Caveat Emptor

KEY TAKEAWAYS

1.  The doctrine of caveat emptor imposes a responsibility on the buyer to scrutinise the product for any defects and ensure that the product they are about to buy fits their requirements.
2.  In the past, the seller did not have any responsibility to ensure that their products met a basic standard of quality.
3.  With a change in times, the doctrine of caveat emptor slowly evolved into caveat venditor meaning ‘the seller beware’.
4.  The responsibility imposed on the buyer was reduced to a great extent and instead the sellers started having more responsibility.

INTRODUCTION

The right to file a complaint against a faulty good or service is bestowed upon every buyer. They can file their complaints in the appropriate district forums and seek relief as compensation if they deem that appropriate. But every right is accompanied by a responsibility. Even the buyer must act in a fair and reasonable manner to ensure that they did not receive a good that is of no use to them simply because they were careless.
When a good or service is being sold, the seller has the responsibility to ensure that their product meets a minimum degree of standard and that they are in no way harmful to the life of the general public. Just like this, the buyer also has the responsibility to ensure that the product they are buying is what they are looking for and that they are aware of the terms and conditions associated with the said product.
Every buyer must exercise due diligence when purchasing a product, as advised by the Latin phrase ‘caveat emptor’ which translates to ‘let the buyer beware’. This maxim essentially reduces the scope for putting the onus on the seller for a fault from the side of the buyer. The buyer must conduct their research and ask such questions to the seller that are necessary to ensure that a dispute does not arise in the future just because the terms were misunderstood.

ORIGIN AND USAGE

Caveat emptor is an image of the mindset that persisted in the nineteenth century wherein the businesses were prioritised over the interests of the consumers. It was created to protect the sellers from any future disputes due to any defects that the buyer found in the goods after purchasing it from the seller. The only way to circumvent it was if it could be proved that the seller had actively concealed any latent defects in the product.
It originated in England and was used widely in common law to protect the interests of the sellers. The seller did not have any legal obligation to provide complete information about the product. The buyer was given the responsibility to examine the product thoroughly before proceeding with buying it. Once the product was purchased by the buyer, they had no right to claim any damages from the seller.

BASIC PRINCIPLE

The main principle behind the maxim ‘caveat emptor’ is that the buyer must be fully aware of any defects in the product and must thoroughly examine the product before proceeding with its purchase. If the product does not stand up to their expectations after purchase, they cannot seek relief against this and the onus is on the buyer to protect their rights through reasonable behaviour. 
It is the consumer who should exercise due diligence to ensure that the products that they purchase meet their expectations, and to reach this effect, they must examine the products thoroughly using all their skill and experience before the purchase. In the past, the seller provided no warranty on the quality of their goods, and thus the buyer should exercise due caution to ensure that they are not cheated.

CAVEAT EMPTOR IN BUSINESS LAW

In the modern world, the principle of caveat emptor provides a certain degree of protection to the sellers. They are generally not obliged to disclose every detail about their product, unless the information is of paramount importance to the buyer. If such information is not disclosed, the buyer could use that fact to sue the seller. The risk of defects in the product is laid upon the buyer who must examine the product to ensure that there are no defects in it and that it is fit for his purpose.
Consumer protection laws have caused a change in how this principle is interpreted, and the seller now has the responsibility to disclose such information that is important enough for the buyer to determine whether they should proceed with the purchase. Although such responsibility already existed, its consequences are now more severe, thereby providing a certain amount of protection to the buyer against fraudulent sales.

WHERE THIS LAW IS APPLICABLE AND WHERE IT IS NOT

The doctrine of caveat emptor imposes certain responsibility upon the buyer to examine the products before purchasing them. Although in the past this law took out almost all responsibility from the seller regarding the quality of their product, modern consumer laws have taken away this privilege from them. The law now imposes certain liability on the sellers to disclose such information that is important to the buyer and that which can affect the decision to purchase the product.
The Sale of Goods Act, 1930, provides certain exceptions to the doctrine of caveat emptor. For instance, Section 16 of the same deals with the situation where the seller is aware of the purpose for which they are buying this specific product. The buyer must ensure that they apprise the seller of the purpose for which they are buying the product in question. If a product has multiple use cases, they must inform the seller of their specific use case. But if the product is such that it can only have one use, it is assumed that they are aware of the purpose of the said product. It must also be proved that the buyer was reliant on the skill and expertise of the seller while making the purchase, and it was the seller who supplied the product that fits the purpose of the buyer. The goods must also be such that they are sold in the ordinary course of business by the seller. If these conditions are met, the seller now has the obligation to sell the product as was specified by the buyer, and if they do not fit the purpose of the buyer, the seller will be held accountable.
The Sale of Goods Act also specifies that the trade name does not automatically assure the buyer of a certain amount of quality. Unless the trade name was used by the seller to assure the buyer of certain quality when the buyer apprised them of their purpose, the seller cannot be held liable. Similarly, when the goods are sold by description, the dealer is under an obligation to provide the goods of merchantable quality, meaning that the product must be of a quality that is fit for the purpose that they are supposed to serve. Such a good must be capable of being resold at full value. 

CAVEAT EMPTOR AND CAVEAT VENDITOR

Caveat emptor was the remnant of a past where the sellers had the privilege of not being held accountable for any defects that may be inherent in their product. This doctrine imposed the onus of ensuring that the goods in question met a basic standard of quality and that they are free from defects. The seller was mostly free from any liability unless they had actively concealed information related to the product that is of such a nature that it can dictate the decision of the buyer pertaining to its purchase.
With the change in time, the Courts realised that the privilege awarded to the sellers had crossed a point where they started being careless with the products they make. There were often situations where neither the seller nor the buyer were aware of certain inherent defects in the products, and therefore the need to make the seller accountable was found, and thus came into existence the doctrine of caveat venditor. 
The doctrine essentially translates to ‘let the seller beware’ and imposes liability on the seller to ensure that they maintain a certain level of quality. It served as the stepping stone in the evolution of consumer protection laws throughout the world.

THE DOCTRINE AND ECOMMERCE PLATFORMS

The method in which the doctrine of caveat emptor applies might be different in the case of ecommerce platforms when compared to traditional markets, but the underlying principle of ‘let the buyer beware’ remains the same. With ecommerce platforms, it is the duty of the consumer to scrutinise the pictures and other information about the product when available to ensure that they meet their requirements and that there is no possibility of future disputes.
It is possible to determine the basic quality of a product or at least tune down the expectations of a product by going through the ratings and reviews of the product. It is possible to understand whether the product in question meets the needs of the buyer by going through reviews of buyers who had similar needs.
The Consumer Protection Act, 2019, expanded its ambit to include ecommerce platforms, thereby ensuring that the doctrine of caveat emptor applies even on online businesses. These laws help ensure that remedies are available against any deficiencies inherent to a product, and that consumers do not feel left out when transacting online.

LANDMARK JUDGEMENTS

1.  McKenzie v. Nagendra Nath (1919)
In this case, the defendants were car dealers, who upon learning that the plaintiffs were interested in purchasing cars, presented that Plymouth cars were of excellent quality and subsequently convinced the plaintiff to buy a Plymouth car. When the plaintiff discovered a defect in the car after purchasing it, they filed a suit in Court. The Court held that the seller had convinced the plaintiff that the car was of excellent quality and that the plaintiff had purchased the vehicle after placing trust on the seller’s skill and experience. Along with this, it was observed that the defect in question was not one that was common to develop in these cars due to inappropriate use, and therefore has to be a manufacturing defect. The Court therefore held the defendants liable for the same.

2.  Wallis v. Russell (1902)
In this case, the plaintiff, relying upon the skill and experience of the defendant, bought crabs assuming them to be fit for human consumption, and after consumption fell seriously ill. The Court held that the defendant was liable to pay damages to the plaintiff since the defendant was aware of the purpose for which the plaintiff was buying the crabs and subsequently bought the crabs by relying upon the skills and experience of the seller. This is therefore a case of implied warranty which the seller is liable to fulfil.

3.  Manju Bhatia v. New Delhi Municipal Corporation (1997)
In this case, the plaintiff had entered into an agreement with a builder for the purchase of certain flats. Unknown to the plaintiff, the construction of certain floors were illegal, and thus were later demolished by the municipal corporation, which caused severe loss to the plaintiff. The Court held that the seller had a duty to apprise the buyer of the defects inherent to the property, and therefore the seller was held liable to pay compensation for the same.

CONCLUSION

The doctrine of caveat emptor imposes a certain responsibility on the buyer to make sure that the product that they are about to purchase do not have any kind of defects and that they fit the purpose for which they buyer intends to buy them. This doctrine was developed by the English Courts at a time when the sellers were given more privilege than the buyers. With a change in times and the uprise of consumer protection laws, the doctrine of caveat emptor was changed to caveat venditor meaning ‘let the seller beware’.

The seller now had the responsibility to ensure that their products met a certain standard of quality and that they were not riddled with defects. This change in the perspective of the lawmakers brought about the Consumer Protection Act which provided a certain degree of protection to the consumers.

FREQUENTLY ASKED QUESTIONS

1.  Can the seller be held liable if they were not aware of the purpose for which the product was being bought by the buyer?
ANS: If the seller was not aware of the purpose for which the product was being bought by the buyer and the buyer bought the product by trusting the skills and experience of the seller, the seller cannot be held liable. Unless the seller promoted a product that was not of the required quality after knowing the purpose for which the buyer is buying the product, they cannot be held liable.

2.  What is the principle of caveat emptor?
ANS: The doctrine of caveat emptor is based on the principle that the buyer must exercise due diligence while purchasing a product. They must ensure that the product fits their purpose and that the product is free from defects. If the buyer is fully satisfied with the product after thorough examination, only then should they buy the product, as the seller cannot be held liable for the same.

3.  What was the intention behind the doctrine caveat emptor?
ANS: The doctrine served as a warning to the buyers to be mindful of their purchases and to employ their skills and experience to scrutinise the product to ensure that there are no defects in the product and that they fit the purpose for which the product is being bought.

4.  Is the doctrine of caveat emptor still relevant in the modern world?
ANS: The doctrine of caveat emptor has lost its relevance in the modern world as there has been a change in the focus of lawmakers towards the rights of consumers. Consumer protection legislations like the Consumer Protection Act, 2019, focuses on the doctrine of caveat venditor which translates to ‘let the seller beware’.

5.  What is meant by merchantable goods?
ANS: By the term merchantable goods, it is meant that the products must be of a reasonable standard of quality. This means that the goods must be fit for resale in the market and must meet a minimum standard of quality. When a buyer buys goods based on a description, the goods must be of merchantable quality, and if otherwise, the seller can be held liable.