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Legopedia

Caveat Emptor: Meaning and Examples

The meaning of the term Caveat Emptor is “let the buyer beware “(literally, sold as is). Caveat emptor is a Latin term and is used in the contract law. It is the responsibility of the buyer which is mentioned in the Doctrine of Caveat Emptor. The definition of Caveat Emptor is, the rule that the buyer is accountable for the inspection of the quality and aptness of goods before any purchase is made.

What is caveat emptor?

A vendor is under no duty to communicate the existence even of latent defects in his/her wares unless by act or implication he/she represents such defects not to exist. The bounden duty of the purchaser is to make all such necessary inquiries and to ascertain all the facts relating to the property to be purchased prior to committing in any manner.
The phrase, “Caveat Emptor”, and its use as a disclaimer of warranties arise from the fact that those buyers typically have less information about the good or service they are purchasing, while the sellers have more information. The quality of this situation is known as ‘Information asymmetry’. Defects in the good or service may be hidden from the buyer, and only known to the seller.

The doctrine of Caveat Emptor

The doctrine of Caveat Emptor is laid down under the provisions of the law under section 16 of the Sales of Goods Act, 1930 as “subject to the provisions of this Act and of 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.” Section 15 lays down the condition which is implied by law in the sale by description. Section 15 says, “Where there is a contract for Section 15 says, “Where there is a contract for the sale of goods by description, there is an implied condition that goods shall correspond with the description. Goods are to be sold by description when the contract contains a description may be in terms of the physical characteristics of the goods or may simply mention the trademark, trade name, brand or label under which they are usually sold.”

Example of Caveat Emptor: A, buyer, and B, Seller. A wanted to buy a horse for race buy did not inform this purpose to B. and the horse he bought is not capable of racing. The seller cannot be held responsible for this purchase.

Exceptions to the rule of caveat emptor

Caveat Emptor Exceptions are as follows:

  • Purpose of buying informed to the seller: It is the duty of the seller to ensure to match the usage of the buyer and offer such goods.
  • Goods sold under Brand name: when the product bought is of a brand, the seller cannot be held responsible for the quality, durability, etc of the product.
  • When goods sold under the description, the seller will be responsible if the goods do not match the description
  • Merchantable quality of goods: Section 16(2): The quality of products sold should be capable of passing the market standards. The seller will be responsible if the goods sold do not pass the market standard.
  • When the goods are brought by a sample; the rule of caveat emptor fails to apply.
  • When the goods are brought by a sample as well as description; if the goods sold by the seller do not match the sample, then the seller will be responsible.
  • Implied warranty or condition as to fitness or quality
  • Fraud or misrepresentation; if for buying the product the consent of the buyer is obtained by fraud then the rule of caveat emptor will not apply.

Caveat Venditor: This principle of caveat venditor states that it is the responsibility of the seller for the problems with respect to any product or service which may be encountered by the buyer. This Principle is in contrast with the principle of Caveat Emptor.

Conclusion

The rule of the caveat emptor applies whenever the buyer voluntarily chooses what he/she buys, it does not mean that the buyer should ‘take chance’ but it means he/she should ‘take care’ if both the buyer and the seller are negotiating from equal bargaining positions. However, the doctrine of caveat emptor would apply.

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by ashish padhy

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