Reducing Environmental Risk

“As Is” Clauses

Seldom is a knowledgeable buyer with experienced counsel willing to accept property “as is.” Nonetheless, if that is the agreed term of the transaction, then special care must be taken to make that provision effective. It will be construed against the seller.

1. If the “as is” clause does not expressly refer to seller’s statutory environmental liability, the court may hold that the “as is” clause only relates to the contractual remedies between the two parties, and not to statutory liability under CERCLA, leaving the buyer free, despite the “as is” clause, to sue the seller for cost recovery under CERCLA. See Southland Corp. v. Ashland Oil, Inc., 696 F.Supp. 994 (D. N.J. 1988); Marden Corp. v. C.G.C. Music LPD, 600 F.Supp. 1049 (D. Ariz. 1984), aff’d, 804 F. 2d 1454 (9th Cir. 1986). The court will consider whether the contractual language addressed CERCLA-type liabilities, whether the parties knew of the presence of hazardous waste on the site, whether the cleanup issue was addressed in negotiations, and whether separate consideration was paid for release of liability. See Northern Star Co. v. Archer Daniels Midland, 1993 WL 285942 (D. Minn. 1993).

2. A suitable “as is” clause may be: “Seller makes no covenant, representation or warranty as to the suitability of the property, the physical condition of the property for any purpose whatsoever, any restriction related to the development of the property, or the applicability of any governmental requirements to the property, including but not limited to Environmental Requirements. Buyer acknowledges that it has inspected the property, observed its physical characteristics and existing conditions, and has been afforded the opportunity to conduct such investigation and study on and of the property as it deems necessary for the purpose of acquiring the property for buyer’s intended use, and buyer hereby waives any and all objections or claims with respect to any and all physical characteristics and existing environmental conditions of the property, including without limitation, any Hazardous Materials in, at, on, under or related to the property. Buyer further acknowledges and agrees that the property is to be sold and conveyed to, and purchased and accepted by, buyer in its present condition, “as is” and with all faults, and hereby assumes the risk that adverse past, present or future physical characteristics and environmental conditions may not have been revealed by its inspection or investigation.”

3. As further protection against a court’s refusing to enforce an “as is” clause, a release can be added: “Buyer unconditionally releases seller from and against any and all liability to buyer under CERCLA or any other law or cause of action for Environmental Damages arising out of any violation of Environmental Requirements due to the presence of any Hazardous Material on, under, or about the property, whether or not caused by the negligence of seller.”

4. Buyer, in exchange for accepting an “as is” clause, may require seller to agree not to waive or release from liability any other responsible party, as defined by CERCLA or other state or federal law, for cost of remediation, and to the extent seller does, so seller must indemnify buyer for any loss occasioned thereby.



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