Best of the Hotline Refrigerator Included "As Is."

By Douglas K. Marsico, Esquire
James L. Goldsmith, Esquire

A recent hotline call involved a situation in which the refrigerator was listed in Paragraph 7 of the Agreement to be included in "as is" condition. When Buyer and Seller signed the Agreement, the refrigerator was working. At the time of the pre-settlement walk-through, however, Buyer discovered that the refrigerator was no longer functioning properly.

At settlement, Buyer asked Seller to share the cost of replacing or repairing the refrigerator. Seller refused, indicating that the refrigerator was included "as is" and, therefore, he had no obligation to replace or repair it. The focus of the dispute was Paragraph 7 and whether it required Seller to assure that the listed personalty/fixtures (e.g. refrigerator) was in the condition as existed when the Agreement of Sale was signed.

Is Paragraph 7 the provision that controls this issue? I am sure many of you have keyed in on Paragraph 18, MAINTENANCE AND RISK OF LOSS, as the more applicable provision. Pennsylvania common law provides an answer as to which provision controls. The law provides that where two or more conflicting provisions apply to an issue, the more specific provision shall apply. Let’s apply this rule to our situation. Paragraph 7 is intended to remove any doubt as to what items will be included with the sale. Indeed, it also provides that the condition will be "as-is" or in the same condition as when the agreement was executed. Paragraph 18 is intended to control those situations where items included with the sale fail between the signing of the agreement and settlement. Which of these provisions controls more directly the situation at hand? I think we would all agree that Paragraph 18, MAINTENANCE AND RISK OF LOSS, is the appropriate provision.

You might ask does it really matter what provision controls. After all, the refrigerator is broken and no longer in the condition it was on the date of settlement. That analysis would have us conclude that Paragraph 18, like Paragraph 7, requires Seller to assure that all items included in the sale are in "as-is" condition. That is not what Paragraph 18 requires. Paragraph 18 provides that the items, and it specifically mentions appliances, are to be in their "present condition" (think "as-is") "normal wear and tear excepted." Our issue becomes whether the refrigerator failed because of normal wear and tear! If it did, then under the more specific, and therefore the controlling clause, Seller has no obligation to repair or replace.

In real life, where hopefully we all practice our trade, we probably would not have suggested or entertained such detailed analysis. The Buyer and Seller would have made this work and quite possibly a salesperson or broker would have kicked in a few dollars. That does not suggest, however, that you forego a reasoned approach to any problem that arises between the signing of the agreement and settlement. Analyzing the situation as we have done in this article might have led to a different result than a feel-good approach and may have saved you a few dollars. Regardless, there will be occasions where the simplest problems are not resolvable because of the nature of the parties, their mental health or for a number of other reasons. A good understanding of the agreement of sale and its application to the day-to-day situations is the starting point for any analysis or path to resolution.

Copyright © James L. Goldsmith, Esquire, CALDWELL & KEARNS, P.C., 2014

All Rights Reserved

Jim Goldsmith is an attorney with Caldwell & Kearns and serves as general counsel to PAR. A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees. He and his firm represent and defend real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. Jim also defends REALTORS® in disciplinary hearings conducted by the Real Estate Commission. He routinely counsels employers on employee relations issues and is one of the voices of the PAR Legal Hotline. He may be reached at www.realcompliance.com