A couple invested in a startup for distributing online courses. The project developers presented them with a representation that the technological system was almost completely ready, of high quality, and that significant resources had been invested in it. The agreement between the parties stated that the system is purchased in its current condition ("AS IS"). Shortly after the venture's launch, numerous failures were discovered, and it became clear that the system was developed hastily, at a low professional level, and without proper testing. The investors announced the cancellation of the agreement and demanded their money back, claiming misrepresentation.
The Court ordered the restitution of the investment funds. Generally, one who enters into a contract due to a mistake resulting from misrepresentation (including the non-disclosure of material facts) may cancel the contract. An "AS IS" clause indeed transfers the risk of defects in the asset to the buyer, but it cannot protect a seller who acted in bad faith and misled the buyer. Here, the developers instilled in the investors the false understanding that the system was mature and of high quality, while concealing information about the flawed development process and the increased risk of malfunctions. Therefore, the agreement was canceled, and the developers were ordered to return the investment amount.