears the cost of any repairs needed after the purchase. ### Can a buyer back out of an "As Is" purchase if a significant defect is discovered after the sale? - [ ] Always - [ ] Sometimes - [x] Rarely, unless there is fraud or misrepresentation - [ ] Only within 7 days > **Explanation:** Generally, in an "As Is" purchase, the buyer cannot back out if a defect is discovered after the sale unless there's evidence of fraud or significant misrepresentation by the seller. ### What should a buyer do to protect themselves in an "As Is" sale? - [ ] Ask for a full warranty - [ ] Ignore any potential defects - [x] Conduct a thorough inspection and due diligence - [ ] Assume everything is in working order > **Explanation:** To protect themselves in an "As Is" sale, a buyer should conduct a thorough inspection and due diligence to understand any potential issues. ### Which of the following is NOT a characteristic of an "As Is" sale? - [x] Full refund policy - [ ] No warranty - [ ] Acceptance of existing conditions - [ ] Risk transferred to the buyer > **Explanation:** An "As Is" sale does not include a full refund policy. It involves no warranties and transfers the risk to the buyer accepting the goods in their current condition.

Thank you for exploring the intricacies of “As Is” transactions and reviewing our quiz questions. Continue to build your knowledge for better-informed purchasing decisions.

Wednesday, August 7, 2024
ASB (Accounting Standards Board / Asset-Backed Security)
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