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Published by: Nishanthini Nithiyananthan on Apr 26, 2012
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Caveat Emptor Rule Caveat emptor is a Latin term meaning "let the buyer beware".

It is a general rule of law that a purchaser assumes the risk of his/her purchase. The intent of the rule is to place a duty of care on the buyer in selecting an item and putting forth appropriate inquiry before completing the sale. In this way, a seller is also protected from liability for buyer's remorse. Today, the rule applies in "as is" sales, sheriff's sales, and forced sales. However, modern concepts such as an implied warranty of merchantability (that the item is fit for its intended purpose), implied warranty of habitability in landlord-tenant law, and financial disclosure rules in stock transactions, have softened the harsh application of the rule. The concept also applies to returns, so that a buyer is responsible for following the seller's policies which may limit the time for returning an item, require a receipt, or impose other requirements. Certain states have abolished the rule in regard to certain purchases. For example, in at least one state, the rule of caveat emptor no longer applies to new home sales. However, it does still apply to sales of used homes. In order to hold the seller liable in such cases of new home sales, the buyer must show: 1. There was a material defect which adversely affects health or safety; 2. The seller or the seller's agents knew of the defect before the sale; 3. The defect was such that it could not be discovered by due diligence; and 4. The house was not bought "as is." 5. The law prohibits seller or the seller's agents to engage in fraud, or deceit, or to make misrepresentations about the condition of the property.

7. the doctrine of caveat emptor does not apply. 3. Sale by sample In a sale of goods by sample.the rule of caveat emptor shall not apply in such a case. Fitness for purpose Where the buyer informs the seller the particular purpose for which the goods are required and relies upon the seller‟s skill or judgment there is in that case. . 8. 6.Exceptions to the rule of caveat emptor There are eight exceptions to this rule of caveat emptor. the buyer is entitled to reject the goods. and the breach of it entitles the buyers to reject the goods. Consent by fraud Where the seller makes a false statement intentionally to the buyer and the buyer relies on it or where the seller knowingly conceals the defects in the good. the rule of caveat emptor does not apply if the bulk does not correspond with the sample or if the buyer is not given an opportune ity to compare bulk with the sample. Purchase by samples and description Where goods are bought by sample as well as by description and the bulk of goods do not correspond with the sample or with the description. 5. 2. Trade name In the case of a contract for the sale of a specified article under its patent or other trade name. an implied condition that the goods shall be reasonably fit for the purposes for which they are required. then this rule (of caveat emptor) does not apply. Merchantable quality Where the goods are bought by description from a seller who deals in goods of that description whatever he is manufacturer or producers or not. 4. there is no implied condition as to its fitness for any particular purpose. there is an implied condition that the goods shall be of merchantable quality. Usage of trade Where the usage or trade annexes an implied condition or warranty as to quality or fitness for a particular purpose and seller deviates from that. Purchase by description The rule of caveat emptor does not apply in a case where goods are bought by description from a seller. It is a condition which goes to the root of the contract. In such a situation there is an implied condition that the goods shall correspond with the description. They are: 1.

but. The landlord argued that Sir Thomas had no right to give up this tenancy because it had been agreed for a minimum term of 5 weeks and only five days had elapsed. the landlord had impliedly promised that the premises would be fit for habitation at the commencement of the tenancy. anyone who thought that the disclosure statement. Thus. in effect. held that numerous structural and material defects in a home purchased by the Plaintiffs could not constitute a basis for action or damages by the buyer. Gave protection to a purchaser should be on notice that . every house must be taken to be let upon the implied condition that there was nothing about it so noxious as to render it uninhabitable. because the agreement was for a furnished letting. HELD: Lord Abinger CB directed the jury that "in point of law. or repairs. and that the closing extinguished any claims based on the contract. the Court found that making an untrue statement on the property condition disclosure statement required under New York State Law was.2007 NY Slip Op 06224 [42AD3d 518]. which is a common law rule meaning „let the buyer beware‟.. not concealment. the contract merged any prior representations. In the absence of any express agreement betweent the parties. not a statutory provision.Case Examples for Caveat Emptor Rule Smith v Marrable (1843) In this case the courts recognised an exception to the caveat emptor rule. neither party is responsible for the condition of the property. The Court held that unless the seller actively concealed any conditions and actively made representations in the Further.it isn‟t necessarily so." However. . Homecheck PeterSimone v. A landlord rented out furnished premises to Sir Thomas Marrable. As in the above matter. The exception to caveat emptor was justified on the basis that a prospective tenant of furnished premises did not have unimpeded freedom to inspect those premises to see the nature and quality of everything that he was getting. The Court in that case did uphold the idea of a fraudulent representation cause of action based on the property condition disclosure report but dismissed the breach of contract claim on the basis that the contract did not contain the representations in question. As the rule in Smith v Marrable is a rule of common law. PeterSimone v. the onus is on the person entering into a tenancy to satisfy himself of the condition of the property to which the tenancy relates. the caveat emptor rule has been largely replaced by statute which protects the occupier against the worst conditions and risks. Under this principle. Homecheck. it is therefore possible to exclude it altogether by means of an express term in the tenancy agreement. Since the introduction of fitness standards in the 1950s. the Court held that the closing precluded any contract claim by the purchaser. rather that a thwarting of the buyers effort to discover conditions was necessary in order to impose liability upon the Seller. et al. Lady Marrable subsequently found the premises to be infested with bugs and Sir Thomas gave notice to the landlord that he was giving up the tenancy.

The seller was not the true owner. He sued the sellers for damages for breach of what is now s12(1). Roland vs Divall Roland v Divall involved the sale of a car. subsequently acquires a title. .Condition as to title There is an implied condition on the part of the seller that.A.000 tins of condensed milk.A. Since the buyer had received no consideration there was no acceptance by him. The buyer used it for 4 months before discovering it had been stolen.IMPLIED TERMS IN SALE OF GOODS ORDINANCE  IMPLIED CONDITIONS 1. in the case of a sale he has the right to sell the goods. never the less they could have been stopped by injunction from selling the tins. Kissenchund vs Ramprotap. held that there was a total failure of consideration. The buyer had bargained for ownership not use. He succeeded in the C. Kingsway Motors 1954 1 W. Although property in the tins had passed to the buyers. Examples: Niblett v Confectioners Materials Co In Niblett v Confectioners Materials Co. The tins bore a wrapping which infringed another company‟s trade mark and that company had the legal right to stop the sale by an injunction. Kissenchund v. The C.L. In a contract for the sale of shares there is an implied condition that there is no encumbrance of charge on the shares in favour of a third party.R. and in the case of an agreement to sell. No set off (a sum deducted to take into account any advantages received or detriments suffered) was allowed for the 4 months use. sellers agreed to sell a consignment of 3. The buyer had to remove the labels and sell the tins at a reduced price. Butterworth vs. he will have the right to sell the goods at the time when the property is to pass. The 4 months use was regarded as irrelevant. The buyer returned the car to the true owner and sued the seller for return of the purchase price.that title feeds the defective titles of both the original buyer and the subsequent buyer. Where a seller having no title to the goods at the time of the sale. Ramprotap. that title feeds the .1286.

The question of whether the substance has remained in substance the same or really becomes a substance of a different character “may if pressed to analysis. 15. The Court of Appeal held that notwithstanding that there was no loss to the buyer. : intended to be a broader more common sense test according to commercial use. Examples: Re Moore Vs Landauer [1921] There was an agreement for the sale of 3. . is a sale of goods by description. brand or label under which they are usually sold. Such description may be in terms of the physical characteristics of the goods or may simply mention the trade mark. there is an implied condition that the goods shall correspond with the description. In such cases the goods supplied must be the same as the goods described.Sale-by description Where there is a contract for the sale of goods by description. be a question of an Aristotelian character”. The market value was not affected. Cf Pinnock Bros v Lewis & Peat Ltd [1923] Cf Pinnock Bros v Lewis & Peat Ltd [1923] 1 KB 690: Contract for the sale of copra cake but when the goods were delivered in fact an admixture of copra cake and castor beans. When delivered it was discovered that half the cases contained only 24 tins although the total number of tins was still 3. A sale of 50 boxes of X brand soap or of 10 tons of Y brand mustard oil.2.000.-Sec. trade name. Goods are to be sold by description when the contract contains a description of the goods to be supplied. The goods did not correspond with their description. he could reject the whole consignment because of the breach of s13 of the Sale of Goods Act (goods must correspond with the description).000 tins of canned fruit packed in cases of 30 tins.

whether he buys for his own use or to sell again. In this case the buyer was not given reasonable opportunity to test the bulk with the sample. Sale by Sample When goods are to be supplied according to a sample agreed upon. it was found that owing to a hidden defect of the cloth which could not be detected on reasonable examination. The buyer was held to be entitled to damage. Examples: James Drurnmond and Sons v. H. acting reasonably. 1949 1K. Fiat Motors Lid .thtrefore unsalable. g . coats made out of it could not stand ordinary wear and were. A agreed to buy some rubber material from B.If the defect is easily discoverable on inspection and the buyer takes delivery after inspection.3. The buyer went to examine the wheat a week later. A found that the measurement of the rubber material was different from that of the sample. James Drurnmond and Sons v. would after a full examination accept it under the circumstances of the case in performance of his offer to buy that article. The sample of the rubber was shown to A . . v. Merchantable This term was defined as follows : "The article in such ttality and in such condition that a reasonable man. It was held that the goods did not correspond to the sample. H. g. which would not be apparent on reasonable examination of the sample. (1822) 1B&C1. Yan ingen ak Co Some mixed worsted coatings were sold by sample.B. the sample. The court held that measurement of the rubber material was part of its quality. One parcel was shown to him but the seller refused to show the other parcel as it was not there. Yan ingen ak Co E&SRuben Ltd vs. he has no remedy.254. (a) The bulk shall correspond with the sample in quality (b) The buyer shall have a reasonable opportunity of comparing the goods with. (c) The goods shall be free from any defect rendering them unmerchantable. The court held that the buyer was entitled to reject the contract of sale.Fair Bros. Lorymer vs Smith. the following conditions are implied." Bristol Tramways Co .. Two parcels of wheat were sold by sample. 17.On receiving the rubber material.-Sec.

Godts refused to accept or pay the goods. in a contract for the sale of a quantity of the sale of seed described as “common English Sainfoin”. 15. The oil corresponded with the sample. the seed supplied was of a different kind. Pratt. .394. though the defect was not discoverable except by sowing the defect also existed in the sample. It was a mixture of rape and hemp oil. Nichol showed samples of oil to Godts. Held the buyer was entitled to recover damages for the breach of contract. Examples: Nichol vs.4. Sale by sample as well as by description When goods are sold by sample as well as by description. He described the oil as: „Foreign refined rape oil. warranted only equal to samples‟ Godts entered into a written contract to buy 33 tons. Wallis v. the goods shall correspond both with the sample and with the description. (1911) A.C . but not the description. Godts (1854) 156 er 410.-Sec.

"Manchester Importer". Lasts The plaintiff. Condition as to fitness or quality There is an implied condition as to quality or fitness for the purpose of the buyer under the following circumstances only: A. (ii) Frost vs.S. which the bottle supplied. The condition was violated by the grocer and damages were recoverable. Where the buyer. Aylesbury Dairy Co. The coal supplied was found to be unfit for this ship. M a milk dealer supplied F with milk which was consumed by F and his family. there was a breach of an implied condition of fitness and A was liable to pay damages. J fell ill and his wife died as a result of eating the salmon. in this case it was held that a buyer relies on the skill of the seller when he makes known to him the purpose for which the goods are required and the circumstances are such that any reasonable seller would tak6 it that his judgment is being relied upon. and the goods are of a description which it is in the course of the seller's business to supply (whether he is the manufacturer or not). so as to show that the buyer relies on the seller's skill. Watson & Sons. Held. there was an implied' condition of fitness because the seller obviously knew that the salmon was being purchased for consumption. or judgment. Examples of rule A: (i) Jackson vs. must be fit for use as a hot water bottle. Held. expressly or by implication. W supplied J with tinned salmon which was poisonous. F's wife was infected and died. B. The milk contained germs of typhoid. who was a draper and had no special knowledge of hot water bottles. Held. Ltd. (iii) Manchester Lines v.5. went to a chemist and asked for a "hot water bottle". It was held that the buyer was entitled to get damages. makes known to the seller the particular purpose for which the goods are required. . Rea Ltd There was a contract to supply 500 tons of coal for the S. An implied condition of fitness may be annexed to a contract of sale by usage of trade or custom of the locality. (iv) Preist v.

fit to sell. Examples of rule C: (i) Jackson v. the buyer was entitled to reject the whole installment as the goods were not saleable quality. but merely looked at the outside of the casks. that is. there was no implied condition as to merchantable quality. Held. When he was drawing the cork the bottle broke and at was injured.' . Fitch Gibbons :Masked for a bottle of Stone's ginger wine in a restaurant. there shall be no implied condition as regards defects which that examination ought to have revealed. (ii) Morelli v. The seller showed him the glue which was stored in his warehouse in casks. (iii) Thornett & Fehr v. There is one exception to rule C.-1f the buyer has examined the goods. Held. Held. The glue was found to have defects which would have been found out if B had inspected the contents of the casks. when goods are bought by description from a seller who deals goods of that description (whether he is the manufacturer or producer or not) there is an implied condition that the goods are of merchantable quality. B did not have the casks opened. which he could have done easily. Rotax Motor Some motor-horns were to be delivered by installments. Beer & Sans B wanted to purchase some glue. The first installment was accepted but the second contained a substantial quantity of horns which were damaged owing to bad packing. the sale was one by description and since the bottle was unmerchantable was entitled to recover damages.C.

The glue was stored in the seller‟s warehouse in barrels. M asked for a bottle of Stones Ginger Wine at S‟s shop. 1868LR 3 QB 197. Examples: Jones vs. The court held that the hemp was not of merchantable quality and it was entitled to be rejected. while M was drawing the cork. the bottle broke and M was injured. Held the sale was by description and M was entitled to recover damages as the bottle was not of merchantable quality.4. Section 16 (2)-Where goods are bought by description from a seller who deals in goods of that description whether he is not the producer or manufacturer or not. Here as against the seller the examination is deemed to be made by the buyer. The court held that there is no breach of implied condition as to merchantability in this case and B was not entitled to any relief. For example. Thornet v. The hemp arrived wetted with sea water. Liter on the glue was found to have defects which B could have noted if he had opened the Barrels. Condition as to merchantability. B was given every facility to open the barrels and inspect them but B did not open the barrels. But where the buyer examines the goods and the defects are such which can be revealed by ordinary examination. This was licensed for the sale of wines. Beers. a) The goods are sold by description b) The seller deals with such goods Merchantable means that the goods must be fit for the ordinary purpose for which such goods are used. when shoes are sold.636. . Packing of goods is an equally important consideration in judging their merchantability. there is an implied condition that the goods shall be of merchantable quality The above provision reveals that the condition of merchantability is applicable when. B wanted to purchase some glue. that they will not break of under the normal use. Now what amounts to an examination is a question of fact in each case. Just. the condition of merchantability would apply when even if the buyer has examined the goods. the condition of merchantability does not apply to the extent of such defects. merchantability requires that the shoes have their heals attached well enough. In Thornet‟s case the buyer had the product before him to examine but he chose not to examine it. Where the product has some latent defects which cannot be revealed by ordinary examination. B & Co A firm of merchants contracted to buy from S some bales of Manila Hemp. (1919) 1 KB 486. Morreli v Fitch &gibbons (1928)2K. This was to arrive from Singapore.B. It was so damaged that it was not possible to sell it as Manila hemp in the market.

There was a breach of theimplied term that it should be fit for its purpose under S14(3) The Sale of goods ordinance. Mason. . that is it should be fit for consumption. short of carrying out a chemical test.The bun contained a stone which broke of C‟s teeth. which may not be reasonable to expect under the circumstances. C brought a Bun from a baker‟s shop . such arguments are not only relevant. The court held that the seller was liable to pay damages as he breached the condition of wholesomeness. The English court held that the milk was clearly for human consumption and it was unfit for its purpose. In the case of food products the condition of fitness or merchantability requires that the goods should be wholesome. Frost vs Aylesbury Dairy Co Ltd (1905) The plaintiff bought milk from thedefendant for family consumption. Wren v Holt where a buyer sued a pub owner successfully for selling beer of unmerchantable quality. Examples: Chapronier vs. Condition as to wholesomeness.5. In contrast.The milk contained typhoid germs and the wife died after drinking the milk. but also critical in a negligence case.(1905)21 TLR633. The beer was found to have been contaminated by arsenic (a poison). It was no defence to the pub owner to argue that the beer came from reputable suppliers and that he had done all that he reasonably could to ensure that the beer was fit for consumption.

16(3). The effect of this clause is that if the buyer pays off the charge or encumbrance. Bitto. required for a purpose. he will be entitled to recover the money from the seller. Because the court found this use of the horse to be nonordinary. may be warranted by usage of trade : A warranty as to fitness for a particular purpose may be annexed to a contract of sale by a custom or usage of trade. (Ala. l4(b)]. 2. 3. Huprich vs. Examples: Whitehouse vs.The buyer must get quiet possession: The buyer shall have and enjoy quiet possession of the goods.IMPLIED WARRANTIES In the absence of an agreement to the contrary. The court stated that the farmer did not hold himself out as having knowledge or skill peculiar to the sale of corn as horse feed. nonordinary purpose The buyers soon discovered that the horse they purchased was incapable of reproducing. and therefore was not a merchant of horse feed for purposes of determining a breach of implied warranty of merchantability .The goods must be free from encumbrance : There is an implied warranty that the goods shall be free from any charge or encumbrance in favour of a third party not declared or known to the buyer before or at the time when the contract is made by Section 14 (c).-Sec. the buyers were entitled to an implied warranty of fitness. [Sec. 1995) A farmer who sold defective horse feed was found not to be a merchant of horse feed.Fitness of goods. this clause may be regarded as an extension of the implied condition of title provided for by Section 14(a). Lange (1996) One court found that horse buyers who indicated to the sellers their intention to use the horse for breeding were using the horse for a particular. the following warranties are implied in every contract of sale: 1. Since disturbance to quiet possession is likely to arise only where the vendor does not possess the right to transfer the goods.

Examples would include contracts of insurance and family settlements. Where there is a fiduciary relationship between the parties to a contract. Thus. for example. there is a duty to disclose the truth. a statement that does not present the whole truth may be regarded as a misrepresentation. If one party fails to do this. if one person is labouring under a misapprehension. However.Impact of the caveat emptor rule for the sale of goods contract The effect of the maxim caveat emptor is that a person has no duty to disclose problems voluntarily. and inter-family agreements. there is no duty on the other person to correct it. Thus. Contracts uberrimae fidei (contracts of the utmost good faith) impose a duty of disclosure of all material facts because one party is in a strong position to know the truth. Where a statement was true when made out but due to a change of circumstances has become false by the time it is acted upon. trustee and beneficiary.   . the contract may be avoided. solicitor and client. A material fact is something which would influence a reasonable person in making the contract. bank manager and client. a duty of disclosure will arise. there are three fundamental exceptions to this rule:  The representor must not misleadingly tell only part of the truth.

title) passes in sales of goods is important as the owner of the goods bears the risk in the event that the goods are destroyed or they perish. In order to constitute a sale of goods under the legislation. The goods are free from any security interest. 6. standard of goods. The seller has the right to sell the goods. 3. 5. the consideration must be money. The goods are reasonably fit for the purpose stated by the intended buyer or implied by the buyer's statements and conduct. unascertained goods and future goods. The buyer will have quiet enjoyment of the goods. whether they have been sold subject to a description. In some instances the contract may be able to be avoided in its entirety. whether they may be returned. the goods will conform with the description. depending upon the type of goods sold in the sale of goods contract. Where the goods sold by sample. 4. such as the time of delivery. and are different for specific and named goods.e. The warranty that the seller has the right to sell the goods may not be excluded by agreement . satisfactory quality and sale by sample do not apply in commercial. 7. The ownership of goods passes at different times. 2. the price. The time the ownership (i. Where the goods sold by description. The agreement need not be in writing.The Impact of Implied terms in sale of goods ordinance for the sale of goods contract A sale of goods is a "contract by which the seller transfers or agrees to transfer the property in goods to the buyer for money consideration called the price": s 2(1) Sale of Goods Act. Possible Exclusions The parties may agree that the implied warranties relating to sale by description. Terms implied into sales of goods contracts by the Sale of Goods Act include: 1. and whether a retention of title is intended to apply to the goods sold under the contract. The goods are of satisfactory quality unless defects are brought to the notice of the buyer prior to the contract or a reasonable inspection would reveal the defect. but is sound practice to do so to avoid uncertainty and the terms of the sale contract. the price is fixed during the course of negotiations between the parties and the contract of sale must be in relation to goods (or chattels) rather than land or buildings. the goods will conform with the sample. rather than consumer sales.


com http://www.uk http://www.Reference:http://www.lawyersclubindia.letlink.com .lawyersnjurists.co.com http://hubpages.

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