The Halachic Validity of a Statement in a Contract That the Apartment Is Sold “As Is” [AS IS]

Question: It is common in transactions, such as the sale of apartments, to include a clause in the contract stating that the seller sells the apartment as it is [known as AS IS ], meaning that even if defects are discovered in the apartment, the buyer will not be able to demand that the seller repair them or cancel the sale. It is necessary to know the halachic position on this matter and whether such a clause is binding.

Answer: The Shulchan Aruch rules that a declaration waiving claims if a defect is discovered in the purchase, without specifying what defect, has no halachic validity. However, in practice it is customary to write in contracts that the apartment is sold as it is [ AS IS ]. In practice, opinions differ as to how this should be treated, and we will address the main approaches. Some batei din hold that only with respect to a defect that the buyer could have checked in advance, or that people normally check and he did not check, the waiver is effective as a mechilah, a relinquishment. But with respect to a defect that people do not normally check, or a hidden defect, the waiver is not effective. Others hold that the waiver applies only to flaws that people do not normally regard as a defect when buying an apartment; in such a case the waiver takes effect. But with respect to a defect that is a substantial flaw in the apartment and reduces its value, the waiver does not take effect. It is clear, however, that regarding a defect of which the seller was aware and did not inform the buyer, the waiver certainly does not apply. Likewise, something the buyer saw and knew about but did not address cannot later be claimed. Therefore, the practical advice for the waiver to have halachic validity is to define the waiver regarding the defect up to a specified percentage of depreciation in value, or up to a specified amount of repair cost, which is considered a fixed amount.

Source of the law

In the Gemara (Bava Metzia 51a), Rav said: One who says to his fellow, “on condition that you have no claim of ona’ah against me,” nevertheless the other party has a claim of ona’ah against him. Even according to Rabbi Yehudah, who holds that in monetary matters one may stipulate against what is written in the Torah, with respect to ona’ah such a condition is ineffective, for “does he know what he is waiving?”

The view of the Rambam and the Shulchan Aruch: a general waiver of a defect has no validity

The Rambam rules (Laws of Sale 15:6): Anyone who buys without specification buys only an item that is whole and free of any defect. If the seller specified and said, “on condition that you cannot return it to me because of a defect,” the buyer may nevertheless return it until the seller specifies the defect present in what he is selling and the buyer waives it, or until he says to him: “Any defect found in this purchase that reduces its value up to such-and-such an amount, I accept.” For one who waives must know the matter that he is waiving, and must specify it, as in the case of ona’ah. It is ruled (ibid. 13:3) that one who says, “on condition that you have no claim of ona’ah against me,” must specify how much ona’ah there is in the sale; and so it is ruled in the Shulchan Aruch (Choshen Mishpat 232:7).

It emerges that an agreement that even if a flaw or defect is found in the purchased item the sale remains valid is ineffective, since as long as the seller did not specify to the buyer the defects in the purchase, the buyer may cancel the sale. This is so even if it was agreed that he could not demand cancellation of the sale due to the defect, because the buyer’s waiver of the defect is ineffective, since he did not know the nature of the defect and its value.

Explanation of the Rambam’s view: according to his approach, one cannot undertake an obligation regarding something not fixed in amount

The Tur (Choshen Mishpat 232) cites the Rambam’s view, but does not cite the end of his words, where he wrote “as in the case of ona’ah.” He explains that the Rambam follows his own view (Laws of Sale 11:16) that a person cannot obligate himself in something not fixed in amount; similarly, he cannot waive something not fixed in amount.

But the Tur cites what he wrote earlier (207:29), that according to the Rosh (Responsa, principle 74, section 1), one can transfer ownership of something that has a fixed measure, and consequently the same applies to waiver; that is, the Tur holds that a person can waive a defect even if he does not know the nature of the defect.

The Beit Yosef (232) writes that the words of our master are correct: the Rambam follows his own view that a person cannot obligate himself to another in something not fixed in amount, and the same applies to waiver; and the halachah follows the Tur and not the Rambam.

However, in Bedek HaBayit he writes that since the Rambam concluded, “as in the case of ona’ah,” it implies that he based the matter on its similarity to the law of ona’ah, as the Maggid Mishneh wrote, and not on the reason of undertaking something not fixed in amount, as the Tur wrote. This is also clear from the Kesef Mishneh, who wrote that the Tur’s words are correct, but from the end of the Rambam’s wording it appears that he derived it from ona’ah and not because it is not fixed; therefore he rules like the Rambam.

Explanation of the Tur’s view, distinguishing between waiver of ona’ah and waiver of a defect

There is a difficulty with the Tur: regarding ona’ah (Choshen Mishpat 227), he rules that a condition is ineffective unless the ona’ah was specified; while regarding a defect (232), he rules that waiver is effective even without specification, and he holds that obligation and waiver regarding something not fixed in amount are effective.

The Bach (232) explains that with ona’ah, people do not normally waive price exploitation, and therefore we assess his intention that had he known there was ona’ah, he would not have agreed. But with a defect, since there are people who are not particular about some defects, there is no assessment that had he known he would not have agreed; therefore the waiver is effective.

The Netivot (232:2) resolves the contradiction in the Tur as follows: with ona’ah, where the seller sells above the price and, according to Torah law, must return the amount of the ona’ah, an explicit waiver is required. But with a defect, it is not a Torah law that the sale is automatically void if it was sold according to its value and price; rather, there is a presumption that a person does not buy and agree to a transaction containing a defect. Since the buyer revealed his view that he is not particular about the defect, the presumption does not apply and the sale is not canceled. [See Galya Masechta, section 3, who raises a difficulty on the Netivot and offers an explanation; this is not the place to elaborate.]

Explanation of the rulings of the Shulchan Aruch

In Chiddushei Hagahot to the Perishah it is written that the text in the Beit Yosef should be emended to say that the words of our master are “not” correct, for in the Shulchan Aruch the Mechaber ruled like the Rambam, even though regarding one who gives something not fixed in amount he did not rule like him.

The explanation appears to be as the Sema (Choshen Mishpat 232:9) asked: the Shulchan Aruch, in the laws of ona’ah (232:7), brings the view of the Rambam; whereas regarding an obligation involving something not fixed in amount (60:2; 207:21), and regarding suretyship for something not fixed in amount (131:13), he brings the Rambam’s view and writes that all later authorities disagreed with him, ruling like them. If so, it is impossible to say that according to the Shulchan Aruch a person cannot waive because this is something without a fixed amount, for he rules not like the Rambam.

The Sema explains that the Shulchan Aruch’s ruling like the Rambam is not for the reason given by the Tur—that it is something not fixed in amount—but because it is learned from ona’ah, where the amount of the ona’ah must be specified in the waiver. He adds an explanation of the reason for the law in ona’ah and in defects: the buyer says to the seller, “When you said this to me at the time of the sale, I thought you did not know that there was ona’ah or a defect in the sale, and you said it only to put my mind at ease.” In Aruch HaShulchan (232:11) he explains: “You said it only to calm my mind, as though it were a valuable purchase, even if it had a defect.” [See Machaneh Ephraim, Laws of Sale, Laws of Ona’ah, section 16, for his explanation.]

The Bach’s explanation of the rulings of the Shulchan Aruch

The Bach (end of 207) explains the contradiction in the rulings of the Shulchan Aruch by distinguishing: where the matter depends on one’s own intention, such as one who obligates himself to his fellow according to the latter’s wishes, or becomes a guarantor for his fellow according to his wishes, he becomes bound even in something not fixed in amount, because that is his will. But when one sells to his fellow “on condition that you will not return it to me because of a defect,” the sale depends on both parties’ intentions: the seller’s intention is to sell at this price only on condition that the buyer not return because of any defect, while the buyer’s intention is to buy only with a certain defect that is fitting to waive, but not with other major defects. Therefore he may return it until the defect is specified, just as ona’ah must be specified.

It emerges according to his view that the Shulchan Aruch’s ruling (232:7) is also in accordance with the Rosh, who holds that one can undertake an obligation regarding something that has no fixed amount, and this is unlike the Tur’s words. However, the Shach (232:4) writes that the Bach’s words are “words of prophecy.”

The view of the Nimukei Yosef in the name of the Ramah: he agrees with the Rambam that a buyer’s acceptance of every defect in the purchase has no validity

The Nimukei Yosef (Bava Metzia 49b in the pages of the Rif) cites the law from Kiddushin (11a): when a man betroths a woman and accepts her defects upon himself, there is no concern that the kiddushin will be voided as a mistaken transaction.

He cites the Ramah, who writes that it is reasonable that this applies only to kiddushin, but with respect to buying and selling, even if he accepted upon himself all defects in the purchase, if a defect is found he may claim that it was a mistaken transaction, as with ona’ah. The distinction between kiddushin and buying and selling is that with kiddushin the practice is to investigate thoroughly, and since there is a presumption that he investigated, it is assumed that he saw all the defects and accepted them upon himself. But in buying and selling it is common for a person not to buy only after checking; therefore we do not say that he waived. This is like the Rambam’s view.

The practical reality in contemporary contracts, where it is written that the apartment is sold as it is [ AS IS ].

In transactions, and especially in the sale of second-hand apartments, the custom is to write that the apartment is sold as it is ( AS IS ). Some batei din take the approach that this applies only to a defect that the buyer knew about, or to matters that are normally checked and he did not check. They prove this from the law ruled in the Shulchan Aruch (232:3): one who sells his fellow an item with a defect of which the buyer was unaware must take it back even after several years, for it is a mistaken transaction, provided that the buyer did not use it; but if he used it after seeing the defect, he has thereby waived it and cannot retract. The Sema (10) cites the Maggid Mishneh that regarding something the buyer can discern immediately, such as something that can be tested or tasted, if he was not particular to do so and the seller sold it to him without specification, he cannot retract. Chochmat Shlomo (there) writes that this applies specifically where fraud is common and he should have checked beforehand; but where such fraud is not common and it is not customary to check it, it is a mistaken transaction as soon as he becomes aware.

Therefore, it appears that with flaws that can be seen but were not seen, or things that a reasonable person checks before buying and did not check, one may rely on the waiver clause. This is aside from cases where the contract explicitly states things that the seller must repair by a certain date.

But defects that cannot be seen, such as a hidden defect, as well as defects that a reasonable person does not check and that are discovered later, are matters regarding which they hold that a general waiver is not valid.

Some batei din hold that a waiver is effective only for certain flaws

However, there is another approach among some batei din: the meaning is that the buyer knows that various flaws are common and buys on that basis. In a matter where this is the accepted practice, one cannot say that there is an assessment of intention that had he known of the flaw he would not have bought. Consequently, as long as the matter concerns minor flaws that do not reduce the apartment’s value, this is not considered a waiver by the buyer to the seller of defects in the purchase, where the defect must be specified; rather, the meaning of their agreement is that in transactions of this type the buyer knows that such flaws are common, and the custom is that they are not considered defects. As ruled in the Shulchan Aruch (232:6), anything that the people of the locale have agreed is not a defect does not allow one to retract; since such flaws are common, they are not considered a defect for the buyer.

Even with major flaws, if they do not reduce the apartment’s value and there is also no clear assessment that had the buyer known of the flaws he would not have bought, the law is that the buyer cannot demand cancellation of the sale or repair. But if there are major defects that reduce the apartment’s value, and there is a clear assessment that had the buyer known of these defects he would not have bought, then the buyer may cancel the sale or demand repair [in accordance with the laws ruled regarding mistaken transactions and ona’ah].

Where the seller deceived the buyer, even with minor flaws the buyer did not intend to waive

The Pitchei Teshuvah (Choshen Mishpat 232:4) cites from Shevut Yaakov (vol. 2, section 166) that if the seller knew that it was fraudulent and presented himself before the buyer as uncertain, this is considered misleading him. That is, where the seller knew of flaws and misled the buyer into thinking there were no flaws, it appears that even with minor flaws that do not reduce the apartment’s value, waiver is ineffective, because it is clear that the buyer did not intend to waive flaws that the seller knew about and concealed through deception.

Practical recommendation

In light of what has been written—that according to halachah a general waiver has no validity, while the common practice is to write in contracts that the apartment is sold as it is [ AS IS ]—its definition depends on the practice of the batei din. Therefore, if one wants the buyer to be unable to return with a claim, it is recommended to add a clause stating that the buyer hereby declares that he waives in advance any claim of a defect that reduces the apartment’s value by up to 20%, or whose repair cost is up to approximately 20% of the apartment’s value [this number is only an example; any desired amount may be set]. In such a case the buyer has waived a fixed amount, which he is able to waive. Otherwise, there may be defects regarding which the buyer will be able to demand that the seller repair them, or cancel the sale, even though it was written that he waives any claim of defect.

From “Torat HaMishpat”