Does this "AS IS" / warranty-exclusion clause validly waive Louisiana's warranty against redhibitory defects?
Yes, if the exclusion is clear, unambiguous, and brought to the buyer's attention: Louisiana's implied warranty against hidden defects is called REDHIBITION, not the UCC's implied warranty of merchantability (Louisiana never enacted UCC Article 2; sales of movables are governed by the Civil Code's own Title on Sale). Civil Code art. 2520: "The seller warrants the buyer against redhibitory defects, or vices, in the thing sold. A defect is redhibitory when it renders the thing useless, or its use so inconvenient that it must be presumed that a buyer would not have bought the thing had he known of the defect." The article has a second branch that the useless-thing definition hides, and a different remedy for each: a defect is redhibitory "also when, without rendering the thing totally useless, it diminishes its usefulness or its value so that it must be presumed that a buyer would still have bought it but for a lesser price", and where the first branch gives "the right to obtain rescission of the sale" the second "limits the right of a buyer to a reduction of the price." Article 2548 supplies the waiver mechanism and its content requirement: "The parties may agree to an exclusion or limitation of the warranty against redhibitory defects. The terms of the exclusion or limitation must be clear and unambiguous and must be brought to the attention of the buyer." The Louisiana Supreme Court confirmed both halves of that test are live requirements, and identified the one thing a seller can never waive its way around, in Shelton v. Standard/700 Associates: "Thus, although the warranty against redhibitory defects may be excluded or limited, a seller cannot contract against his own fraud and relieve himself of liability to fraudulently induced buyers." Shelton is nevertheless a seller's win, which is the half a reader needs: the Court found the buyer's "conjectural allegations of fraud are too speculative", held "Summary judgment was properly granted in defendants' favor" and affirmed, over one dissent.
The trap
Article 2548's own third sentence is the fraud exception Shelton applies, and it is not a general unconscionability escape hatch: its text speaks of a seller who "has declared that the thing has a quality that he knew it did not have." Do not read that as limited to spoken misrepresentations, though: Shelton reads the sentence as meaning the waiver "is not effective if the seller commits fraud, as defined in the civil code, upon the buyer," and the Code's definition, art. 1953, is "a misrepresentation or a suppression of the truth" and adds that "Fraud may also result from silence or inaction", so a seller's knowing silence about a defect can defeat the waiver as readily as a false statement (Shelton's own three elements begin with "a misrepresentation, suppression, or omission of true information"). Do not assume a generic "AS IS" clause automatically satisfies the "clear and unambiguous ... brought to the attention of the buyer" standard the way a UCC jurisdiction's conspicuousness rule might be satisfied by boldface type alone: a waiver buried in a lengthy standard form without the buyer's specific attention drawn to it risks failing art. 2548 even if it uses clear words. Where the waiver does hold, the burden is the buyer's and it is a double one: in Creole Gardens, L.L.C. v. Schreiber the Fourth Circuit held that the buyer "had the burden to prove a redhibitory defect existed at the time of sale and that the Schreibers knowingly failed to disclose this defect", calling those the "necessary elements to recover when the warranty against redhibitory defects has been waived", and affirmed judgment for the sellers of an "as is" building. Separately, art. 2521 supplies an independent, narrower exclusion that has nothing to do with a drafted waiver clause at all: the seller owes no warranty "for defects that should have been discovered by a reasonably prudent buyer": an objective inspection-based cutoff distinct from any negotiated exclusion. And because Louisiana has no enacted UCC Article 2, do not reach for the conspicuousness, merchantability or as-is and with-all-faults vocabulary of UCC § 2-316 when drafting or reviewing a Louisiana movable-sale disclaimer: art. 2548's own, differently-worded test controls.
10 authorities
- statuteLa. Civ. Code art. 2520enactment date not established
The words that state the rule
The seller warrants the buyer against redhibitory defects, or vices, in the thing sold. A defect is redhibitory when it renders the thing useless, or its use so inconvenient that it must be presumed that a buyer would not have bought the thing had he known of the defect. The existence of such a defect gives a buyer the right to obtain rescission of the sale. A defect is redhibitory also when, without rendering the thing totally useless, it diminishes its usefulness or its value so that it must be presumed that a buyer would still have bought it but for a lesser price. The existence of such a defect limits the right of a buyer to a reduction of the price.
- statuteLa. Civ. Code art. 2521enactment date not established
The words that state the rule
The seller owes no warranty for defects in the thing that were known to the buyer at the time of the sale, or for defects that should have been discovered by a reasonably prudent buyer of such things.
- statuteLa. Civ. Code art. 2548enactment date not established
The words that state the rule
The parties may agree to an exclusion or limitation of the warranty against redhibitory defects. The terms of the exclusion or limitation must be clear and unambiguous and must be brought to the attention of the buyer.
The words that state the rule
Thus, although the warranty against redhibitory defects may be excluded or limited, a seller cannot contract against his own fraud and relieve himself of liability to fraudulently induced buyers.
The words that state the rule
Under this article, an otherwise effective exclusion or limitation of the warranty against redhibitory defects is not effective if the seller commits fraud, as defined in the civil code, upon the buyer.
- statuteLa. Civ. Code art. 1953enactment date not established
The words that state the rule
Fraud is a misrepresentation or a suppression of the truth made with the intention either to obtain an unjust advantage for one party or to cause a loss or inconvenience to the other. Fraud may also result from silence or inaction.
The words that state the rule
In sum, there are three basic elements to an action for fraud against a party to a contract: (1) a misrepresentation, suppression, or omission of true information; (2) the intent to obtain an unjust advantage or to cause damage or inconvenience to another; and (3) the error induced by a fraudulent act must relate to a circumstance substantially influencing the victim's consent to (a cause of) the contract.
- statuteLa. Civ. Code art. 2548enactment date not established
The words that state the rule
A buyer is not bound by an otherwise effective exclusion or limitation of the warranty when the seller has declared that the thing has a quality that he knew it did not have.
The words that state the rule
In conclusion, we find plaintiffs conjectural allegations of fraud are too speculative. Plaintiff has failed to produce factual support sufficient to establish that she would be able to satisfy her evidentiary burden of proof at trial. Summary judgment was properly granted in defendants' favor. Accordingly, the judgment of the court of appeal is affirmed. AFFIRMED.
- caseNo. 2019-CA-0105 (La. Ct. App. 4th Cir. Sept. 25, 2019)Creole Gardens, L.L.C. v. Klaus-Peter F. Schreiber and Sarah Leonard SchreiberLa. Ct. App.decided 2019
The words that state the rule
Creole Gardens had the burden to prove a redhibitory defect existed at the time of sale and that the Schreibers knowingly failed to disclose this defect. The district court not only found that the Schreibers did not make a false warranty about the existence of fire code violations at the time of sale, but also that they did not make any knowing misrepresentations—necessary elements to recover when the warranty against redhibitory defects has been waived. Our review finds no error in these findings. Accordingly, based on the foregoing reasons, we affirm the judgment.
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