Lyall v. DeYoung
42 Wash. App. 252, 711 P.2d 356 (1985)
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Rule of Law:
A party who signs a contract is bound by all its terms, including express warranties incorporated by reference, regardless of whether they read or specifically bargained for those terms. A general merger clause in a subsequent contract does not automatically extinguish such a warranty where it was a material inducement for the sale.
Facts:
- Roger and Arlene DeYoung (buyers) and Mary Lyall (seller) signed a real estate purchase and sale agreement for Lyall's house.
- The agreement contained a pre-printed, incorporated warranty stating the property's well provided an adequate supply of water meeting state purity standards.
- Lyall also made oral representations to the DeYoungs that the water was adequate in quality and quantity.
- After closing, the parties signed a final conveyance contract containing a merger clause stating no other covenants or agreements applied unless attached in writing.
- After taking possession, the DeYoungs discovered the 'well' was an open cistern with water that did not meet state health standards for human consumption.
- Three attempts to drill a functional well on the property were unsuccessful.
- Following the discovery, the DeYoungs stopped making payments on the property.
Procedural Posture:
- Mary Lyall (seller) sued Roger and Arlene DeYoung (buyers) in a state trial court, seeking specific enforcement of the real estate contract.
- The DeYoungs filed a counterclaim for damages, alleging breach of warranty.
- The trial court ruled in favor of Lyall, concluding the warranty was not part of the contract because it was unbargained-for boilerplate of which Lyall was unaware.
- The trial court dismissed the DeYoungs' counterclaim and awarded attorney's fees to Lyall.
- The DeYoungs (appellants) appealed the trial court's judgment to the Court of Appeals of Washington.
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Issue:
Does an express warranty of water quality contained in a real estate earnest money agreement remain enforceable against a seller who was unaware of its existence, even if a subsequent final contract contains a merger clause?
Opinions:
Majority - Grosse, J.
Yes, the express warranty remains enforceable. A voluntary signatory to a contract cannot escape its terms by claiming ignorance of its contents. In the absence of fraud, a party is deemed to have had the opportunity to study the contract and its provisions, including those incorporated by reference. The 'bargained for' requirement is typically applied to protect buyers from sellers' fine-print disclaimers of warranties, not to invalidate the warranties themselves. Furthermore, a general boilerplate merger clause in a subsequent contract does not vitiate a prior express warranty that was a material inducement to the sale, as allowing it to do so would amount to constructive fraud.
Analysis:
This decision reinforces the fundamental contract principle that a party is bound by the terms of an agreement they sign, regardless of whether they have read them. It significantly limits the power of boilerplate merger clauses to extinguish prior express warranties, especially in real estate transactions. The court prioritizes the manifest understanding of the parties over standardized legal clauses that would otherwise negate a material inducement for the contract, thereby protecting buyers from sellers' claims of ignorance about the terms of their own agreements.
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