An "as-is" provision in a purchase and sale agreement is a key component of said agreement. As such, litigation over the scope of this type of clause is noteworthy. While an ongoing dispute in the U.S. District Court for the District of Massachusetts is not near completion, it is worth following to see how the "as is" provision is assessed. The underlying dispute concerns a Hawaii-based entity seeking relief against a Massachusetts marine construction corporation for misrepresenting the seaworthiness in connection with a barge (Barge). At stake is whether the "as is" clause will defeat reliance on an alleged fraudulent classification society gauging report.
In a four-count complaint filed in Boston, the moving party alleges that the defendant commissioned a fraudulent Hull Diminution Survey (Gauging Report) for the classification society. Based on this Gauging Report, which was given to the movant as part of the purchase negotiations, the classification society is alleged to have recommended that the Barge was seaworthy and should be "retained as classed."
After the purchase of the Barge, which was moored in Louisiana at the time of sale, then towed to California, it is alleged that a mandatory inspection revealed that the defendant had made material misrepresentations about the condition of the vessel. The inspection is said to have revealed extensive steel wastage, which would not be possible if the Gauging Report was accurate.
Boilerplate Contract Language Does Not Automatically Defeat Industry Standards
The defendant moved to dismiss the complaint, pointing to language in the purchase and sale agreement that states the Barge was "sold and purchased, AS IS-WHERE IS, without any warranties, or representations" as to the seaworthiness of the vessel and that "any warranties and/or representations either express or implied are explicitly disclaimed by the Buyer and disavowed by the Seller." The district court judge was unconvinced, holding that the generalized language in the purchase and sale agreement did not contradict the specific representations made by the defendant, both orally and in the Gauging Report, about the Barge's condition.
These representations included, among other things, that the Gauging Report was provided by a class-certified hull inspection company, that the Gauging Report is an industry standard, that it is common and accepted marine industry practice for potential vessel purchasers to accept prior reports of a vessel's condition as accurate representations of the condition and that the defendant is a sophisticated marine construction corporation with knowledge in vessel and barge maintenance.
Chapter 93A Requires More than a Massachusetts Headquarters
Though the claim of fraudulent inducement weathered the motion to dismiss storm, the district court dismissed its Chapter 93A claim of unfair or deceptive trade practices.
Unfair trade claims in Massachusetts are examined under a "center of gravity" inquiry, meaning that a court must first determine whether the conduct at issue occurred primarily and substantially in state. Although the defendant is headquartered in Massachusetts and the purchase and sale agreement was governed by Massachusetts law, the district court judge determined that "the center of gravity" here fell outside of the Commonwealth because the Barge was purchased while in moored in Louisiana and the movant acted upon the defendant's representations from its headquarters in Hawaii.
That dismissal of the 93A claim has major implications, as triple damages under the law are permitted.
Conclusion
Purchase and sale agreements for maritime boats, barges, ships, vessels and everything in between occur daily. The "as-is, where is" clause is a key component of these deals, but with limitations as to reliance in court as advised by this initial trial court ruling. Moreover, simply because a contract is governed by Massachusetts law does not by itself open up a business to liability under the Commonwealth of Massachusetts' consumer protection statute.
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