Real property purchase agreement; Whether an “as is” clause barred innocent misrepresentation claims; Coosard v Tarrant; Common-law fraud; Fraud in the inducement

The court held that “the trial court properly found that the ‘as is’ clause in the parties’ purchase agreement barred plaintiffs’ claim of innocent misrepresentation, but erroneously found that” it also barred their common-law fraud and fraud in the inducement claims. Thus, it affirmed in part, reversed in part, and remanded. Plaintiffs contended the trial court erred in holding that the “as is” clause barred their fraud claims. As to common-law fraud, the court held that as plaintiffs established a question of fact as to whether defendant-Giles “engaged in common-law fraud, which serves as an exception to the transfer of risk to a property purchaser under an as-is clause, . . . and as an exception to the common-law rule of caveat emptor in real estate transactions,” the trial court erred in granting summary disposition to Giles. As to fraud in the inducement, the allegations of fraud were “firmly and inextricably tied to the purchase agreement and sufficient evidence has been presented which, when viewed in the light most favorable to plaintiffs, present questions of material fact concerning whether Giles fraudulently induced plaintiffs to enter into the purchase agreement.” Thus, the trial court erred in granting Giles summary disposition on the claim of fraud in the inducement. Finally, “‘innocent misrepresentation is premised upon the seller having no knowledge of the falsity of a representation, and “as is” clauses are fundamentally intended to allocate the risk of unknown losses.’” Thus, if innocent misrepresentation claims could avoid application of such clauses, they “‘would essentially become universally invalid.’” As a result, the court concluded plaintiffs’ claim of innocent misrepresentation was barred by the “as is” clause.