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INTRODUCTION
Contract clauses are quite quintessential to the realization of an efficacious contract and can have a significant impact on the operations of a commercial relationship. They serve to clarify many facets of any legal agreement where each clause affects the contract’s overall enforceability.
More often than not, and while drafting private contracts involving sale of goods, lawyers are wont to including the infamous “As Is, Where Is” clause. Therefore, by understanding the concept and utilization of the “As Is, Where Is” clause, both buyers and sellers can manage their expectations and protect their interests during a transaction.
What exactly is the “As Is, Where Is” Clause?
An “As Is, Where Is” clause is typically used in a commercial transaction where a buyer agrees to purchase an item and/or property in its current condition without any warranties or guarantees from the seller. The buyer accepts the property with all its existing faults, whether visible or hidden, thereby reducing the seller’s liability regarding the condition or quality of the sold asset.
Example: “The buyer agrees that it is purchasing and shall take possession of the purchased asset AS IS, WHERE IS, with all existing faults, known or unknown, without any warranty or representation of any nature, express or implied by seller or the receiver, including without limitation, any implied warranty of merchantability, implied warranty of fitness for particular purpose, or any warranty, express or implied, respecting title or non- infringement.”
“As Is, Where Is” clause vis-à-vis the legal framework
Considering that the use of “As Is, Where Is” clause relates to private contracts involving the sale of goods and commodities, it becomes trite enough that it falls under the ambits of two municipal statutes i.e.;
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Law of Contract Act, CAP 23 Laws of Kenya;
The Act recognizes all written contract which have been drafted in conformity with the law. Specifically, Section 3 of the Law of Contract Act states that: “No suit shall be brought whereby to charge any person upon or by reason of any representation or assurance made or given concerning or relating to the character, conduct, credit, ability, trade or dealings of any other person, to the intent or purpose that such other person may obtain credit, money or goods, unless such representation or assurance is made in writing, signed by the party to be charged therewith.”
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Sale of Goods Act, CAP 31 Laws of Kenya.
The Sale of Goods Act governs all dealings relating to the sale of goods and commodities in Kenya and which must emanate from the formation of a valid contract. To a greater extent, the Act dictates conditions that must be met in drafting a valid agreement relating to sale of goods.
Specifically, Sections 15 and 16 (a) & (b) of the Act go ahead to describe the requirements to be met where goods are sold by prescription to wit:
- Conditions implied by description
Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description; and, if the sale is by sample as well as by description, it is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description.
- No implied warranty as to fitness, except in certain cases
Subject to the provisions of this Act and of any Act in that behalf, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows—
- where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller’s skill or judgment, and the goods are of a description which it is in the course of the seller’s business to supply (whether he be the manufacturer or not), there is an implied condition that the goods shall be reasonably fit for that purpose:
Provided that in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose;
- where goods are bought by description from a seller who deals in goods of that description (whether he be the manufacturer or not), there is an implied condition that the goods shall be of merchantable quality:
Provided that if the buyer has examined the goods, there shall be no implied condition as regards defects which that examination ought to have revealed;
Judicial decision;
Over time, most litigants have been subjected to the brunt of strict interpretation of the constitution and statutes which form the primary sources of law. However, the advent and tenets of secondary sources of law like case laws/judicial authorities have played a vital role in law making and interpretation.
In a very recent landmark judgment in the case of Best Cars Limited t/a Impact Motors v Omoke & another (Civil Appeal E409 of 2023) [2025] KEHC 474 (KLR) (Civ) (23 January 2025) (Judgment), the High Court of Kenya, presided over by Justice LP. Kassan, was faced with an appeal from the Magistrate Court where the Trial Magistrate held that the seller of a motor vehicle was liable for misrepresenting to the buyers a faulty vehicle to be in perfect working condition and/or merchantable quality in a clear breach of the agreement of sale between the buyers and the seller which occasioned the former loss by way of repairs to the tune of Kshs. 400,000/-.
At the appeal, the seller (Appellant) contested that parties thereto were bound by the sale agreement which provided that the suit motor vehicle was sold “AS IT IS”. Specifically, the sale agreement provided that “it is further agreed upon between the buyer and the seller as follows; 1) The aforesaid vehicle is sold on the basis of “as it is” basis and the buyers have satisfied themselves that the vehicle is up to their expectations. The seller does not guarantee the buyer whatsoever”.
The Appellant further contended that the 1st Respondent having being given an opportunity to inspect and examine the condition of the suit motor vehicle, using his mechanics, there was no breach on the part of the Appellant. The Appellant through its Counsel thus relied on the provisions of Section 16(b) of the Sale of Good Act and the decisions in National Bank of Kenya Ltd vs Pipeplastic Samkolit (K) Ltd & Another [2001] eKLR and Prudential Printers Limited v Carton Manufacturers Limited [2012] eKLR in urging the Court to allow the appeal.
Counsel on record for the buyers (Respondents) contended that in reading of Section 16(b) of the Act, the Appellant is only exempted from the implied warranty that his goods are of merchantable quality where the buyer is an expert in that particular field and he examines the goods whose defects are identifiable upon ordinary examination. They relied on the decisions in Wood Products Limited v Rufus Kithela Kobia [2019] eKLR, Vivid Printing Equipment Solutions Limited Monicah Ng’ong’oo t/a Identity Partner [2019] eKLR and James Watenga Kamau v CMC Motors Group Limited [2020] eKLR.
In adjudicating the dispute, the appellate court put itself to answer whether the sale in question was one by description, sample or both. Guided by the decision of the Court of Appeal in Pradip Enterprises (EA) Limited v Magic Chemicals Inc [2019] KECA 607 (KLR), the learned Judge was of the finding that there was reasonable belief that given the merchantability of the suit motor vehicle was captured in the sale agreement despite the limited test drive undertaken at the point of sale, the nature of sale was one of description. In the upshot, the learned Judge held that the Trial Court was correct in its judgment and upheld its decision.
Implication of the judgment in sale of land transactions
Just like in the sale of goods/property, in the majority of cases, the seller of a land is not under a legal duty to disclose to the buyer any patent and/or latent defects in the land.
A patent defects is that which is obvious to the buyer and could be discovered through a reasonable inspection of the property e.g. A large hole in the ground that is plainly visible. The law assumes that the buyer can identify such an apparent defect and raise concerns with the seller. A latent defect is that which the buyer could not be expected to identify based on reasonable inspection of the property e.g. a hydrophobic soil that causes flooding during rains.
In most conveyancing transactions, the “As Is, Where Is” clause finds its root in the common law doctrine of “Caveat Emptor” i.e. Buyer beware. Just as the clause, this doctrine puts the duty on the purchaser to carry out all necessary inspection of the property before entering into an agreement. Therefore, where the purchaser fails to conduct such an inspection, then later identification of defects in the property may not be a ground to revoke or claim damages under the contract. In such cases it is presumed that the purchaser had the notice of defects, if any.
However, considering that land constitutes property sold by description, the judgment in Best Cars Limited t/a Impact Motors v Omoke & another (Civil Appeal E409 of 2023) [2025] KEHC 474 (KLR) (Civ) (23 January 2025) thus applies in a relative fashion.
Therefore, with the wake of this judgment, property owners shall more likely be put to account on the warranties of the actual state of their properties prior to disposing them off by way of sale.
CONCLUSION
The judgment concludes a long quest for justice and accountability particularly for parties who have been subjected to improper deals at the expense of the subtle but dreadful wordings of their respective contracts.
INFERENCES
- Sellers should ensure that all goods sold are of merchantable quality and that the fitness of the goods match the description.
- “As Is, Where Is” is not a remedy/defence to non-performance, misrepresentation, deception and/or fraud to any non-performing party.
- In any event, where the “As Is, Where Is” clause exists in a contract, the assumption is that the purchaser is not an expert hence any defect that surfaces after purchase cannot be assumed to have been easily detected upon ordinary examination.
- Regardless of inspection by a buyer, the seller may be in breach of an agreement for delivering any good of poor quality since there is an implied condition as to fitness to purpose. Therefore, a seller ought to be careful not to sell any unworthy good(s) that may not be fit to operate for its intended purpose.
Disclaimer:
The information contained in this article should neither be construed as legal advice from JRO ADVOCATES LLP and/or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter.
At JRO ADVOCATES LLP we continue to monitor the implementation of the law and provide first hand and prompt feedback. For more information or queries, please contact our team of experienced advocates for any clarifications or appointments through +254113230047 or via email through info@jroadvocatesllp.co.ke.
