The Oklahoma Court of Civil Appeals held that commercial buyers, unlike less sophisticated residential buyers, could be held to different standards when it comes to warranty disclaimers in a real estate contract.

Oklahoma City, OK -- (ReleaseWire) -- 02/25/2020 -- In any real estate transaction there is a "due diligence" period. This is the time after a contract is signed when the buyer has the chance to inspect the property. If there are any defects in title, such as an inaccurate description of the property, the buyer has a chance to object. If the buyer does not object, their legal remedies going forward may be limited.

A February 13 decision from the Oklahoma Court of Civil Appeals, Oak Tree Partners, LLC v. Williams, provides an apt illustration. This case involved a failed land deal. Tracy Williams signed a contract in April 2014 to purchase several parcels of land from Oak Tree Partners (OTP). The contract identified a total of 99.71 acres.

The contract also provided for a 60-day due diligence period and contained a warranty disclaimer. After the due diligence period expired, Williams informed OTP that the actual amount of land was short by 6.47 acres. OTP said the shortfall was only 4.28 acres. And in any event, OTP said the warranty disclaimer absolved it of any liability for the error.

Williams refused to close the deal. He demanded a reduction in the purchase price. OTP balked. Litigation followed. Williams alleged OTP committed breach of contract. OTP alleged slander of title after Williams filed a lis pendens against the properties.

The trial judge dismissed Williams' claims on summary judgment. A jury then ruled in favor of OTP on its slander of title claim and ordered Williams to pay damages. Both sides appealed.

The Court of Civil Appeals, Division II, agreed with Williams that the trial judge erred in submitting the slander of title question to the jury. Williams was entitled to summary judgment on that issue. But the judge did not err in rejecting Williams' breach of contract and related claims.

Oklahoma City business and commercial litigation attorney George H. Brown explained that courts are not lenient with commercial buyers who fail to exercise due diligence. "The appeals court distinguished a commercial buyer from someone purchasing a home. A residential buyer is typically 'not skilled in real estate' and signs a contract drafted entirely by a professional. In those situations, Oklahoma courts have said a blanket warranty disclaimer made by the seller is invalid. But here, Williams was a 'sophisticated' commercial buyer who had adequate time to perform due diligence. Since he failed to object to the inaccurate property description before the due diligence period expired, he was out of luck."

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