The common belief of most consumers, and indeed most lawyers, is that when someone buys a used car “as-is” they have given away all right to complain about the future performance of the car. Certainly, many car dealers feel this is the case as “you bought it as-is” is a common refrain for consumers that try to complain after a sale.
Fortunately for consumers, most people, lawyers included, are mistaken.
Because the “lemon law” applies only to new cars, a bad used car case most often falls under the Oregon Unlawful Trade Practices Act, ORS 646.606, et seq.
In the provision most relevant to used car transaction, ORS 646.608(1)(t) makes it a violation for a dealer to fail to affirmatively disclose “any known material defect or material nonconformity.”
Because the UTPA sets up a negligence framework, it is also a violation for a dealer to fail to disclose material nonconformities or defects that the dealer has “negligently disregarded when the dealer or broker should have known, prior to sale or lease of a motor vehicle.” OAR 137-020-0020(o).
So how does the UTPA interact with an “as-is” clause? The good news for consumers is that, essentially, it doesn’t. Despite the fact that most lawyers, and almost every car dealer, will attempt to use the “as-is” clause as a defense at some point in litigation or negotiation, Oregon courts have consistently held that an “as-is” clause does not defeat a UTPA claim.
The issue was first addressed in Hinds v. Paul’s Auto Werkstatt, Inc., 107 Or App 63 (1991).
The seller defendant claimed that because it used a standard “buyer’s guide” with a standard as-is clause pursuant to 16 CFR§455.2 it was protected from a UTPA claim for failure to disclose known material defects. The trial court found for the defendant, stating that the “clear intent” of the buyer’s guide “is to make certain that a buyer purchasing a used car ‘as is’ is aware of the full consequences of the agreement.” Id. at 65 n. 3. However, the Court of Appeals rejected this argument and reversed the trial court, stating that because 16 CFR§455.2 is silent as to “disclosure of known defects” the UTPA requirement that a seller disclose defects that it knew of or should have known of is not affected. Id. at 65.
Additionally, in Parrott v. Carr Chevrolet, Inc. the defendant argued that it was protected by an “as-is” clause and that a broad interpretation of ORS 646.608(1)(t) would “effectively nullify” a car dealer’s ability to use an “as-is” clause. 156 Or App 257, 270 n. 9 (1998), affirmed 331 Or 537 (2001). The court disagreed, stating that an “as-is” clause “calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty” whereas “ORS 646.608(1)(t) addresses the failure to disclose known material defects.” Id. (emphasis added).
Once again, the courts discussed as-is clauses only in the context of “warranties” and refused to extend that language to cover a dealer’s failure to disclose material defects and nonconformities.
While there are plenty of pitfalls and nuances to taking on a bad used car case, the presence of an “as-is” clause should not scare lawyers from investigating further and potentially taking the case.
In the end, an “as-is” clause will not bar recover under a valid UTPA theory.