The Rule Of Caveat Emptor

INTRODUCTION

Every witness standing in the court must swear to tell nothing but the truth. Will this apply to the seller selling his goods? Will he be required to tell everything about the products he offers for sale? Let us suppose that A is selling a car to B. It has 3 good qualities namely a, b and c and one bad quality i.e. d. However, A reveals only the good qualities to B and does not talk about quality “d”. Will A be liable to B if he buys the car because of his description of the good qualities? This is what is explained in the rule of caveat emptor. The doctrine explains the circumstances when the seller will be held liable for selling defective goods and when will he not be.

MEANING OF CAVEAT EMPTOR

‘Caveat emptor’ means ‘let the buyer beware’. We come across this word mostly in commercial transactions. The Latin  maxim for this word is ‘qui ignorare non debuit quod jus alienum emit’. The maxim explains that it is the responsibility of the buyer to take caution in buying goods from the seller. Hence, even if the buyer buys goods that are partially or completely defective,  the seller bears only limited  or  no responsibility. For this maxim to come in to play, the defects in the goods should have been known to the customer if he had been prudent and diligent when purchasing the goods from the seller. Once, the purchaser is satisfied and purchases the product offered by the seller after necessary inspection, he has no subsequent right to reject the product. The seller is not obliged to fully disclose the details of the products he sells.

Section 16 of the Sale of Goods Act, 1930 provides that there can be no implied condition or warranty for the sale of goods subject to the provisions of this Act or any other law in force at the time of selling goods, then he has given a guarantee that his products have no defects at all.

EXCEPTIONS TO THE RULE OF CAVEAT EMPTOR

However, Section 16 of the Sale of Goods Act, 1930 provides certain exceptions to the Doctrine of Caveat Emptor. They are explained as follows:

When the purpose is specified to the seller

Section 16 (1) provides the first exception to this rule. If the buyer explains to the seller his specific purpose for buying the good from the seller and he relies on the seller’s judgement for the purchase of that specific good, and the goods are of a description which is in the seller’s course of business to supply, then there is an implied condition by the seller that the goods sold by the seller shall be reasonably fit for the purpose required by the buyer. This exception will apply only when the buyer has relied wholly on the seller’s expectations and has not gotten a chance to inspect the goods. For example, ‘A’ goes to ‘B’ to buy trekking shoes. ‘A’ specifies to ‘B’ his purpose of buying the shoes. However, ‘B’ sells him a pair of shoes which are not suitable to wear during trekking. Now, if ‘A’ gets himself hurt during his trek, he has a right to claim compensation from the seller.

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When the goods are bought on the seller’s description

Section 16 (2) provides that on the purchase of goods by the buyer on the furtherance of description by the seller who deals with the description of such goods in the course of business, there is an implied condition that the goods sold are of merchantable quality. However, on the inspection of goods by the buyer, the responsibility passes on to the buyer if the defects could have been revealed on his examination.

The case of Priest v. Last[1] enunciated this exception of caveat emptor. In this case, the buyer has bought a hot water bottle from the seller on his description. However, the bottle burst on the third day and the buyer’s wife was scalded. The seller claimed exception from liability on the ground that the seller was not specified of the purpose. However, the Court held the seller liable as the buyer had bought the bottle on his description and that the buyer had only used the bottle for the usual purpose.

When the seller has committed fraud or misrepresentation

This is one of the important exceptions to the rule of caveat emptor. When the seller has committed fraud or misrepresentation while describing the  product, then the seller cannot escape his liability through the doctrine of caveat emptor. For example, if A sells a bike to B despite knowing that the brake in the bike malfunctions, then caveat emptor will not apply and B has a right to recover from A.

When the goods are not of merchantable quality

When the seller has undertaken to sell the goods then he gives a warranty to the buyer that his goods are of merchantable quality. That is, the goods are up to the market standards. Thus, when the goods are not found to fulfil the market standards, the seller will be held liable. On the other hand, if the buyer had a chance to inspect the goods before buying them, then the rule of Caveat emptor would apply.

When there is a sale by providing sample

When the seller has provided a sample to the buyer, then the buyer has a right to sue the seller if he buys the goods on the examination of the sample and the rest of the goods did not resemble the sample the seller had provided. For example, A provides a sample of a black colour mobile phone to B. B places an order for the same after examining the sample. However, A delivered a blue colour mobile phone to B. Here the doctrine of caveat emptor will not apply.

When the seller sells goods under a brand name

This is no exception to the rule of caveat emptor. Here, when the buyer buys goods which are branded or under a trademark, there is no implied condition or warranty on part of the seller about the usefulness or quality of the product sold.

JUDICIAL PRONOUNCEMENTS 

The Judiciary has pronounced a lot of judgements on when the doctrine of caveat emptor can be applied and when it cannot be applied. The following are some of the important judgements given by the Courts on this doctrine.

In the case of Frost v. Aylesbury Dairy Co. Ltd[2], A, a milk supplier supplied milk to B’s family. However, the milk contained some typhoid germs. Consequently, B’s wife died of typhoid after consuming the milk. The Court held that the seller was responsible and that the doctrine of Caveat emptor will not apply as the purpose for what the milk was required was known to the seller and the milk he supplied was not fit for human consumption.

In the case of Ranbirsingh Shankarsingh Thakur v. Hindustan General Electric Corporation Ltd[3], it was held that Sec.16(1) of Sale of Goods Act,1930 applies when the buyer specifies his purpose of buying the goods either expressly or impliedly and the seller should sell the goods in the course of his business irrespective of the seller being a producer or not.

In Shital Kumar Saini v. Satvir Singh[4], the petitioner purchased a compressor from the respondent with one year warranty. However, the compressor got damaged within 3 months. When the petitioner asked for a replacement, the replacement was done but no further warranty was given. The Court held that the goods sold should be reasonably fit for the purpose and further held that there was an implied condition in the present case.

In Ward v. Hobbes[5], the Court held that the seller is not under a duty to explain completely about the product he sells. It is the duty of the buyer to take reasonable care in purchasing the product.

ORIGIN OF CAVEAT VENDITOR

However, it is pertinent to note that the doctrine of caveat emptor is gradually fading with the growth of a new doctrine namely ‘Caveat venditor’. The meaning of this doctrine which can easily be inferred from the word is ‘Let the seller beware’. That is, this doctrine asks the seller to be careful in selling the goods. This doctrine was introduced so that the seller should also realize that he has an equal responsibility to provide the goods without any defects to the buyer who buys the goods in good faith. The introduction of many complex structured goods in modern society led to a situation that even if the buyer has inspected the product thoroughly, he will not be able to find even the apparent defects. This was taken by the sellers to their advantage to exploit the consumers because only the seller will be able to know completely about the products he offers for sale. Thus, the seller selling the goods in spite of knowing about the defects in the product and taking the defence of caveat emptor cannot be accepted. With the growth of caveat venditor, the seller cannot take advantage of the exclusion clauses in caveat emptor and sell substandard goods to the customers anymore.

CONCLUSION

Thus with the origin of the ‘caveat venditor’ concept and after the legislation of many other provisions for consumer protection, the courts are now mostly in favour of the buyers. Thus, now both the seller and the buyer do not have an unfair advantage over the other. Care must, however, be taken to not take either of the doctrines too far which might result in complications. Thus, the legislation should provide some proper guidelines with respect to both the ‘caveat emptor’ and the ‘caveat venditor’ to not let any party take away the right of the other party in a commercial transaction involving the sale of goods.

REFERENCES

[1] [1903] 2 KB 148.

[2] [1905] 1 KB 608.

[3] AIR 1971 Bom 97.

[4] (2005) 1 CPR 401.

[5] (1878) 4 AC 13.

 

BY- REEMA N |TNDALU SCHOOL OF EXCELLENCE IN LAW