Wagner v. Rao - 180 Ariz. 486, 885 P.2d 174 (Ct. App. 1994)

Rule:

As a general rule, the words "as is" in a contract do not deprive a buyer of the right to prove fraud or misrepresentation inducing execution of the contract. The principle expressed in the rule is that when fraud enters into a transaction to the extent of inducing execution of a written document, the instrument never becomes a valid contract, and the party seeking to rescind the contract is not bound by its terms. This rule acknowledges the reality of contractual transactions and recognizes that affirmative representations of fact often go to the heart of the bargain.

Facts:

Appellant-buyer, John Rao and Cathy Rao, husband and wife entered into a contract with the appellee-seller, Willie G. Wagner, Dba Wagner's Auto Body & Sales, for the sale of a classic car. The contract set forth that the car was sold on an "as is" basis and contained an integration clause which stated that all promises not specifically contained in the contract were expressly waived. Appellant signed the contract, paid the purchase price, and agreed to an additional amount for a trailer. After the appellant found latent defects, he demanded the return of his money and the appellee demanded the return of the trailer. In the appellee's action for breach of contract, the trial court granted summary judgment in favor of the appellee and dismissed the appellant's counterclaim alleging fraudulent misrepresentation. Appellant sought review of the decision of the superior court, which granted summary judgment in favor of the appellee in a breach of contract action. Appellant’s counterclaim alleged fraud and misrepresentation. On appeal, the court reversed the decision. 

Issue:

Was an "as is" provision and an integration clause in a contract for the sale of a "classic car" precluded the appellant's fraud claim as a defense to its enforcement?

Answer:

No.

Conclusion:

The court reversed the grant of summary judgment in favor of the appellee-seller and reversed the dismissal of the appellant-buyers' counterclaim for fraud. The court reversed the decision because the question of whether the appellant-buyer waived any right to rely on those representations could not be determined on the basis of the existence of the "as is" provision or the integration clause. The words "as is" in the contract did not deprive the appellant of the right to prove fraud and although the parties could contractually disclaim potential tort liability by a clear expression of intent to do so, there was an exception for fraud.