“As Is” Clauses Don’t Grant You Immunity If You Commit Fraud — and Parol Evidence Can Help Prove It
A recent case out of South Dakota, Oxton v. Rudland, #28070 (behind paywall), is another case involving alleged fraud during the sale and purchase of a house, this one with an explicit parol evidence debate.
As in the previous case I blogged about on this topic, the contract for the house contained an “as is” clause. The Oxtons agreed that the contract with this “as is” clause was unambiguous and fully integrated. However, they argued that the parol evidence rule never applies when a party is alleging fraud. Because they were alleging fraud, they wanted to be able to bring in parol evidence regarding that fraud.
The court agreed that the parol evidence rule does not apply in cases of fraud, which cannot be avoided by disclaimers in the contract. Therefore, the court looked at the Oxtons’ evidence of fraud, which consisted of the fact that the Rudlands who sold them the house had just bought it a few months before and in the course of buying it had been told about “major settling” of the house (the problem at issue). The Rudlands, however, did not disclose that “major settling” when they sold to the Oxtons months later. The Rudlands countered that the disclosure statement that did not contain any language about “major settling” was largely irrelevant, and that the Oxtons were well aware they were purchasing the home “as is” and had the opportunity to obtain an inspection before finalizing the contract.
The court found that it could not resolve these questions of fact but that there was enough evidence to possibly support the Oxtons’ fraud claim, such that summary dismissal of that claim was inappropriate. The court allowed the parol evidence to support the claim, and also explicitly pointed out that “as is” clauses do not provide “general immunity from liability for fraud.” Therefore, the Rudlands could not rely on the “as is” clause alone as blanket protection for all of their behavior and statement, and the litigation over the alleged fraudulent inducement should continue.
It’s interesting to contrast this with the Texas case I just blogged. There, the court held that getting an inspection was enough to prove that you were not relying on the sellers’ statements. The Oxtons did obtain an inspection in this case but little attention is given to that fact. I wonder if it will gain more prominence as the debate over the alleged fraud goes forward, as at the moment the case was pretty focused on the parol evidence rule and the operation of the “as is” clause, not on the effect of the inspection.