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Contracts-II Project

Winter Semester- 2018-19

Topic- Rule of Caveat Emptor and its evolution

Submitted by-

Vaibhav Tomar

Section- B

ID-218113
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TABLE OF CONTENTS
1. Introduction.........................................................................................................................3

2. Caveat Emptor: Principle and Scope..................................................................................3

3. Origin and Evolution..........................................................................................................4

4. The Exceptions: The outcome of evolution........................................................................4

a. Implied condition as to Fitness for a particular purpose.................................................4

b. Merchantable quality.......................................................................................................5

5. Condition as to the sale being in seller’s Course of business.............................................7

6. Conclusion..........................................................................................................................8

7. Bibliography.......................................................................................................................9
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1. INTRODUCTION
The doctrine of Caveat Emptor is an early common law doctrine that has prevailed in the
markets since time and tide. For quite a long time it has been a very intrinsic part of all the
trade transactions that happened all over the globe. However, in the modern era the doctrine
of Caveat emptor has been subjected to a numerous litigation processes as a result of which
the unrestrained application of this doctrine has been checked to quite an extent. This has
been done by introducing a number of exceptions and limitations to its usage in various legal
systems around the globe.

This paper is therefore an attempt to understand the various reasons entailed in bringing about
such a sea-change in the applicability of this doctrine. Further we shall be analysing how this
doctrine evolved over the period of time and would finally be looking at its present position
in the law.

2. CAVEAT EMPTOR: PRINCIPLE AND SCOPE

The expression Caveat Emptor is a Latin term that translates to “Let buyer beware”.
According to this doctrine the buyer assumes the risk involved in the purchase and thereby
relies on his own skill and judgement while purchasing the goods from the seller. Therefore,
if a defect arises subsequently with respect to the goods the buyer has no right to reject the
sale. This is because during the time when this doctrine originated the sale-purchase of the
goods was done in open markets.1 The buyer had every opportunity for performing the due
deligence of the goods so as to satisfy himself with the quality of the goods. In the case Ward
v Hobbes, the house of lords held that the rule of caveat emptor is not applicable if the seller
fraudulently conceals the defects of the product on sale.2 However, the court also laid down
that the doctrine didn’t as well impose any duty on the seller to reveal all the defects present
in the goods to the buyer.3

In Indian law the doctrine of caveat emptor is covered under the s 16 of the sale of goods act
1930.

1
Morley v Attenborough, (1849) 3 Ex 500: [1849] 2 WLUK 118 p 947; POLLOCK & MULLA, THE SALE OF
GOODS ACT 170 (GC Bharuka, 7th ed., 2007)
2
Ward v Hobbes (1878) 4 AC 13 p 26
3
Ibid.
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3. ORIGIN AND EVOLUTION

The doctrine of Caveat Emptor is said to have originated in the primeval roman law. 4 The
society in which it originated was primarily an agrarian one where the subject matter of the
transactions was not very complex also the dealings used to happen in a face to face manner. 5
Thus, the buyer was very much competent to examine the goods for defects as a result of
which the seller wasn’t relied upon to inform the buyers about the defects with regard to the
goods on sale.6

However, with regards to the origins of the doctrine of Caveat Emptor in the common law the
case Chandler v Lopus7 serves as a cornerstone. This case harbingered the English Courts
position that the parties should take care of the matters regarding the fairness of the exchange
in a trade on their own.8 The doctrine soon spread to the legal systems of other common law
countries as well. However, with the advent of Sale of Goods act 1893 in England this age-
old doctrine witnessed a downfall in its position in the common law as the sec 13 and 14 of
this act brought in the implied terms as to the quality and fitness. This act was then further
amended many times throughout the 20th century with each time the amendments being made
in favour of the buyer as a result of which today this doctrine is nearly non-existent.

4. THE EXCEPTIONS: THE OUTCOME OF EVOLUTION

With the passage of time as the trade and commerce started to expand and the business
transactions became more and more complex the judges found it very unjust to apply the
doctrine of caveat emptor in its absolute form. Thus, the application of this doctrine was
limited by means of introducing exceptions to its applicability. Those exceptions are:

a. Implied condition as to Fitness for a particular purpose

In Bigge v Parkenson9 the CJ ruled that when a buyer buys a specific good or article then the
rule of caveat emptor is applicable.10 But if by the nature of the circumstance it can be
deduced that the buyer relied on the skill or judgement of the seller for the selection of an
4
A. ROGERSON, IMPLIED WARRANTY AGAINST LATENT DEFECTS IN ROMAN AND ENGLISH LAW, IN STUDIES IN
THE ROMAN LAW OF SALE 112, 113 (David daube ed., 1959); WILLIAM L. BURDICK, PRINCIPLES OF ROMAN LAW
445 (1938).
5
Alan M. Weinberger, Let the Buyer Be Well Informed? - Doubting the Demise of Caveat Emptor, 55 Md. L.
Rev. 387 (1996).
6
ibid
7
Chandler v Lopus 79. Eng. Rep.3, Cro.Jac.4(Ex.Ch. 1603);
8
A. ROGERSON, IMPLIED WARRANTY AGAINST LATENT DEFECTS IN ROMAN AND ENGLISH LAW, IN STUDIES
IN THE ROMAN LAW OF SALE 112, 113 (David Daube ed., 1959); See also PATRICK S. ATIYAH, THE RISE AND
FALL OF FREEDOM OF CONTRACT 178-179 (1979).
9
Bigge v Parkenson (1862) 31 LJ Exch 301.
10
P. RAMANATHA AIYAR, LAW OF SALE OF GOODS, 148 (9th ed., 2010)
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article to fulfil a particular purpose hence in such cases even in the absence of an express
assertion there is an implied warranty the article purchased must fulfil the intended purpose.11

The present law in India i.e. S 16(1) of Sale of Goods Act is based upon S 14 (1) of the
English sale of goods act and has a much wider scope than the previous law. The present s
16(1) also clears the doubt raised in the case Parkinson v lee12 in which it was held that if the
seller is not the manufacturer of the goods then he is not liable for the latent defects present 13.
As per the present law it is immaterial whether the seller is a manufacturer or not. 14 It was
established the Bengal corporation case15 that a person invoking s 16(1) must fulfil the
conditions which are essential for the application of this subsection. It also laid down the
conditions necessary for invoking s 16(1) and they are-

1. The buyer must expressly or by implication communicate to the seller the purpose for
which the goods are needed.16
2. This communication of purpose will show that the buyer relied on the seller skill or
judgement.17
3. Goods are of description which is in seller’s course of business to supply.

b. Merchantable quality
This concept has been well recognised both in England by cases such as Jones v Just18 as well
as in India by two cases of Madras High-court19 in which the court held that the goods sold
must be of merchantable quality20.

Farewell LJ in the case Bristol Tramway Co. v Fiat Motors gave the definition of
merchantable quality as “the article is of such quality and in such condition that a reasonable
man, acting reasonably, would after a full examination accept it under circumstances of the
case in the performance of his offer to buy that article whether he buys for his own use or to

11
Ibid.
12
Parkinson v lee (1802) 2 East 314.
13
Supra Note 10.
14
Ibid
15
Bengal Corporation v Commissioner for Port Trust of Calcutta AIR 1971 Cal 357 ⁋ 39.
16
The communication of the purpose by buyer to the seller may not be express. Its inference is incidental to the
case and is based on the description furnished by the buyer. (Ranbir Singh Thakur v Hindustan General Electric
Corporation Ltd. AIR 1971 Bom 97: 71 Bom LR 793, ⁋ 9).
17
It is not required for the buyer to rely entirely on the skill and judgement of the seller. Even if the buyer relied
considerably the seller has a duty to supply the correct product to the buyer. [Cammell Laird & Co. v.
Manganese Bronze & Brass co., 1934 AC 402; Eastern Mining Contractors v Premier Automobiles (1963) 65
BOM LR 183.
18
Jones v Just 1868 LR 3 QB 197.
19
Peer Mohammed v Dalooram, AIR 1919 Mad 728 and Mali& co. v RVA Firm, (1992) 43 Mad LJ 208.
20
Supra note 10.
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sell it again”.21 Besides in general as well merchantable quality is defined by keeping these
two things in mind firstly if the goods are bought for self-use then they must reasonably be fit
for the purpose for which such goods are usually bought for and used, secondly if the goods
are bought for the purpose of re-sale then they must fulfil that very purpose. 22 As an
illustration to the first principle in Australian knitting Mills 23 case where the plaintiff caught
dermatitis after wearing the under garments due to the sulphites present in the cloth the court
held the defendant liable as the under garments didn’t fit their common purpose which was
to be worn near the skin and hence were not merchantable. In the respective provisions of
Sale of Goods act of both India and England (s 16(2) of the Indian act and s 14(2) of the
English act) it has been accepted that when the goods are bought by description there is an
implied condition as to the merchantable quality of the goods (satisfactory quality under
English Law). If the goods on sale do not match the description under which they are sold
then can’t be held as of merchantable quality. This has been established by the case
Konsingtos case where a car was put on sale under a false description of being ‘beautiful and
immaculate’ was held to be of unmerchantable quality.24

As far as the merchantability with respect to the resale is concerned for the goods on sale to
qualify as being merchantable quality, there is no implied condition that the goods must be
legally saleable in the market intended by the buyer even if he conveys that destination to the
seller.25 The aforementioned principle can be very well illustrated by the Tehran case 26 where
the tractors which were bought by the buyer were not saleable as per the laws of Iran yet the
court held them as merchantable as the plaintiffs relied on their own judgement to ascertain if
the tractors were fit for re-sale in Persia.

As per Lord Wright’s method that he deduced in the Canadian Atlantic Grain Export Co case
goods are of merchantable quality if they are fit for any one of the many purposes for which
they are commonly used.27 Though position of law is no longer the same under the English
law where the expression ‘ Merchantable quality’ has been replaced with ‘satisfactory
quality’28 in 1994 which means that the goods must be fit not only for one of the several but

21
Bristol Tramways Co v Fiat Motors Ltd., (1910) 2 KB 831: (1908-10) All ER Rep 113: [1910] 7 WLUK 70, p
841.
22
P. RAMANATHA AIYAR, LAW OF SALE OF GOODS, 153 (9 th ed., 2010).
23
Grant v Australian Knitting Mills Ltd. [1936] A.C. 85: [1935] WLUK 28.
24
Konsingtos & Chelsen (Royal) London Borough Council v Riley 1973, RTR 122.
POLLOCK & MULLA, THE SALE OF GOODS ACT, 181 (GC Bharuka, 7th ed., 2007).
25

26
Tehran Europe v S.T. Belton (1968) 2 QB 545: (1968) 3 WLR 205;
27
Canada Atlantic Grain Export Co. v Eilers, (1929) 35 LI LR 206 (213).
28
Sale and Supply of Goods Act (U.K.) 1994.
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for all the purposes for which they might ordinarily be used. The English Law as of now is
more precise and narrower than the Indian one in discussing the quality of goods suitable as
to the purpose of sale.

In India as per sec 16(2) there is no implied condition with regards to the defects which could
have been easily revealed by an examination by the buyer. 29 If the buyer wilfully excuse
himself from examining the goods in question then the seller won’t be liable for damages as
they had done their duty by providing reasonable opportunity to the buyer for examining the
goods.30

5. CONDITION AS TO THE SALE BEING IN SELLER’S COURSE OF BUSINESS

The exceptions to the rule of caveat emptor can only be applied if the seller is selling in his
course of business. The provisions S 16 of the Sale of Goods Act 1930(India) and S 14 of
Sale Goods Act 1979(England) which embody the principle of Caveat Emptor have also
made it clear. Talking in the Indian context the s 16(1) says “the goods are of description
which it is in the course of the seller’s business to supply” 31. The S 16(2) also says “goods are
bought by description from seller who deals in goods of that description” 32 which basically
means that the dealer is selling in his course of business. This requirement that the seller must
be selling in his course of business has been mandated so as to contain the application of
implied terms to marketmen only and to exclude casual sellers from responsibility of any
kind as people buy things from them because of their personal trust on them and not because
of any trust in market33. The expression “in course of seller’s business” does not essentially
imply that the seller must be dealing regularly and habitually in goods that form the subject
matter. The position of law in this respect has been cleared by the cases like Stevenson v
Rogers34 and Davies v Sumner35. In the case Stevenson v Rogers, the English Court of Appeal
held that if the sale is closely is related to the business activities of the seller (as in this case
boat was closely to the business of the seller which was fishing) then that sale would be
considered in the course of seller’s business. Besides under English law in 1973 an
amendment was made to the existing Sale of goods act 1893 which removed the requirement

29
S 16(2) Sale of Goods Act 1930.
30
Thornett & Fehr v Beers & Sons [1919] 1 K.B.486: [1919] 2 WLUK 8 p 489;
31
S 16(1) Sale of goods act 1930.
32
S 16(2) Sale of Goods act 1930.
33
P. RAMANATHA AIYAR, LAW OF SALE OF GOODS, 164 (9 th ed., 2010).
34
Stevenson v Rogers (1999) 1 All ER 613 (CA) p 1042.
35
Davies v Sumner (1984) 3 All ER 831 (833-834): (1984) 1 WLR 1301 (1305-1306).
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for regularity of dealing in the goods. This amendment was later re-enacted in the s 14(2) of
the sale of goods act 1979 without any alterations.

6. CONCLUSION
The Doctrine of caveat emptor owes its origin to the ancient Roman law. This doctrine
thrived very well in the primeval agrarian society but as the socio- economic structure of the
societies changed and the trade transactions became more complex this doctrine started to
lose its prominence. The numerous changes made by the common law courts in its
applicability by way of introducing exceptions to this doctrine took away its absolute nature
and limited its use to quite an extent. The doctrine hence since its origin has evolved from
caveat emptor to caveat venditor i.e. from ‘let buyer beware’ to ‘let seller beware’.
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7. BIBLIOGRAPHY

Cases cited
Bengal Corporation v Commissioner for Port Trust of Calcutta AIR 1971 Cal 357 ⁋ 39.....................5
Bigge v Parkenson (1862) 31 LJ Exch 301............................................................................................4
Bristol Tramways Co v Fiat Motors Ltd., (1910) 2 KB 831: (1908-10) All ER Rep 113: [1910] 7
WLUK 70, p 841...............................................................................................................................6
Cammell Laird & Co. v. Manganese Bronze & Brass co., 1934 AC 402..............................................5
Canada Atlantic Grain Export Co. v Eilers, (1929) 35 LI LR 206 (213)..................................6
Chandler v Lopus 79. Eng. Rep.3, Cro.Jac.4(Ex.Ch. 1603)...................................................................4
Davies v Sumner (1984) 3 All ER 831 (833-834): (1984) 1 WLR 1301 (1305-1306)...........................7
Eastern Mining Contractors v Premier Automobiles (1963) 65 BOM LR 183......................................5
Grant v Australian Knitting Mills Ltd. [1936] A.C. 85: [1935] WLUK 28............................................6
Jones v Just 1868 LR 3 QB 197............................................................................................................5
Konsingtos & Chelsen (Royal) London Borough Council v Riley 1973, RTR 122................................6
Mali& co. v RVA Firm, (1992) 43 Mad LJ 208.....................................................................................5
Morley v Attenborough, (1849) 3 Ex 500: [1849] 2 WLUK 118 p 947.................................................3
Parkinson v lee (1802) 2 East 314.........................................................................................................5
Peer Mohammed v Dalooram, AIR 1919 Mad 728...............................................................................5
Ranbir Singh Thakur v Hindustan General Electric Corporation Ltd. AIR 1971 Bom 97: 71 Bom LR
793, ⁋ 9.............................................................................................................................................5
Stevenson v Rogers (1999) 1 All ER 613 (CA) p 1042..........................................................................7
Tehran Europe v S.T. Belton (1968) 2 QB 545: (1968) 3 WLR 205......................................................6
Thornett & Fehr v Beers & Sons [1919] 1 K.B.486: [1919] 2 WLUK 8 p 489.....................................7
Ward v Hobbes (1878) 4 AC 13 p 26....................................................................................................3
Statutes

S 16(1) Sale of goods act 1930..................................................................................................7

S 16(2) Sale of Goods Act 1930................................................................................................7
Sale and Supply of Goods Act (U.K.) 1994.....................................................................................6

Treatises & Books

A. ROGERSON, IMPLIED WARRANTY AGAINST LATENT DEFECTS IN ROMAN AND ENGLISH

LAW, IN STUDIES IN THE ROMAN LAW OF SALE 112, 113 (David daube ed., 1959)...............4
P. RAMANATHA AIYAR, LAW OF SALE OF GOODS, 148 (9th ed., 2010).......................................4
PATRICK S. ATIYAH, THE RISE AND FALL OF FREEDOM OF CONTRACT 178-179 (1979).............4
POLLOCK & MULLA, THE SALE OF GOODS ACT, 181 (GC Bharuka, 7th ed., 2007).....................6
WILLIAM L. BURDICK, PRINCIPLES OF ROMAN LAW 445 (1938).................................................4

Journal Articles
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Alan M. Weinberger, Let the Buyer Be Well Informed? - Doubting the Demise of Caveat
Emptor, 55 Md. L. Rev. 387 (1996).......................................................................................3