THE DOCTRINE OF CAVEAT EMPTOR

LET THE BUYER BEWARE

SUBMITTED BY SUBMITTED TO

REETIKA VAID Dr RUCHI GUPTA

BBA LLB ASSISTANT PROFESSOR OF

(3RD SEMESTER) CONTRACT LAW (II)

 ACKNOWLEDGEMENT

I would like to thank Dr Ruchi Gupta for giving me an opportunity to research on the topic,
Reliance by buyer on seller’s skills with respect to the case of Richard Thorold Grant vs. Australian
Knitting Mills Ltd.
 INTRODUCTION

The doctrine of caveat emptor is a part of Sales of Goods Act, 1930. This doctrine is defined
under Section 16 of the Sales of Goods Act, 1930. The doctrine translates to “buyer beware”,
which means that the responsibility to preview the goods before buying is of the buyer. The
doctrine also says that the buyer at the time of the transaction should use his knowledge carefully
or accept the consequences of him not being attentive.

Section 16 of the Sale of Goods Act 1930 incorporates the principle of caveat emptor which reads
as- “Subject to the provisions of this act or any other law for the time being in force there is no
implied condition or warranty as to quality or fitness for any particular purpose of goods
supplied.”

Caveat emptor is run by a legal maxim, “Caveat emptor, qui non quio non ignorare non debuit
quod jus emit”, which means let the purchaser beware, for he ought not to be ignorant of the
property which he is buying from another person. Caveat emptor is derived from the Greek word
“caveat” which means may he beware and the word “emptor” which means buyer.

The philosophy behind this rule basically was that the buyer should be aware of his rights. There
are many legislations for the protection of rights of buyer or consumer. If any wrong committed
against the right of the consumer or the buyer, remedy is provided for that. So, the doctrine deals
with, buyer shall apply his own skills and judgement before buying and second, that the buyer
should be aware of his rights.

SCOPE OF CAVEAT EMPTOR

In Ward v. Hobbes (1878) 4 AC 13, the House of Lords held that a vendor cannot be expected to
use artifice or disguise to conceal the defects in the product sold, since that would amount to fraud
on the vendee; yet the doctrine of caveat emptor does not impose duty on vendor to disclose each
and every defect in the product. The caveat emptor imposes such obligation on vendee to use care
and skill while purchasing such 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,” it means he must “take
care.” It applies to the purchase of specific things, e.g., a horse, or a picture, upon which the buyer
can, and usually does, exercise his own judgment; it applies also whenever the buyer voluntarily
chooses 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.”

EXCEPTION TO THE RULE OF CAVEAT EMPTOR

1. Section 16(1) - Fitness for buyers’ purpose

Sub section (1) of Section 16 of the said Act prescribes the circumstances in which the seller is
obliged to supply goods to the buyer as per the purpose for which he intends to make a purchase.
It states that when the seller either expressly or by necessary implication is aware of the purpose
for which buyer makes purchase thereby relying on seller’s skill and judgment and the goods to
be purchased are of a description which the seller in his ordinary course of business supply, then
there is as implied condition that the goods shall be reasonably in accordance with the purpose.

Thus, if the case of Andrew Yule and Co., the buyer had informed the seller that he needed the
hessian cloth for packing purpose, he could reject the cloth if he found that the same was unsuitable
for that purpose.

• Buyer shall be dependent on seller’s skill or judgement.

• The goods are of a description which the seller supplies in his official course of business.

In Raghava Menon vs. Kullappan Nair, it was observed that ‘‘the plaintiff is a layman and he
approaches a fairly reputed firm like the defendant dealing in watches and purchases a watch from
them, not for any special purpose , but for the common purpose of knowing the correct time. In
such a case, sec.16(1) of Sales of Goods Act must apply , by implication, the purpose for which
he purchases the watch and also relies on the seller’s skill or judgement.’’

Exception to Sec.16 (1) – provides that when the sale is for specified goods under the patent or
trademark of such goods, the concept of implied condition as to the fitness does not exist. The
proviso deals with the cases where the buyer relies on the trade name of the product and not on the
skill of the seller.
Requirements of the Section 16(1) are as follows:

• The buyer should make the seller aware of the particular purpose for which he is making
purchase;
• The buyer should make purchase on the basis of seller’s skill or judgment;
• The goods must be of a description which it is in the course of the seller’s business to
supply.

2. Merchantable quality [Section 16(2)]

The second important exception to the doctrine of caveat emptor is incorporated in Section 16(2)
of the Act. The Section provides that the dealer who sells the goods has a duty to deliver the goods
of merchantable quality.

Sub-Section (2) which contains this exception says:

“Where the goods are bought by description from a seller who deals in goods of that description
(whether he is the manufacturer or producer or not), there is an implied condition that the goods
shall be of the merchantable quality.”

Meaning of Merchantable Quality: Merchantable quality means that if the goods are purchased
for resale, they must be capable of passing in the market under the name or description by which
they are sold.

Merchantable quality depends on two factors:-

• Marketability- Merchantability does not merely mean that the goods shall be
marketable, but that they shall be marketable at their full value. “Merchantability does
not mean that the things are saleable in the market because it looks all right; it is not
merchantable in that event if it has defects unfitting it for its only proper use but not
apparent on ordinary examination.”
• Reasonable fitness for general purposes- “Merchantable quality” means, in the second
place, that if the goods are purchased for self-use, they must be reasonably fit for the
purpose for which they are generally used. Example: The plaintiff bought a hot-water
bottle which is ordinarily used for application of heat to the human The bottle burst
scalding the plaintiff’s wife. The seller was held liable.
In Grant vs. Australian Knitting Mills Ltd., the underwear contained certain chemicals which could
cause skin disease to a person wearing them next to skin, it was held that because of such a defect,
the underwear was not of merchantable quality.

Proviso to Sec. 16(2)- According to this, where the buyer has examined the goods, there shall be
no implied condition as regards defects which such examination ought to have revealed .So the
proviso divides the defect into two kinds, patent and latent.

The defects which were found on examination by a person of ordinary prudence with exercise of
due care and attention are called ‘patent defect’ and the defects which are hidden are called ‘latent
defects.’

Implied condition is negatived on examination if the defects, the implied condition of

merchantability continues in spite of the examination of the goods.

3. Usage of trade [Sec.16(3)]

This section gives a statutory force to the condition implied by the usage of a particular trade . It
says that when a seller is aware of the usage of trade. It says that when a seller is aware of the
usage of trade i.e., purpose for which goods will be used, then there is an implied condition that
seller must warrant the quality or fitness of the goods.

4. Express terms [Sec.16(4)]

The parties in a contract of sale can agree to any express conditions or warranties as to the liabilities
for the defect in the goods. But such warranty or condition implied by law unless such express
terms are inconsistent with the implied conditions.

5. Fraud or misrepresentation

If the seller in a contract, obtains the consent of a buyer by fraud or misrepresentation, then, the
seller will be held liable.

6. Sale by description and sample

In this case, the responsibility will be on the seller if the goods do not resemble such sample and/or
description.
 ORIGIN OF CAVEAT VENDITOR

In the twentieth century with the enactment of English Sale of Goods Act, 1893 and later modified
by English Sale of Goods Act, 1979 the exceptions to the rule of caveat emptor have become more
prominent than the rule itself. Further, on account of the complex structure of modern goods, it is
only the sellers who can assure the contents and the quality of the goods. For these reasons, it
became necessary to restrict the rule of caveat emptor by grafting a few exceptions upon its scope.
There is a duty now to deliver appropriate goods and also to provide appropriate information about
them. Thus, it has led to the birth of ‘caveat venditor’ which means ‘let the seller beware’ in
contrast to caveat emptor.

Caveat emptor have come a long path from its origin. Caveat emptor which means ‘let the buyer
beware’ was given by common law way back but this concept was overridden by the phrase
‘caveat venditor ’. The phrase ‘caveat emptor’ is no longer used by jurist now-a-days because it
does not lay a duty on the seller if the product is damaged, defective or against expectation of the
buyer. It puts all the duty on the buyer to be aware, use his skill and knowledge and also should be
aware of the remedies available to him.

In Australian Mills Ltd. vs. Grant, it was stated that the goods should be in such an actual state
that the buyer fully acquainted with the facts and, therefore, knowing that hidden defects existed
and not being limited to their apparent condition would buy them without abatement of price
obtainable for such goods if in reasonably sound order and condition and without any special
terms.

CONCLUSION

Thus, by legislation, the pendulum is moving in favour of the buyer. The age-old principle of
caveat emptor may now disappear in the favour of the new principle of caveat venditor that is
directed towards a new Consumer Protection System. Such a change will not only balance between
rights and obligations of the seller and the buyer. But it should be noted that if this trend of change
is taken too far, we might end up in retarding transaction due to the approach then becoming
extremely pro-buyer who might misuse the protection under the law. Thus, doctrine of caveat
emptor will be applied only when firstly, the seller has all knowledge about all implied conditions
and warranties, secondly, the seller would be liable for loss on account of sale if the goods do not
come up to the standard required by law even though he has taken all possible care, thirdly, the
seller must disclose all the facts regarding product in order to avoid conflict. The principle of
Caveat Venditor can be justified where there is disproportionate of power between the seller.

In the age of globalization, most of the articles are packed and sealed by the producer but still the
buyer can examine the packed goods by its description shown on the cover, expire date, logo, etc.
So, the modern trend to protect consumer rights has minimized the importance of rule of ‘caveat
emptor’. The change is taking place in order to create a more consumer – oriented market wherein
transactions of commercial nature will be encouraged. Such change will hold a more consumer –
friendly market and an appropriate balance between rights and obligation of buyer and seller .