The Doctrine of Caveat Emptor
This Blog is written by Anuj Singh from Maharshi Dayanand University Centre For Professional And Allied Studies, Gurugram. Edited by Saumya Tripathi.
The Doctrine of Caveat Emptor literally means “Let the buyer be aware”. The Word caveat derives from Latin verb Caveare is the verb of caution and Emptor means buyer. Thus Caveat Emptor talks about the rule of the buyer must be aware/caution while buying the goods. The term is actually part of a longer statement, Caveat emptor, quia ignorare non debuit quod jus alienum emit means Let a purchaser beware, for he ought not to be ignorant of the nature of the property which he is buying from another party. It is the responsibility of the buyer, not the seller that he must check all the aspects regarding the good while buying. The doctrine of caveat emptor was the guideline for the courts and the point was that the buyer had the chance to use his knowledge to be careful or accept the cost of his inattention. No warranties were implied to assure the quality of the goods he was going to buy and only a seller making a false statement could be sued in tort for deceit/fraud. In such a case he was not simply assuming a fact but giving a clear warranty to the buyer he could be sued even though he did not know about the falseness of his affirmation. For example, a consumer who purchases a coffee mug and later discovers that it has a leak is stuck with the defective product. Had they inspected the mug prior to the sale, they may have changed their mind. A more common example is a used car transaction between two private parties (as opposed to a dealership, in which the sale is subject to an implied warranty). The buyer must take on the responsibility of thoroughly researching and inspecting the car—perhaps taking it to a mechanic for a closer look—before finalizing the sale. If something comes up after the sale, maybe a transmission failure, it is not the seller’s responsibility. Garage sales offer another example of caveat emptor, in which all sales are final and nothing is guaranteed.
The caveat emptor was originated in common law and found in English Sales of Goods Act, 1893 which has seen various changes and amendments according to the need of society.
In 19th century the vision of common law is clear through the maxim caveat emptor that they were on the side of the seller. They want that buyer must know and judge what was best for him. The seller is free from any liability except for fraud. In a market for the competition being less stringent, they decided to push the burden on the buyer. The buyer conscious and abilities were in the centre attraction of the market while buying goods. It is based on the fundamental principle that when a buyer is satisfied with the suitability of the product for his use, no subsequent right will be left with him to reject the same. In English Sale of Goods Act, 1893, it is quite evident that the seller’s duty to disclose the information of goods while selling it was less and not above the buyer’s duty of awareness. The act is rigid for the buyer as if the seller did not give necessary requirements and the buyer buy of his conscious then he had no remedy for it. The Concepts which could be used to shift the burden as to quality and fitness on the seller such as ‘fitness of goods’ and ‘merchantability’, were not encouraged. Another strong statement which was present in Section 11(1)(c) in the said Act, which mandated that the buyer could not reject the goods on any ground in cases where there was a sale of ‘specific’ goods. Thus, it is highly noticeable that the law was bent towards the seller and in those times, one could not even find a parallel or corresponding law which would transfer the burden on the seller.
CHANGE IN APPROACH
As a matter of fact, the industrial revolution and the scale production of massive quantities of goods changed in some way the approach of the courts. Sellers and buyers were no longer contracting at fairs but they were often actually in different places; moreover, sellers started to realise that the quality of the products they were selling was very important in order to be competitive in a big market where the same product was sold by different producers. There was the slightest change towards the caveat venditor i.e. seller be aware. At the time of origin, the rule of caveat emptor was absolute and strict. It was followed rigidly but as the time passed there were certain changes in the attitudes of judges while dealing with the rule. The market competition pressurises the quality and change in the behaviours of seller. The rule of caveat emptor seen a change for the first time in the case of Priest v. Last  2 KB 148, wherein reliance was placed on the buyer relying on seller’s skill and judgement and the buyer was allowed to reject the goods for the first time. In this case, the buyer purchased a hot water bottle relying on the seller’s skill and judgement. It was observed that if a buyer purchases an object relying on the seller’s skill and judgement then the buyer will be allowed to reject the same on the occurrence of any defect. This was the first-ever decision in common law in which importance was given to the buyer’s reliance on the seller’s judgement and skill.
From there began the shift of caveat emptor to caveat venditor i.e. seller be aware. The change in approach had received a value approach. Now the seller’s obligations could be mentioned and made them liable under various circumstances. The case laws had evolved the rule of caveat emptor and put various limitations under which the buyer can sue the seller. In case laws circumstances like adulteration, contamination, desire quality etc. are mentioned under which the liability of seller originated. The court according to the facts of the case decides the defect and liability of the seller are their or not would be the discretion according to the facts of the case. In the case of Harlingdon & Leinster Enterprises Ltd v. Christopher Hull Fine Art Ltd, the buyer claimed that he had the right to reject the painting as it was not of the original painter. So, it was observed that where the buyer has more expertise in a given field and is more reasonable than the seller then it would be completely wrong to suggest that the buyer would have the right to reject the purchased object. Therefore the seller is bound by the duty to make known to the buyer all the defects in the goods and the information relating to the usage of goods. This obligation of the seller is irrespective of his own judgement and skill because what matters is what he is expected to have and not what he has.
The doctrine of Caveat Emptor is an integral part of the Sale of Goods Act, 1930. It translates to “let the buyer beware”. This means it lays the responsibility of their choice on the buyer themselves. It is specifically defined in Section 16 of the act “there is no implied warranty or condition as to the quality or the fitness for any particular purpose of goods supplied under such a contract of sale”. For example. A bought a horse from B. A wanted to enter the horse in a race. Turns out the horse was not capable of running a race on account of being lame. But A did not inform B of his intentions. So B will not be responsible for the defects of the horse. The Doctrine of Caveat Emptor will apply
EXCEPTIONS TO THE RULE
1• Fitness of Product for the Buyer’s Purpose- Section 16(1) of the act states that if in circumstances where buyer either expressly or impliedly tells the seller or he knows about the intention of the buyer for which product he requires. Further, the goods are of such description which the seller supply in his ordinary course of business and by relying upon the judgement and skill of the seller, the buyer purchases that product, then the goods should be in accordance with the purpose. The goods if not provided with specification then buyer would be liable for that. In this exception buyer must explain the specification of good, he must rely on the seller and the seller must provide the goods according to the intention of the buyer. In case of Shital Kumar Saini v. Satvir Singh, a compressor was purchased by the petitioner with one year warranty. The defect in the product appeared within three months. The petitioner sought a replacement. The seller replaced it but did not provide any further warranty. The State Commission stated that an implied warranty was guaranteed under section 16 of the Sale of Goods Act, 1930 and allowed it to be rejected.
2• Goods Purchased under Brand Name- In some cases, buyers purchase good not on his skill and judgement. He buys good on trade name or brand name. In such a case if the good doesn’t come out of the said quality. Then it is unjust for the sellers to blame as they sold the good under some brand or trade name. The proviso to Section 16 deals with such cases. It provides that, “Provided that, there is no implied condition as to fitness for any particular purpose in the case of a contract for the sale of a specified product under its patent or other trade names.”
3• Goods of Merchantable Quality- Another exception to the rule of Caveat emptor is mention in Section 16(2) of the Act. The Section imposes a duty upon the dealer to deliver the goods of merchantable quality. It means when a buyer buys a good on behalf of the description mentioned in the good. Then it is the duty of the seller to provide goods of aforesaid quality. If the buyer did not get the goods of descriptions than the seller is liable. However, if the buyer has got the complete chance to inspect the goods before buying then there is no liability of seller if any defect finds further.
4• Conditions implied by trade usage- Section 16(3) gives statutory force to the conditions implied by the usage of a particular trade. It states: “An implied condition or warranty as to the quality or fitness for any particular purpose may be annexed by the usage of trade.”In the case of Peter Darlington Partners Ltd v Gosho Co Ltd, a contract for the sale of canary seeds was subjected to the custom of trade and held that if there exist any impurities in the seeds the buyer will get a rebate on the price but he would not reject the goods. However, a custom which is unreasonable will not affect the parties’ contract.
5• Sale by Sample- If the buyer buys his goods after examining a sample then the rule of Doctrine of Caveat Emptor will not apply. If the rest of the goods do not resemble the sample, the buyer cannot be held responsible. In this case, the seller will be the one responsible. For example, A places an order for 50 toy cars with B. He checks one sample where the car is red. The rest of the cars turn out orange. Here the doctrine will not apply and B will be responsible
6• Fraud or Misrepresentation- If the seller obtains the consent of the buyer by fraud then caveat emptor will not apply. Also if the seller conceals any material defects of the goods which are later discovered on closer examination then again the buyer will not be responsible. In both cases, the seller will be the guilty party.
From the above analysis, we got to know that caveat emptor was seller-friendly at early stages. The seller was the king of the market. We saw a change in the approach of courts, legislation while dealing with the rule of caveat emptor. The approach is now become buyer friendly and now the seller can also be liable in different situations. However, there are some limitations in the rule which make a balance between the buyer and seller so that one can misuse it and the market will not become a pro buyer or pro seller.