Chicago Business Litigation Lawyer Blog
“As is” and certain other non-reliance or purported exculpatory clauses under the common law, have not provided a defense against fraud in Illinois courts for decades. This is particularly important where, as in most automobile sales transactions, one party is unsophisticated, and the other party, like a used car dealer, is an expert in the field. As Zimmerman v. Northfield Real Estate, Inc., 156 Ill. App. 3d 154, 164 (1st Dist. 1986), found: “Exculpatory clauses are not favored and are strictly construed and must have clear, explicit and unequivocal language showing that it was the intent of the parties.” And the Consumer Fraud Act contains an anti-waiver provision which makes a sold “as is” clause defense to used car auto fraud matter a non-starter for statutory fraud, even if the common law already did not do that.
The Consumer Fraud Act, like other analogous Illinois statutes, such as the Real-Estate Disclosure Act, has an anti-waiver provision which preludes use of an “as is” clause or the no warranty clause present here to defeat a claim for misrepresentation or knowingly failing to disclose material defects. As the Court in Bauer v. Giannis, 359 Ill.App.3d 897, 906 (2d Dist. 2005) holds:
The policy prohibiting waiver of the obligations under the Act applies with equal force here. By insisting on the “as is” clause, which provides that plaintiff accepted the property without any warranty or representation, defendants in effect sought to obtain a waiver of their obligation under the Act to disclose material defects. … We see nothing in the “as is” provisions of the disclosure form that may be read as allowing a seller to contract out of its disclosure obligations.
Used car dealers may dream that “as is” language or a warranty disclaimer clause ends their obligations to tell the truth and saves them from having to disclose known material defects but that is not the law. If that were the case, there would be no used car consumer fraud claims unless the claims arose out of false written statements labeled as warranties. Used car dealers would then be free to sell cars that they knew were dangerous to drive and that they knew had defects by simply inserting an “as is”, no warranty or other exculpatory clause into a form contract, and then concealing and omitting to disclose those known defects. This would not only violate the Consumer Fraud Act’s prohibition on selling products with known material defects simply by failing to disclose them or by misrepresenting that they did not exist, but it would also violate the dealers’ obligations under the Vehicle Code requiring that they put safe cars on the road. Allowing used car dealers to sell dangerous cars would endanger not only the buyer and the buyer’s family and passengers but also the public. The Vehicle Code makes it: “unlawful for any person to . . . knowingly permit to be driven or moved on any highway any vehicle . . . which is in such unsafe condition as to endanger any person or property …” 625 ILCS §5/12-101(a).
Breach of warranty is not a pleading predicate to a consumer fraud claim A consumer does not have to assert a contractual warranty violation to plead and prove a statutory claim for consumer fraud for misrepresentations or knowing omissions of material fact that caused the consumer to purchase a defective vehicle which was defective at the time it was sold and, in this case, dangerous to operate. The 500-mile power train warranty is an added consumer protection, not a limitation of consumer rights and redress, interpreting the Consumer Fraud Act, holds used car dealers to a high standard and forbids them from misrepresenting the car’s condition or knowingly concealing material defects. As the Court in Crowder v. Bob Oberling Enterprises Inc., 148 Ill.App.3d 313, 318–19 (4th 1986) held, concealing the accident history and defective condition of a used car is exactly the type of misconduct that violates the Act and is so egregious that it calls for a punitive damages award:
Our review of the record thus far illustrates clearly the egregious scheme of deceit and fraud perpetrated by [car salesmen] Oberling and Fierge against plaintiff and against the public generally. Their false representations and omissions of material fact were made wantonly and by design. The trial court acted wisely in recognizing this to be a proper case in which to award punitive damages in order to punish Oberling and Fierge and to deter others from similar conduct. Id. at 318–19.
See Twyman v. S&M Auto Brokers, 16 C 4182, 2016 WL 6082357, at *3 (N.D. Ill. Oct. 18, 2016) (fraudulent sale of a rebuilt wreck in violation of the ICFA could result in a substantial punitive damages award and thus the potential for such damages meets the $75,000 threshold needed to create federal diversity jurisdiction); Totz v. Cont’l Du Page Acura, 236 Ill.App.3d 891, 904 (2nd Dist. 1992) ($5,000 in punitive damages for concealing rebuilt wreck with $400 in actual damages); Crowder v. Bob Oberling Enterprises Inc., 148 Ill.App.3d 313, 318–19 (4th Dist. 1986) ($9,000 in punitive damages for hidden accident and frame damage arising out of a $5,500 actual damages award).
Section 10c of the Consumer Fraud Act clearly forbids the use of “as is” or a no warranty clause as a defense: “[a]ny waiver or modification of the rights, provisions, or remedies of this Act shall be void and unenforceable.” See Tortoriello v. Gerald Nissan of N. Aurora, Inc., 379 Ill. App. 3d 214, 238 (2nd 2008) (contractual waiver of punitive damages void under ICFA anti-waiver provision since the Act provides for punitive damages). Just as in the case for punitive damages claims, the Act expressly provides for claims for misstatements or omissions of material fact which cannot be waived by an “as is” or no warranty clause. See Bauer, 359 Ill. App. 3d at 906. Moreover, “as is” clauses have long been held to be ineffective in fraud claims under the common law, even when there is no anti-waiver provision as there is with the Consumer Fraud Act. Napcor Corp. v. JP Morgan Chase Bank, NA, 406 Ill. App. 3d 146, 149, 152-53 (2nd 2010); Bauer, 359 Ill. App. 3d at 908 (“as is” clause is not a defense to fraud). Simply put, any type of contractual disclaimer of fraud, as Mother Earth, Ltd. v. Strawberry Camel, Ltd., 72 Ill.App.3d 37, 52 (1st Dist. 1979) holds, is ineffective:
[I]t is well established that the terms of any written contract executed in conjunction with fraud are irrelevant to a cause of action grounded not in contract but in tort (citations omitted). Likewise, we see no particular evidentiary significance in plaintiffs’ having signed a contract disclaiming any additional representations, when they have produced evidence that such representations were in fact made to them.
The reason for this rule is obvious. To allow this alleged defense to remain would be a clear-cut violation of Illinois’s statutorily mandated public policy of forbidding contractual waivers of its protections. And the existence of the “as is” clauses should be barred from even being mentioned at trial by an order in limine as the Court found in Bauer, 359 Ill. App. 3d at 908-909 (“we conclude that the final sentence of paragraph A–2 of the rider, wherein plaintiff accepts the property in “as is” condition without any warranty or representation, should not be admitted for any purpose.”)Contact one of our Chicago or Oak Brook used car fraud lawyers for a free consultation at 630-333-0333 or online here.