Implied vs Express Term: A Clash of Opinions

Mate, I'm having a debate with my friend over an MCQ for AP LAWCET, and I need your guys' help to settle this. Q: In a contract of sale of goods, where a merchant sells goods 'as is', the buyer claims that the goods were defective. The court holds the merchant liable for damage caused to the buyer. Which of the following statements is correct?

Argument 1: My friend says A is the correct answer, that this is an example of an implied term (expressed by the merchant through their conduct) that the goods were not defective. But, my friend thinks it's a term collateral to the main purpose of the contract, hence implied by law.

Argument 2: I'm of the opinion that B is correct. I think the phrase 'as is' is an express term that limits the merchant's liability, effectively creating an exception to the implied term of satisfactory quality.