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S Development Company v. Pima Capital Management Co.8/30/2001
ct themselves accordingly. To sophisticated parties represented by counsel as were these, an "as is" clause serves not only as a warning to the buyer but a disclaimer of a representation of condition or quality.
The appellees rely upon Salt River Project Agricultural Improvement & Power District v. Westinghouse Electric Corporation, 143 Ariz. 368, 694 P.2d 198 (1984), and Aranki v. RKP Investments, Inc., 194 Ariz. 206, 979 P.2d 534 (App. 1999), in which this court cited SRP in its holding, and argue that the existence of an "as is" provision in a purchase contract cannot operate as a waiver of tort claims. The holdings of these cases are insufficient to support the appellees' position.
The court in SRP specifically considered whether a general Uniform Commercial Code warranty disclaimer could necessarily act as a waiver of claims for strict product liability pursuant to Section 402A. It did not address the issue of negligent non-disclosure under Section 551, the duty of disclosure imposed by Section 551(2)(e) or the effect of an "as is" clause on that duty.
Additionally, the actual holding of the court in SRP, which holding was reiterated in Aranki, stated that an agreement will not be enforced to constitute a waiver of tort liability when it is the product of coercion or inadvertence, when the agreement consists of a mere exchange of preprinted forms, when no evidence exists that an agreement was actually bargained for and when the evidence suggests unequal bargaining strength. Salt River Project, 143 Ariz. at 385, 694 P.2d at 215; Aranki, 194 Ariz. at 209, 979 P.2d at 537. However, the court in SRP stated that a waiver will be given effect where commercial parties have equal bargaining positions so that the choice was freely and fairly made and not forced by the circumstances. Further, the parties must have negotiated the specifications of the product and have knowingly bargained for the waiver. Under these circumstances our courts will enforce the bargain, even if it turns out to have been a bad bargain for one party or the other. 143 Ariz. at 385, 694 P.2d at 215 (emphasis added).
The question is whether the foregoing quotation describes the relationship and therefore the duty between the appellants and the appellees. The answer first requires a determination whether, in fact, a contractual agreement between two parties with equal bargaining positions was freely and fairly made and whether the parties actually negotiated the specifications of the contracts and knowingly bargained for the agreements which contained the "as is" clauses.
The appellees have been registered real-estate agents since 1984. By the time the appellants approached them about purchasing the property, the appellees had earned several million dollars from real-estate dealings. In addition to their own knowledge and experience in the commercial real estate business, in this particular matter, the appellees had retained experts to assist them in the purchase of the property, including legal counsel. Indeed, paragraph 28.13 of the contracts to which both parties agreed states:
Interpretations and Definitions. The parties agree that each party and his counsel have reviewed and revised this Agreement and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply in the interpretation of this Agreement.
Furthermore, neither party knew for two years that the plumbing was inherently defective.
The purchase contracts between two parties in equal bargaining positions were freely and fairly made. Both parties, with the aid of legal counsel, negotiated the specifications of
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