Monday, January 2, 2012


As-is is a term that means that what the supplier is selling is the item in its current state, with all faults. The term as-is may may used to disclaim potential implied warranties on sales such as the product being of merchantable quality or being fit for a particular purpose. As-is makes no statement as to the quality of the product. As-is also effectively says that the product is not going to be changed to fit a particular purpose. It is what it is and nothing more.

The term as-is is most commonly used with the sale of used products. Suppliers of new product normally sell a product with a warranty and that warranty is intended to demonstrate both the quality and reliability of the product showing its value because the price paid is based on the value perceived. As-is sales of new product are rare but they do occur in certain circumstances. A supplier might sell a new product on an “as-is” basis if the product was a pre-production where it had not been fully tested or not had been assembled using normal production means. A supplier might also use as-is if they simply do not want to be responsible to provide warranty on product where they know they have a problem. For example, if they had a lot that was returned to them by a customer because it had a number of defects, they could potentially sell the product elsewhere on an as-is basis and provide no warranty for repair or replacement for a lower price. In that case the buyer of the product would be trading off the benefit they get by the reduced price against the risk of a high number of defective products.

A buyer might also want to use the term “as-is” when selling excess inventory. When you sell excess inventory you are now legally functioning as the seller you could be subject to implied warranties. Most Supplier agreements will also not allow you their Customer to pass through warranties or indemnities they receive to another company. That’s because they don’t want their customer potentially functioning as a distributor and competing with their distributors. The biggest risk that you have in reselling product is you become part of the sales chain. As part of the sales chain you may liable if injury or property damage to a third party occurs in the use of the product.

Some companies may prefer to simply destroy any excess to avoid the potential liability especially if who they are selling it to has limited resources such as a broker or independent distributor. Others might include something like: “Seller is selling the Product on an as-is basis, without any indemnities or warranties express or implied. Seller’s sole liability for any Product shall be limited to the Price.” By doing that what the seller is doing is limiting the liability they can limit which is the liability with respect to the purchaser of the product. What they can’t limit is their potential liability to injured third parties. That is one reason why a Buyer may not want to resell excess. Selling a product on an as-is basis does not protect the seller against that potential third party liability.

If you sell something “as-is” you want to avoid providing detailed descriptions as even though you sold it as-is they buyer could reject the product if it failed to meet the description. If you are buying an as-is product you want a description so you can reject it if it fails to meet that description. Selling something as-is also would not protect you if you were fraudulent. If fraud was involved the contract is voidable meaning the other party can void the contract. If they void the contract, it no longer exists, so it doesn’t matter what you said in that contract.

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