'As Is' Clause Doesn't Apply to Profitability of Business

Facts: A tenant and an owner discussed the value and potential of a business for sale, and then entered into a lease agreement that allowed the tenant to lease the property, the business, and all of its contents for a specified amount with an option to purchase. The document signed by both parties contained an “as is” clause.

The tenant operated the business for less than a month and realized that the business was not as profitable as he was led to believe, and that the owner did not have actual authority to sell the business. The tenant sued, alleging that the owner fraudulently misrepresented the profitability of the business and its authority to sell the business. The lower court ruled for the tenant, and the owner appealed.

Decision: A Texas appeals court upheld the lower court's decision in favor of the tenant.

Reasoning: The owner argued that the tenant's lawsuit should not have been successful on the fraudulent misrepresentation claim, because the tenant had agreed to purchase the business “as is.” The court explained that the owner's reliance on the “as is” clause in the lease was related to the property where the business was located, not to the profitability of the business.

• Oliver v. Ortiz and Lauricella, August 2008