“Let the buyer beware.”
The doctrine of caveat emptor lays down a fundamental principle that a buyer shall be aware of his responsibility to check the quality and suitability of the product that he is purchasing and once he is satisfied, he shall have no right to reject the product.
The doctrine is based on a presumption that a customer possesses skills and judgment to be assured of the quality of a product. Thus, a seller should not be held liable if the product does not live up to the customer’s potential.
Meaning of Caveat Emptor-
A commercial transaction involves two parties i.e. seller and buyer, both must take every care to protect their own interests and rights. When a person is buying goods, he should examine them thoroughly as the seller is under no obligation to disclose the whole truth about the goods.
The meaning of the maxim caveat emptor is “let the buyer beware” which means that the buyer has a duty towards seller to provide him information about his requirement and the seller will supply as per his requirements.
The principle of caveat emptor applies in case of purchase of specific goods where he can use his own judgment and can buy goods in his own responsibility. For e.g. purchase of a painting. The provision of Caveat Emptor is enshrined in Section 16 of the Sale of Goods Act which provides that “Subject to the provisions of this act or any other law for the time being in force there is not implied condition or warranty as to quality or fitness for any particular purpose of goods supplied.”
Exceptions to the Principle of Caveat Emptor
With the Globalization of trade and commerce, the seller and buyer stopped coming face to face and it became difficult for buyer to examine goods before purchasing them. Thus, it became necessary to protect the buyer’s interest and some restrictions were carved out for those purposes which are as following:
- a) Fitness for buyer’s purpose [Section 16(1)]: When a seller either expressly or by implication is aware of the purpose for which a buyer requires the goods and the buyer is dependent upon the judgment or skills of the seller, then the supplier has a duty to provide the customer the goods in accordance with the purpose of his purchase.
There are three requirements need to be fulfilled under this Section:
- a) The buyer must tell the seller the purpose of his purchase;
- b) The buyer shall be dependent on the seller’s skill or judgment;
- c) The goods are of a description which the seller supplies in his usual course of business.
In Shital Kumar Saini v. Satvir Singh, a compressor purchased by the petitioner with one-year warranty showed a defect within three months of purchase. When the buyer asked for a replacement, it was replaced without any further warranty. The Commission held that the goods should be reasonably fit for the purpose for which they are sold and there was an implied warranty in this case.
Proviso to Section 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. This proviso deals with the cases where the buyer relies on the trade name of the product and not on the skills of the seller.
- b) Merchantable Quality: [Section 16(2)]: Merchantable quality means the goods must be capable of passing in the market in the name or description by which they are sold. A dealer who is not a manufacturer of goods has a duty to deliver the goods of merchantable quality. It is an exception to the rule which says that when a seller is dealing in goods of a specific description and the goods are being bought by the buyer under such description, it is implied that such goods shall be of merchantable quality.
To ensure that the goods are of merchantable quality, two factors must be satisfied:
- i) Marketability: It means that the goods shouldn’t merely be capable of looking good on the outsider side but also shall be capable of rendering its proper use. The goods are not said to be merchantable when they look all right but has defects which makes it unfit for the proper use.
- ii) Reasonable fitness for general purposes: The goods must be well suited for the purpose of purchase. E.g. If Devendra bought a hot-water bag; it must be well-fit for giving heat to his body. If it bursts and scalds him then the seller would be liable.
Proviso to Section 16 (2) says that where a buyer has examined the goods and such examination has the capability of revealing out the defects in the goods, there shall be no implied condition in regard to the defects and the seller shall not be held liable for such defects.
- c) Usage of Trade [Section 16 (3)]: The 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 a trade i.e. the purpose for which the goods will be used, then there is an implied condition that seller must warrant the quality or fitness of the goods. E.g. Priya bought goods from Shweta in an auction of the contents of a ship but Shweta did not inform Priya that the contents were sea damaged, then the caveat emptor doctrine will not apply here.
In Peter Darlington Partners Ltd v. Gosho Co. Ltd, there was a contract for sale of canary seed and it was held that the contract was subject to the customs of the trade and the buyer shall receive a rebate on the price for impurities in the seed but the goods cannot be rejected. However, any unreasonable custom of trade does not affect a contract between the parties.
- d) Express Terms [Section 16(4)]: The parties in a contract of sale can agree to any express conditions or warranties as to liability for the defect in the goods. But such warranty or condition does not render any warranty or condition implied by the law unless such express terms are inconsistent with the implied conditions.
- e) Fraud or Misrepresentation: This is also an important exception to the doctrine. If the seller, in a contract of sale, obtains the consent of a buyer by fraud or misrepresentation (concealing a known defect which cannot be discovered by reasonable examination), the doctrine ceases to apply in such cases. In both the cases, the seller will be liable.
- f) Sale by description and sample: If the seller sells the goods via sample and description of the product, the responsibility will be on the seller if the goods do not resemble such sample and/or description.
Important Cases relating to the doctrine of Caveat Emptor-
In Ranbirsingh Shankarsingh Thakur v. Hindustan General Electric Corporation Ltd, it was held that Section 16(1) applies where the buyer requires goods for a specific purpose and he expressly or impliedly makes that purpose known to the seller, he relies on the skills of the seller and the seller’s usual course of business is to sell such goods whether he is the actual producer or not.
In Frost v. Aylesbury Dairy Co. Ltd., it was held that when the plaintiff brought milk from the defendant, the milk contained germs of typhoid fever and the plaintiff’s wife took the milk and got an infection as a result of which she died. Plaintiff was entitled to recover damages.
In Ward v. Hobbes, it was held that a seller cannot use artifice or disguise in order to conceal the defects in the products as it would amount to have committed fraud by the vendor against the vendee. But the doctrine does not impose a duty to disclose all the defects in the product sold, on the vendor.
In Wallis v. Russel, the court while explaining the scope of the doctrine said that Caveat Emptor only implies that a buyer must take care. It does not mean that a buyer shall take a chance. The doctrine applies where a buyer exercises his own judgment and voluntarily chooses the product he needs to buy.
In Jones v. Padgett, the plaintiff purchased an indigo cloth from the defendant for making liveries but failed to inform his intention to the seller. The cloth purchased turned out to be not suitable for making liveries and the plaintiff sued the defendant for loss but the court held that the defendant was not liable under the principle of caveat emptor.
In Raretto v. T.R. Pruce, the plaintiff asked the defendant (who was a dentist) for a set of false teeth, the defendant gave a set of false teeth which did not fit into the mouth of plaintiff. The plaintiff sued the defendant for refund of the price paid for the set. The defendant pleaded the doctrine of caveat emptor but court rejected the plea and held that defendant should have provided a set suitable for the plaintiff.
From the above discussion, it can be concluded that the legislation protects the rights and interests of buyer as well as seller without being bias towards any of them. It protects the seller’s rights by enshrining the doctrine of Caveat Emptor but at the same time, the law provides exceptions as well under which a seller can be held liable and it has been said again and again that the exceptions to the rule are considered more important than the rule itself.