Doctrine Of Caveat Emptor – Explanation And Exceptions

Introduction

The Doctrine of Caveat Emptor is a Latin phrase that literally translates as ‘let the buyer beware.’  It means that during a transaction, the buyer must ascertain himself with the quality of the thing that he is purchasing as the seller will not be liable if that thing contains any defects. However, there are certain exceptions to this principle as well which we will discuss further in the article. This is a doctrine which is used in almost every commercial transaction all over the world. The word Emptor stands for buyer and Caveat comes from the verb cavern which means caution. A simple example of this is that when a buyer goes to buy a second-hand motorcycle from a seller, it becomes the duty of the buyer to apply his due diligence in order to make sure that the product does not have any defects, even going to the extent of calling a mechanic to make sure of it and if after purchasing the motorcycle, any defects are found out then the seller cannot be held liable for it.

Development of the Caveat Emptor

This rule of caveat emptor was developed by the English courts to make sure that a buyer protects himself from any hidden or obvious flaws in a product and that he would not be entitled to recover any damages from the manufacturer or seller for these defects. Since medieval times, it was held by the English courts that the buyer was liable to accept the cost of his inattention. One way in which a buyer could get compensated is if he was fraudulently convinced by the seller to buy a particular good. The other way was the presence of a written warranty that was held to be false but in case of a fraudulent transaction, there was no need for a written warranty and just the false affirmation was enough.

In spite of this, the law was strongly tilted towards the sellers as in most of the cases there were no written warranties and there were hardly any other ways for the buyer to get compensated. This situation can be explained by a 17th-century case by the name of Chandler v. Lopus in which the plaintiff who was the buyer bought a Bezoar Stone found in the stomach of certain animals and known to have medicinal qualities from the defendant but after finding no exceptional properties attached to it, the plaintiff brought an action against the seller and subsequently due to the absence of any written warranty, was denied any claim by the court.  

As society began to progress and The Industrial revolution came, people were no longer carrying out transactions one on one but present at different locations selling a large number of products. The sellers also started working upon the quality of the goods that they were selling as the industrial revolution also led to the increase in competitiveness of the markets. Thus, going in line with these changes, the courts also started to change their approach. In the case of John v. Bright, the non-written or implied warranty about the quality of the goods was finally accepted and the concept of merchantability of the goods was introduced. Merchantability of the goods means the goods being of commercially acceptable quality and in accord with the statements given on the package or label. 

This led to the formulation of the English Sale of Goods Act, 1983. However, in this act as well the concepts which shift the burden of responsibility of goods like ‘fitness of goods and merchantability were not emphasized. This act also placed minimal responsibility upon the seller with respect to the disclosure of the quality of the goods and heavy reliance was still placed upon the diligence of the buyer. 

Further Modifications of the Principle

The rule of caveat emptor in its present form had become detrimental for the furtherance of trade and commerce in a rapidly globalizing world. There had to be resources available to the buyer when the defect was so latent as not being able to be detected by a reasonable examination by the buyer or when the buyer bought the product in good faith relying upon the skill and knowledge of the seller selling a particular product. But the pendulum seemed to be swinging in the buyer’s favor as beginning with the case of Priest v. Last in which the principle was challenged. In the case, the buyer purchased a hot water bottle relying on the seller’s skill and judgment and it was observed by the court that if the buyer does so, then he will be entitled to reject the same on the occurrence of any defect. The courts also started to impose the rule of reasonable examination in which if the buyer was not able to find any defect even after reasonably checking the product, then the seller could be made liable for the existence of any defects.

The case of Wallis v. Russel is also important as it explained the scope of the doctrine of caveat emptor stating that it only means that the buyer should take care but does not extend to mean that the buyer should take any chance. It applied only to those products upon which the buyer could exercise his own skill and judgment and also in those cases or contracts in which it is stated in terms that the buyer would not rely on the skill and knowledge of the seller. 

Exceptions to the Doctrine of Caveat Emptor

The Sale of Goods Act which came under the British Raj gave certain exceptions to the Doctrine of Caveat Emptor. 

Fitness for the purpose of Buyer – Section 16(1)

It is a case in which the seller is either expressly or by implication, is aware of the purpose for which the buyer buys the goods and hence the buyer places his reliance upon the skill and judgment of the seller selling that particular good. 

The three requirements for the above section are that – 

1. The buyer should inform the seller about the purpose of the purchase of a good.
2. The buyer should have relied upon the skill of the seller while buying that particular good.
3. The good was of a description as supplied by the seller in his ordinary course of business.  

An example of this is when a person goes into a shoe store and tells the seller that he wants sports shoe particularity for the purpose of running and hence buys those shoes relying upon the skill and the judgment of the seller. Now if he finds out that those shoes are not suitable for running, then he is entitled to claim damages.

Sale under Trade Name, Proviso to section 16(1)

It takes into account those cases in which the buyers purchase certain things not relying upon the skill or the judgment of the seller but upon the product’s trade name or its brand. 

Merchantable Quality – Section 16(2)

This exception imposes a duty upon the dealer to sell goods of merchantable quality. It is implied through this section that a seller who deals in goods of a particular description has to supply those goods to the buyer in a merchantable quality. Merchantable quality means that the goods should be of commercially acceptable quality and capable enough to pass through the market under the name they are sold.

There are two conditions for checking the merchantability of goods:

1. Marketability – This talks about the fact that the goods should not only look good but should also be capable of being used properly. They should not have defects which would make them useless to the buyer.
2. Reasonable Fitness for general purposes – It means that the goods must be fit and safe for their general use even with the absence of any known defects. For example, a mobile phone charger bought by a person should not burst while charging the phone. 

Examination by the buyer, Proviso to section 16(2)

If sufficient opportunity is given to the buyer to examine the goods and he uses this opportunity to do so and subsequently finds some defect with regard to the product and still goes on to buy the product, then there would be no implied condition with regards to the product purchased and the seller could not be held liable.

Usage of Trade – Section 16(3)

This particular section is given a statutory force to the condition implied by the usage of a trade. It simply says that with regards to the usage of a trade which is the purpose for which the goods would be used, then there is a condition implied that the seller must insure or warrant the quality or fitness of the goods.

Express Terms – Section 16(4)

The parties to a contract can come up with certain express conditions or warranties among themselves in order to appoint express liabilities but such conditions could not go against or be inconsistent with any of the liabilities implied by the law. 

Fraud and Misrepresentation style=”font-weight: 400;”> – This is perhaps the oldest and one of the most important exceptions to the doctrine of caveat emptor as it says that the seller cannot sell anything to the buyer by resorting to any kind of fraud or misrepresentation. This can happen when the seller says something to be of a particular quality in order to obtain the assent of the buyer but he knows that the thing is not of that quality.

Sale by description and sample – This is an exception that comes into the picture when the seller sells a product with the help of a sample or description, but fails to make sure that the product actually resembles such sample or description.

Conclusion

We first discussed the meaning of the doctrine, then we tried to trace its development and shortfalls and then ended up discussing how these shortfalls have been addressed in the act. Through this, we were able to see that with the changes in the times due to globalization and also with the advent of online shopping, it has become imperative to look into and try to reform this doctrine in order to protect the interest of the consumers. And to carry forward the same trend, the three-decade-old Consumer Protection Act was repealed by the government in 2019 to fill the loopholes and to make the act more exhaustive as well as effective in order to secure the rights of the consumers. Hence, It can be said that with the changes in our surroundings, the doctrine of Caveat Emptor is now being replaced by the doctrine of Caveat Venditor. 

This article has been written by Harshvardhan Nathawat, B.A. LL.B (Hons.) student at NALSAR University Of Law, Hyderabad