Opinion
Docket No. 71552.
Decided October 12, 1983.
Allaben, Massie, Vander Weyden Timmer (by Timothy I. Miner), for plaintiffs.
Wernette Vermeer (by Martin Wernette), for defendants.
Before: ALLEN, P.J., and R.B. BURNS and J.H. GILLIS, JJ.
ON REMAND
This case was remanded to this Court by the Supreme Court for reconsideration in light of Lenawee County Board of Health v Messerly, 417 Mich. 17; 331 N.W.2d 203 (1982). Miller v Varilek, 417 Mich. 998 (1983).
The facts are sufficiently presented in our original opinion, Miller v Varilek, 117 Mich. App. 165; 323 N.W.2d 637 (1982).
In Lenawee, supra, pp 31-33, the Supreme Court discussed when rescission of a contract should be granted:
"A court need not grant rescission in every case in which the mutual mistake relates to a basic assumption and materially affects the agreed performance of the parties.
"In cases of mistake by two equally innocent parties, we are required, in the exercise of our equitable powers, to determine which blameless party should assume the loss resulting from the misapprehension they shared. [Footnote omitted.] Normally that can only be done by drawing upon our `own notions of what is reasonable and just under all the surrounding circumstances'.[14]
"Equity suggests that, in this case, the risk should be allocated to the purchasers. We are guided to that conclusion, in part, by the standards announced in § 154 of the Restatement of Contracts 2d, for determining when a party bears the risk of mistake. * * * Section 154(a) suggests that the court should look first to whether the parties have agreed to the allocation of the risk between themselves. While there is no express assumption in the contract by either party of the risk of the property becoming uninhabitable, there was indeed some agreed allocation of the risk to the vendees by the incorporation of an `as is' clause into the contract which, we repeat, provided:
"`Purchaser has examined this property and agrees to accept same in its present condition. There are no other or additional written or oral understandings.'
"That is a persuasive indication that the parties considered that, as between them, such risk as related to the `present condition' of the property should lie with the purchaser. If the `as is' clause is to have any meaning at all, it must be interpreted to refer to those defects which were unknown at the time that the contract was executed.[15] Thus, the parties themselves assigned the risk of loss to [the purchasers].[16]
"[14] Hathaway v Hudson [ 256 Mich. 694, 702; 239 N.W. 859 (1932)], quoting 9 CJ, p 1161.
"[15] An `as is' clause waives those implied warranties which accompany the sale of a new home, Tibbitts v Openshaw, 18 Utah 2d 442; 425 P.2d 160 (1967), or the sale of goods. MCL 440.2316(3)(a); MSA 19.2316(3)(a). Since implied warranties protect against latent defects, an `as is' clause will impose upon the purchaser the assumption of the risk of latent defects, such as an inadequate sanitation system, even when there are no implied warranties.
"[16] An `as is' clause does not preclude a purchaser from alleging fraud or misrepresentation as a basis for rescission. See 97 ALR2d 849. However, [purchasers] did not appeal the trial court's finding that there was no fraud or misrepresentation, so we are bound thereby."
Taking the analysis in the instant case one step further, we must decide whether the parties agreed to the allocation of the risk between themselves.
In the instant case, the offer to purchase contained the following clause:
"Buyer has personally examined this property and agrees to accept same in its present condition except as may be specified herein and agrees that there are no other or additional written or oral understandings."
Based on Lenawee, supra, which was handed down after our prior opinion in this matter, and the language in the offer to purchase, we reverse our original position and now hold that the trial court did not err by denying plaintiffs' motion for relief from judgment.
Affirmed.