CONTRACT OF SALE

UNIT III

SUBJECT-CONTRACT-II

BA LLB V SEM

FACULTY-MS.SADIA ZEB
 MEANING OF RULE OF CAVEAT EMPTOR

The doctrine of Caveat Emptor is an integral part of the Sale of Goods Act, 1930. It means “let the buyer beware”. This
means it lays the responsibility of their choice on the buyer themselves. Henceforth, it lays down a fundamental principle
that a buyer shall be aware of his responsibility to check the quality and suitability of the product he is purchasing.
Therefore, buyer has duty towards seller to provide him information about his requirement and the seller will supply as per
his requirements. The rule of caveat emptor applies in case of purchase of specific goods where a buyer can use his own
skill and judgment and buy the goods. For eg. Purchase of painting. This rule of Caveat Emptor is enshrined in Section 16
of Sale of Goods Act, 1930 which provides that “Subject to the provisions of this Act and any other law for the time being
in force, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied
under a contract of sale.”

For eg: A bought a horse from B. A wanted to enter the horse in a race. Turns out the horse was not capable of running a
race on account of being lame. But A did not inform B of his intentions. So, B will not be responsible for the defects of the
horse. The Doctrine of Caveat Emptor will apply.
Case Laws

1. Ward v. Hobbes (1878) 4 AC 13, the House of Lords held that if a seller uses artifice or disguise to conceal the defects
in the product which is to be sold, it would amount to fraud on the buyer; still no duty to disclose the defects in the product
is imposed on the seller by the doctrine of caveat emptor. An obligation to use care and skill while purchasing goods is
imposed on the buyer by the doctrine of Caveat emptor.

2. Wallis v. Russel (1902) 2 IR 585, the Court of Appeal explained the scope of caveat emptor and laid down that the rule
of Caveat emptor implies that the buyer must take care. It applies to the purchase of those things upon which buyer can
exercise his own skill and judgment, e.g. a picture, book, etc (also known as specific goods); it also applies in the cases
where by usage or by a term of contract it is implied that the buyer shall not rely on the skill and judgment of the seller.
 EXCEPTIONS TO RULE OF CAVEAT EMPTOR

The doctrine of caveat emptor is subject to the following exceptions:

1. Fitness for buyers purpose (Sec. 16(1)): Section 16(1) of the said Act provides that in situations where the seller is
aware either expressly or by necessary implication of the purpose for which a buyer needs to purchase a specific product,
further, the goods are of such description which the seller supply in his ordinary course of business and by relying upon the
judgment and skill of the seller, the buyer purchases that product, then the goods should be in accordance with the purpose.
Henceforth, his section explains the circumstances where the seller has an obligation to supply the goods to the buyer as
per the purpose for which he intends to buy the goods.

In Shital Kumar Saini v. Satvir Singh (2005) 1 CPR 401, a compressor was purchased by the petitioner with one-year
warranty. The defect in the product appeared within three months. The petitioner sought a replacement. The seller
replaced it but did not provide any further warranty. The State Commission stated that an implied warranty was guaranteed
under section 16 of the Sale of Goods Act, 1930 and allowed it to be rejected.
2. Sale under a patent or trade name (Proviso to Sec. 16(1)): In the case of a contract for the sale by a specified article
under its patent or other trade name, there is an implied condition that the goods shall be reasonably fit for any particular
purpose.

3. Merchantable quality (Sec. 16 (2)): Where the goods are purchased by description from a seller who deals in goods of
such description there is an implied consideration is that the goods shall be of merchantable quality. But if the buyer has
examined the goods, there is no implied condition as regards defects which such examination ought to have revealed.

4. Conditions implied by trade usage (Sec. 16(3)): An implied warranty or condition as to quality or fitness for a
particular purpose may be annexed by the usage of trade.

In the case of Peter Darlington Partners Ltd v Gosho Co Ltd [1964] 1 Lloyd’s Rep 149, a contract for the sale of canary
seeds was subjected to the custom of trade and held that if there exist any impurities in the seeds the buyer will get a rebate
on the price but he would not reject the goods. However, a custom which is unreasonable will not affect the parties’
contract.
5. Consent by fraud: Where the consent of the buyer is obtained by the seller or where the seller conceals a defect, the
doctrine of caveat emptor does not apply.

6. Sale by Sample: Where the goods are bought by sample the doctrine does not apply, if the bulk does not correspond
with the sample.

7. Sale by Description: Where the goods am sold by description and the goods supplied by the seller do not correspond to
the description. In the case of Priest v. Last (1903) 2 KB 148, the plaintiff purchased a hot water bottle from the defendant,
a retail chemist. Some days later, the bottle while in use by the plaintiff’s wife, burst. As a result, she was scalded and the
plaintiff sued the defendant. It was held that if the description of the goods by which they were sold pointed to one
particular purpose only, then the requirement of disclosure of purpose is deemed fulfilled.
 RELEVANCE OF RULE OF CAVEAT EMPTOR

The rule of Caveat Emptor appeared to play an important role in the past when trade was conducted on local scale and the
buyer had every opportunity to examine the goods before buying. However, in the modem context, the rigours of the rule
have been mitigated because of global dimensions of trade, government legislations on consumer protection, professional
management, intense competition and consumer awareness.