Doctrine of Caveat Emptor

This article is written by Anushka Singh, a second-year student pursuing BBA-LLB at Unitedworld School of Law, Karnavati University.

INTRODUCTION

Caveat Emptor is a Latin phrase which means ‘to let the buyer be aware’. It is a principle of contract law that places the onus on the buyer to perform careful examination and inspection before buying. Emptor in Latin is the buyer and the verb cavere is a verb of caution: caveat emptor was the perfect principle for transactions involving not massive quantity of goods.

This doctrine is a crucial part of the Sales of Goods Act and is specifically defined in section 16 of the Act. It states that the buyer cannot hold the seller responsible if the product is not fit for his usage or it is defective. As the duty to ensure that the product was suitable for his usage falls on the buyer because when an individual buys a product he does so after a thorough inspection and after he is satisfied with the quality.

Example- A bought a car from B. A wanted to participate in the car race with the bought car. However, the car was not capable of racing as it was a daily use car. Here as A did not inform B of his intentions of car racing, B will not be responsible for the sale of the wrong car. And the Doctrine of Caveat Emptor will be applied. However, a buyer can shift the responsibility to the seller if the given below three conditions are fulfilled[1]–

If the buyer mentions his purpose or usage of the product while buying.
If the buyer relies completely on the knowledge and judgement of the seller.
The seller sells such goods.

Scope of Caveat Emptor

Ward v. Hobbes (1878) 4 AC 13, the House of Lords held that a seller cannot be expected to use pretence or disguise to hide the facts about a product that the buyer is buying in order to trick the buyer, as that would amount to fraud. The doctrine of caveat emptor does not enforce a duty on the seller to disclose every little defect with regards to the product he is selling but instead puts the responsibility on the buyer to check and verify the product before buying the product.

In Wallis v. Russel (1902) 2 IR 585, the Court of Appeal explained the scope of caveat emptor-“Caveat emptor does not mean in law that the buyer must take a chance but rather it means he must exercise care. This doctrine applies to specific purchases; ones where the buyer can use his own judgement and skill to what he buys. It applies also whereby usage or otherwise it is a term of the contract, that the buyer shall not rely on the skill or judgment of the seller.”[2]

Exceptions to the Doctrine of Caveat Emptor

Explained below are the exceptions to the doctrine of caveat emptor-

Best Product for Buyers use- While buying a product if the buyer informs the seller, of his purpose or use behind buying that product, it is then implied that he is relying on the seller’s judgement and it becomes the duty of the seller to make sure that the product he buys matches his expectations or mentioned desires. For example, if A, the buyer informs B, the seller he wants to buy a car for sales and marketing purposes in rural areas. Here if B sells a luxurious car with less mileage, it won’t fulfil A’s purpose as he needs a car with high mileage and tough to be able to travel long distances.
Branded Products- When a buyer buys a branded product under a famous company’s name, the seller cannot be held liable for the usefulness or quality of the product. Therefore, there is no implied condition in this situation that the good will be the best fit for the buyer’s intended use.
Goods bought on Description- When a buyer buys a product based only on its description. If the said product does not match the description then in this situation the seller will be held liable.
Merchantable Quality Products- The exception of merchantable quality is mentioned in section 16(2) of the Sales of Goods Act, 1930. It states that the seller who is selling products by description has a duty to provide products of merchantable quality i.e. products that pass the market standard. So, if a product is inferior to the market quality, then the seller will be held responsible. However, if a buyer is given sufficient time to examine the product this exception will not apply.
Sale by Sample- If a buyer buys a product after a thorough examination of its sample, then this doctrine won’t be applicable. Even if the goods do not live up to the same standard as the sample, the buyer cannot be held responsible.
Sale by description as well as a sample- If a product is sold with a sample in addition to its description, then the buyer will not be held responsible for the product not being similar to the sample or its descriptions. The responsibility here falls solely on the shoulders of the seller.
Usage of Trade- Buying a product may also establish an implied condition with regard to the quality or fitness of goods for a particular purpose. For example, A bought a car from B. But B did not inform A that certain parts of the car were damaged, and so the rules of the doctrine will not apply here.
Fraud or Misrepresentation- If a seller gets the consent of a buyer by committing fraud (knowingly lying to him) then this doctrine will not apply here. Similarly, if a seller gets consent or sells a product by actively trying to hide/ coverup certain facts about the product, this will be misrepresentation by the seller and the buyer will not be held responsible.

Cases

Mariappan v Inspector General of Registration, Department of Registration, Chennai and others, in this case it was held that the petitioner should have bought the property with more careful inspection or in other words the application of Caveat Emptor. As a buyer he shouldn’t be ignorant about the details of the property he is buying from another party.

In the case of Indrani Kailash v Debt Recovery Appellate Tribunal, it was that the petitioner had previously purchased the property in 1995 and did not take any action against the seller for fraudulently selling the property to her, even though the mortgage was executed by her Power Agent. The principle of Caveat Emptor was applied to the case of the petitioner.

Conclusion

In 1935, Lord Wright said that the old rule of caveat emptor is being superseded by caveat venditor as such change is necessary with the daily new developments in commerce and trade. The first time the doctrine of caveat emptor suffered a blow was in the case of Priest v. Last, this case gave the first traceable judgement on the reliance that a buyer places on the seller and his judgement. After this it was only a matter of time before it became obvious that caveat emptor is a dying doctrine and taking its place is caveat venditor i.e. need for disclosure on seller’s part.

[1] https://www.toppr.com/guides/business-laws/the-sale-of-goods-act-1930/doctrine-of-caveat-emptor/

[2] https://blog.ipleaders.in/exceptions-rule-caveat-emptor/

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