As-Is Provisions in Commercial Real Estate Contracts - Texas and Missouri

Introduction

If you do nothing else right drafting for a Seller, get a bloody “as-is, where is” provision in the purchase and sale agreement. I am in the process of adopting a standard as-is provision for my new law firm and decided to research the applicable law for Missouri and Texas. Below are my findings.

Overview

An “as is” clause looks the same in a Texas contract and a Missouri contract. It does not have the same effect.

In Texas, a properly drafted “as is” clause is a powerful defense. The Texas Supreme Court has held that a valid “as is” agreement negates the causation and reliance elements common to a buyer’s claims about the condition of the property — defeating, as a matter of law, claims for breach of implied warranty, violations of the Deceptive Trade Practices Act, negligence, breach of the duty of good faith and fair dealing, and fraud. The sole exception is fraud in the inducement of the “as is” agreement itself.

In Missouri, a properly drafted “as is” clause does less. No Missouri appellate court has held that an “as is” clause negates the causation or reliance elements of a fraud claim; the clause places the risk of the property’s condition on the buyer, but it does not bar a claim for fraudulent concealment or nondisclosure of a known, latent, material defect. That last point is not what separates the two states — Texas does not bar such a claim either, because concealment that induces the “as is” agreement falls within the fraudulent-inducement exception. The difference is that the Texas clause additionally defeats the buyer’s non-fraud, condition-based claims — implied warranty, DTPA, negligence, and good faith — by negating causation and reliance, while Missouri’s does not.

That difference is the subject of this article. For counsel practicing across the Texas–Missouri footprint, identical clause language carries materially greater protective weight in Texas than in Missouri.

Texas

The seminal Texas case is Prudential Insurance Co. of America v. Jefferson Associates, Ltd., 896 S.W.2d 156 (Tex. 1995). A sophisticated investor bought a commercial building “as is,” later discovered asbestos, and sued. The Texas Supreme Court held that the “as is” agreement negated causation: the buyer, by agreeing to take the property “as is,” made his own appraisal of the bargain and accepted the risk that he was wrong. As the Court put it, “the sole cause of a buyer’s injury in such circumstances, by his own admission, is the buyer himself.”

The clause reaches a wide range of theories. A valid “as is” provision negates the causation and reliance elements of DTPA, fraud (excluding fraudulent inducement of the clause itself), negligence, and breach of the duty of good faith and fair dealing. Prudential, 896 S.W.2d at 161; Gym-N-I Playgrounds, Inc. v. Snider, 220 S.W.3d 905 (Tex. 2007). It can also waive implied warranties — in Gym-N-I, the implied warranty of suitability in a commercial lease. The principle governs commercial sales (Prudential) and commercial leases (Gym-N-I) alike.

Factors Affecting Enforceability

Prudential also made clear that an “as is” clause does not have a determinative effect in every case. Texas courts have distilled the opinion into a five-factor test:

1. the sophistication of the parties;
2. the terms of the “as is” agreement;
3. whether the agreement was freely negotiated;
4. whether it was an arm’s-length transaction; and
5. whether there was a knowing misrepresentation or concealment of a known fact.

Procter III v. RMC Capital Corp., 47 S.W.3d 828 (Tex. App.—Beaumont 2001, no pet.). Whether the buyer was represented by counsel, while not an independent factor, also matters. The clause must “leave no doubt” as to exactly what the buyer agreed to. Prudential; Nooner Holdings, Ltd. v. Abilene Village, LLC, 668 S.W.3d 956 (Tex. App.—Eastland 2023, pet. denied). Prominence helps: language set in capitals, set apart for emphasis, and repeated across the transaction documents is far stronger than boilerplate buried in a form. A negotiated, bargained-for clause between sophisticated parties is enforced; an unnegotiated, boilerplate provision in a standard form may not be. Prudential, 896 S.W.2d at 162.

The Fraudulent-Inducement Exception

A buyer is not bound by an “as is” clause he was fraudulently induced to accept. A seller “cannot have it both ways”: he cannot assure the buyer of the property’s condition to obtain the “as is” agreement and then disavow the assurance that procured it. Prudential, 896 S.W.2d at 162. A seller also cannot obstruct the buyer’s inspection and still insist on “as is.”

In practice, this exception is narrow. A buyer is charged with what a reasonable inspection would reveal, so an independent inspection — or the failure to conduct one in the face of contractual “red flags” — usually defeats the reliance and causation that fraudulent inducement requires, because the buyer’s own diligence, not the seller’s silence, becomes the source of the buyer’s knowledge. In Nooner Holdings, the contract acknowledged “defects in the parking lot,” the buyer conducted no diligence, and the court rejected its claim of reliance on the seller’s failure to disclose the full extent of those defects.

Texas also enforces a disclaimer-of-reliance clause as a distinct and independently sufficient ground. In Community Management, LLC v. Cutten Development, L.P., No. 14-14-00854-CV, 2016 WL 3554704 (Tex. App.—Houston [14th Dist.] June 28, 2016, no pet.), a clause stating the buyer was “not relying upon any information provided by Seller” barred fraud claims in a $33 million apartment transaction — even against evidence of fifty-eight prior written leak reports — under the Texas Supreme Court’s Schlumberger line, because the parties were sophisticated, counseled, and bargaining at arm’s length. As the Nooner court put it, an “as is” clause “is a form of disclaimer of reliance.”

The Common-Law Duty to Disclose

Beyond the contract, Texas also recognizes a common-law duty to disclose — and this is the point at which Texas doctrine overlaps with Missouri’s. Failing to disclose is equivalent to a false representation only when particular circumstances impose a duty to speak and the party deliberately stays silent; absent such a duty, silence is not fraud, and whether the duty exists is a question of law. See Nooner Holdings, 668 S.W.3d 956. The duty generally does not arise without a confidential or fiduciary relationship, a partial disclosure that creates a false impression, or a seller’s superior knowledge of a material fact that “(1) would not be discoverable by the exercise of ordinary care and due diligence by the purchaser or (2) a reasonable investigation and inquiry would not uncover.”

The corollary matters as much as the duty. A buyer who does not investigate is “charged with knowledge of all facts that would have been discovered by a reasonably prudent person similarly situated” — so in Nooner, where the buyer conducted no diligence on a parking lot the contract had already identified as defective, there could be no actionable nondisclosure as a matter of law. Missouri applies the same analysis, as discussed below.

Limits on the Clause’s Protection

The clause’s protection is not unlimited. A seller who makes affirmative misrepresentations to procure the “as is” agreement, or who actively conceals or obstructs inspection, loses the clause’s protection. Conversely, a seller has no duty to disclose what it does not actually know; Prudential turned on that point (no actual knowledge of the asbestos).

Missouri

Missouri begins from caveat emptor — buyer beware. See Blaine v. J.E. Jones Construction Co., 841 S.W.2d 703 (Mo. App. 1992) (treating caveat emptor as the baseline against which a seller’s duty to disclose may arise); see also Timothy A. Reuschel, Note, Caveat Vendor: Sellers of Real Estate Now Need to Beware of Misrepresentations about the Condition of Property, 64 Mo. L. Rev. ___ (1999). Unlike Texas, however, Missouri has not developed a body of law that gives the “as is” clause independent doctrinal force. There is no Missouri analog to Prudential, and no Missouri appellate decision treating an “as is” clause as negating the causation or reliance elements of a buyer’s claims about the property’s condition. The operative question in a Missouri condition dispute is therefore not what the clause does to the buyer’s claims, but whether the seller’s conduct — an affirmative misrepresentation, or silence in the face of a duty to speak — crossed into actionable fraud. The clause bears on that inquiry, but as one fact relevant to caveat emptor and the buyer’s right to rely, not as a freestanding defense.

Within that framework, an “as is” clause still does real work. In an arm’s-length commercial sale it confirms the caveat-emptor allocation, places the risk of the property’s condition on the buyer, and forecloses condition-based contract claims. Its warranty-waiver function, by contrast, is largely redundant in the commercial setting: Missouri recognizes no implied warranty of quality in the sale of commercial real estate. The implied warranty of merchantable quality and habitability is confined to new homes sold by a builder-vendor, and caveat emptor otherwise governs the sale of land and improvements. Smith v. Old Warson Development Co., 479 S.W.2d 795 (Mo. 1972). What the clause cannot do is immunize a seller who affirmatively misrepresents the property’s condition, obstructs the buyer’s inspection, or conceals a known latent defect that the buyer could not have discovered through reasonable diligence.

Missouri recites fraud as nine elements: (1) a representation; (2) its falsity; (3) its materiality; (4) the speaker’s knowledge of its falsity, or ignorance of its truth; (5) the speaker’s intent that the representation be acted upon by the hearer in the manner reasonably contemplated; (6) the hearer’s ignorance of the falsity; (7) the hearer’s reliance on the representation’s truth; (8) the hearer’s right to rely on it; and (9) consequent and proximately caused injury. Hess v. Chase Manhattan Bank, USA, N.A., 220 S.W.3d 758, 765 (Mo. banc 2007); Ringstreet Northcrest, Inc. v. Bisanz, 890 S.W.2d 713 (Mo. App. W.D. 1995); Constance v. B.B.C. Development Co., 25 S.W.3d 571 (Mo. App. W.D. 2000).

Critically, concealment can substitute for an affirmative misrepresentation where the seller has a duty to speak. Reis v. Peabody Coal Co., 997 S.W.2d 49 (Mo. App. 1999); Andes v. Albano, 853 S.W.2d 936 (Mo. banc 1993) (silence equals misrepresentation only when there is a duty to disclose). A duty to disclose arises from a fiduciary or confidential relationship, from a partial disclosure that conveys a false impression, or from particular circumstances — most importantly, where one party has superior knowledge of a fact not within the fair and reasonable reach of the other and is relied upon to disclose it. Missouri courts weigh the open-ended factors set out in Blaine: the relative intelligence of the parties, their relationship, the nature of the undisclosed fact, the nature of the contract, whether the concealer is buyer or seller, the materiality of the fact, and the respective knowledge of the parties.

The Missouri Supreme Court applied this in Hess v. Chase Manhattan Bank, USA, N.A., 220 S.W.3d 758 (Mo. banc 2007): a seller-bank that knew the property was under EPA investigation for hazardous-waste dumping, and did not disclose it, could be liable for fraud where the buyer could not reasonably have discovered the investigation. Silence, in the face of a duty to speak, replaced the element of an affirmative representation. Accord Droz v. Trump, 965 S.W.2d 436 (Mo. App. W.D. 1998) (cited in Hess as directly on point; seller’s failure to disclose a state environmental investigation of a former landfill was actionable). And — directly relevant to an “as is” or disclaimer clause — the Hess Court held that because the buyer’s claim was one for fraudulent inducement, it was not precluded by the disclaimers in the contract itself. That is the Missouri counterpart to the Texas fraudulent-inducement carve-out: a seller cannot use boilerplate to contract away liability for fraud that induced the contract.

The converse mirrors Texas’s inspection rule, though it operates through a different mechanism. In Missouri, a defect is not latent if it is discoverable by reasonable diligence. Mobley v. Copeland, 828 S.W.2d 717 (Mo. App. 1992). A buyer who has — or reasonably should have — access to the facts cannot complain of nondisclosure, because the information was within his reasonable reach and the duty to disclose never attached. In both states, the buyer’s ability to discover the defect is often dispositive; Texas treats it as defeating reliance, and Missouri treats it as defeating the existence of a duty.

Two practical points close the Missouri analysis. Missouri imposes no statutory condition-disclosure mandate on a commercial seller, and the affirmative disclosure duty codified at Mo. Rev. Stat. § 339.730 runs to licensees, not to the principals themselves. A Missouri seller’s protection in a commercial transaction therefore comes from accurate, documented disclosure and a documented buyer inspection right, not from the language of the clause.

Comparison

The overlap is larger than it first appears. The common-law carve-outs to the “as is” / caveat-emptor default are substantially the same in both states. In each, a seller’s silence becomes actionable only when a duty to speak exists, and that duty arises in the same three situations: a confidential or fiduciary relationship, a partial disclosure that conveys a false impression, or a seller’s superior knowledge of a material defect that the buyer could not uncover through ordinary care and reasonable investigation. Compare Nooner Holdings, 668 S.W.3d 956 (Texas), with Blaine, 841 S.W.2d at 705, Constance, 25 S.W.3d at 581, and Hess, 220 S.W.3d 758 (Missouri). And both states apply the same corollary: a buyer who fails to investigate is charged with constructive knowledge of whatever reasonable diligence would have revealed, which defeats the claim — Nooner in Texas, Mobley (a defect is not latent if it is discoverable by reasonable diligence) in Missouri. A practitioner familiar with the Texas duty-to-disclose analysis will recognize most of the Missouri one.

The divergence concerns what the contract can accomplish beyond that shared carve-out:

• Texas. Beyond the shared duty-to-disclose carve-out, a prominent, negotiated “as is” clause — ideally paired with a disclaimer of reliance — between sophisticated, counseled parties negates causation and reliance and defeats DTPA, negligence, warranty, and good-faith claims about the property’s condition, plus fraud claims other than fraudulent inducement of the clause itself. The clause is, in the Nooner court’s words, “a form of disclaimer of reliance.”

• Missouri. The same clause confirms the caveat-emptor allocation and places condition risk on the buyer, but it carries no independent force against the buyer’s claims. Missouri has no Prudential-style rule negating causation or reliance; the analysis stays in caveat emptor and common-law fraud. A seller cannot, through drafting, escape liability for affirmatively misrepresenting or concealing a known, latent material defect.

The carve-outs are therefore similar; the baseline against which they operate is not. A clause that is largely dispositive in Texas is not self-executing in Missouri past the point of disclosure. In Missouri, once a matter falls outside the shared common-law carve-out, the seller’s protection depends on the accuracy of its disclosure and the buyer’s opportunity to inspect.

Closing

An “as is” clause has a different effect in the two states. In Texas, a clause that is conspicuous, specific, and negotiated between sophisticated parties can negate the causation and reliance elements of a buyer’s condition-based claims — including DTPA, negligence, warranty, and fraud claims — subject to the fraudulent-inducement exception and the underlying common-law duty to disclose. In Missouri, the same clause confirms the caveat-emptor allocation but carries no independent force against the buyer’s claims: it does not negate causation or reliance on a fraud claim, and it does not relieve a seller of the duty to disclose a known latent defect. In both states, whether a buyer could have discovered the defect through reasonable inspection is often the decisive question.

---

Citations

Texas Case Law

• Prudential Insurance Co. of America v. Jefferson Associates, Ltd., 896 S.W.2d 156 (Tex. 1995)
• Gym-N-I Playgrounds, Inc. v. Snider, 220 S.W.3d 905 (Tex. 2007), aff’g 158 S.W.3d 78 (Tex. App.—Houston [14th Dist.] 2005)
• Nooner Holdings, Ltd. v. Abilene Village, LLC, 668 S.W.3d 956 (Tex. App.—Eastland 2023, pet. denied)
• Community Management, LLC v. Cutten Development, L.P., No. 14-14-00854-CV, 2016 WL 3554704 (Tex. App.—Houston [14th Dist.] June 28, 2016, no pet.)
• Procter III v. RMC Capital Corp., 47 S.W.3d 828 (Tex. App.—Beaumont 2001, no pet.)

Missouri Case Law

• Hess v. Chase Manhattan Bank, USA, N.A., 220 S.W.3d 758 (Mo. banc 2007)
• Droz v. Trump, 965 S.W.2d 436 (Mo. App. W.D. 1998)
• Smith v. Old Warson Development Co., 479 S.W.2d 795 (Mo. 1972)
• Andes v. Albano, 853 S.W.2d 936 (Mo. banc 1993)
• Constance v. B.B.C. Development Co., 25 S.W.3d 571 (Mo. App. W.D. 2000)
• Blaine v. J.E. Jones Construction Co., 841 S.W.2d 703 (Mo. App. 1992)
• Reis v. Peabody Coal Co., 997 S.W.2d 49 (Mo. App. 1999)
• Ringstreet Northcrest, Inc. v. Bisanz, 890 S.W.2d 713 (Mo. App. W.D. 1995)
• Mobley v. Copeland, 828 S.W.2d 717 (Mo. App. 1992)

Missouri Statutes

• Mo. Rev. Stat. § 339.730 (real estate licensee duty to disclose adverse material facts)

Secondary Authority

• C. Elaine Howard, Avoiding Risk with “As Is” Clauses, State Bar of Texas 37th Annual Advanced Real Estate Drafting Course, ch. 7 (Mar. 2026)
• David A. Weatherbie, Case Law Update, State Bar of Texas 37th Annual Advanced Real Estate Drafting Course, ch. 1 (Mar. 2026)
• Timothy A. Reuschel, Note, Caveat Vendor: Sellers of Real Estate Now Need to Beware of Misrepresentations about the Condition of Property, 64 Mo. L. Rev. ___ (1999) (analyzing Droz v. Trump and Missouri’s narrowing of caveat emptor)
• David A. Dick, Missouri Real Estate Dispute Spotlights the Limits of an Oft-Used Contract Phrase, Thompson Coburn LLP (Oct. 19, 2021)