Contesting Disclaimer-of-Reliance Clauses by Efficiency, Free Will, and Conscience: Staving Off Caveat Emptor

This Article hopes to make evident two trends seemingly in conflict. The first trend is toward raising the standards of probity and veridicality in contractual relations toward greater accountability and liability on market actors operating outside traditional bounds. The first is expressed by new rules that: require good faith and fair dealing between parties; ensure sellers are obligated to disclose material facts about a property otherwise unavailable to buyers; and make wrongdoing parties liable to non-parties who foreseeably relied on the wrongdoers' contractual undertakings. This trend promises to avert injury, achieve efficiency, and seems to accord with society's evolving notions of fairness. The second trend, exemplified in Teers, counters the first. Because humans are innately self-interested, entrepreneurs (and rascals) have devised techniques to avoid these new levels and kinds of exposure to potential liability for non-disclosure and to non-parties. They have employed market and contract strategies that purport to shift to the other party the onus of uncovering the truth--which might be buried under layers of misrepresentations and that limit non-parties' right to rely on contract promises. The effect is to enable a market actor to contract away liability for intentional wrongdoing by the simple expedients of “as is” and “disclaimer-of-reliance” clauses--the result in Teers. This is troubling in a number of respects. First, the clauses undercut the fundamental character of enforceable contracts being the product of free will. Indeed, the first requirement of contract formation is a meeting of minds. Fraud, ostensibly camouflaged by disclaimers, negates the unknowing party's free will. Second, such liability-avoidance techniques, although ostensibly consistent with the contracting parties' free will, disturb the markets because of the externalities. Absent the truth about the quality or condition of the property, buyers enter into transactions, or pay to