Contract Disclaimers and As Is Provisions

Parties to a contract can try to assign risks and limit liability. Here's how.

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Contract disclaimers let parties to a contract rid themselves of certain responsibilities, while "as is" contract provisions typically put buyers on notice that they're stuck with any problems associated with the product or property they're purchasing. This article discusses the basics of disclaimers and as is provisions in contracts. (To learn more about your legal rights if something goes wrong with your contract, check out Nolo's Contract Disputes topic.)

What Are Disclaimers?

Maybe you're watching an ad for a new drug, and it promises to cure dandruff, hair loss, bad breath, and stained teeth, and it just sounds fantastic -- until it ends with a statement saying, "your results may vary" or warning that the manufacturer won't be responsible if, say, your hair turns blue or your organs fail. Statements like these, in which a seller or manufacturer explicitly disavows responsibility for certain results, are disclaimers.

Disclaimers are a way of distancing yourself from contractual or other legal obligations. Like other types of exculpatory provisions -- such as indemnity clauses or limitations on liability provisions -- they're used to minimize risks when the results of certain behavior are uncertain. For example, the parties may put a disclaimer in their contract giving up the right to seek consequential damages, because those damages can be difficult to predict and neither party wants to be on the hook later.

You can't disclaim everything. Some obligations cannot be disclaimed, because law and public policy don't allow people to avoid certain obligations. For example, a provision disclaiming a certain kind of warranty may be unenforceable. For that reason, you may need a lawyer's advice to determine which obligations may be disclaimed and which may not. (You can use Nolo's trusted Lawyer Directory to find and speak with an experienced contracts attorney near you.)

A disclaimer may also be required by contract. For example, a party that manufactures a product may require resellers to use a certain disclaimer on the product. As with all disclaimers, statements like these may not be enforceable if they violate the law or public policy. Let's say a financial accounting firm licenses its website content to a tax-preparation website. As a condition of the license, wherever the information is posted, the tax website must include the following disclaimer: "We are providing financial information, not financial advice. If you need financial advice, you should seek guidance from an accounting professional."

As Is Provisions in Contracts

You're about to buy a car and the owner tells you he's selling it as is. You suddenly feel uptight. What is he hiding? A missing gear shift, faulty brakes, a dead body in the trunk? A century ago, all purchases were as is and the buyer had an obligation to seriously inspect every purchase before making it. The age-old legal rule was caveat emptor: Let the buyer beware. But during the 20th century, laws were enacted to protect consumers, including laws requiring that goods and services be merchantable and useful for their intended purposes -- known as an "implied warranty of merchantability." But this implied warranty does not apply when property is sold as is. And, as long as the buyer had a reasonable opportunity to inspect the property beforehand, the as is buyer takes the goods in their current condition and cannot complain about problems later.

For more tips on getting your agreement in writing, read Nolo's article Contracts 101: Make a Legally Valid Contract. If you're looking for an A to Z guide to everything you need to know about contracts, get Nolo's new book Contracts: The Essential Business Desk Reference, by attorney Rich Stim.

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