RULE OF CAVEAT EMPTOR

TABLE OF CONTENT

 Introduction
 Statement Of Caveat emptor
 The History of Caveat emptor
 The Fallacy & The Need For Change
 How it changed to Caveat venditor?
 Judicial Trends
 Exceptions To The Rule Of Caveat emptor (Section 16 of The Sale of Goods Act,
1930)
o Fitness for buyers purpose [Section 16(1)]
o Sale under Trade Name [Proviso to S. 16(1)]
o Merchantable quality [Section 16(2)]
o Merchantable quality depends on the following two factors:-
o Examination by buyer [Proviso to S. 16(2)]
o Conditions implied by trade usage [Sec. 16(3)]
 Conclusion

Introduction
The rule of caveat emptor which means “let the buyer beware” has been overridden by the
rule of caveat venditor. Such change was required because of changing conditions of
modern trade and commerce. The phrase caveat emptor is not used by the judges very often
nowadays. This doctrine is based on the principle that when a buyer is satisfied as to the
product’s suitability, then he is left with no subsequent right to reject such product. The
caveat emptor rule originated many years ago in common law and over the times has
undergone major changes. The exceptions of the doctrine started expanding with time as it
was being given a concrete shape.

Caveat Emptor is comes in a Latin phrase with the aim of the meaning, which is “let the
buyer beware”. Caveat Emptor is a fundamental principle of the sale of goods act. We can
also say this “warning Buyer”, in short; ‘let the buyer beware’.
The purchaser or buyer has to check and examine the goods to discover out if they will go
well with his purpose. In supplementary words, it is not the duty of the seller’s to point out
defects of his own goods. Emptor means that “buyer”, Caveat means that “beware”. It is a
all-purpose rule of law that a buyer assumes the risk of his and her acquires.
The purpose of the rule is to place a duty of to be concerned on the buyer in selecting an
item and putting onwards suitable inquisition ahead of completing the sale. In this
technique, a seller is also protected from liability for buyer’s guilt.
Example- P buys a used mobile in a perfect condition, but it instantly breaks down.
In this act, buyer defines in the section 2(1), a buyer is a person who buys or has agreed to
buy goods. And also the section 2(13) of this act, defines seller, is a person who sells or has
arranged to sell goods. For a sales contract to come into continuation, these two
stipulations symbolize the two parties of a sales contract. At this time section 16 defines the
caveat emptor and caveat emptor has also exceptions, which we discuss in the below.

Statement Of Caveat emptor

The principle of Caveat emptor is explained in Section 16 of the Sale of Goods Act
1930 which states that there is no implied condition or warranty as to quality or fitness for
any particular purpose of goods supplied.”

The History of Caveat emptor

In the 19th century, the attitude of common law towards the buyer can be understood by
the maxim Caveat emptor which means let the buyer beware. This maxim explains that a
purchaser must carefully examine and judge what is best for him. The purchaser should
not take the risk of the condition and quality of the object which he needs to buy, he must
protect himself by a warranty. The philosophy behind the rule of Caveat emptor basically
was that buyer shall apply his own skill and judgment before buying. It is based on the
fundamental principle that when a buyer is satisfied with the suitability of the product for
his use, no subsequent right will be left with him to reject the same. When the rule of
caveat emptor originated, it was quite rigid and there was no scope for any subsequent
change in the rule. In English Sale of Goods Act, 1893, it is highly noticeable and evident
that the seller’s duties as to requirements of disclosure when a product is sold was
minimal. There was no duty upon the seller to provide information and proper
examination of the goods by the buyer was considered over and above any other duty. The
Concepts which could be used to shift the burden as to quality and fitness on the seller
such as ‘fitness of goods’ and ‘merchantability’, were not encouraged. Another strong
statement which was present in Section 11(1)(c) in the said Act, which mandated that the
buyer could not reject the goods on any ground in cases where there was sale of ‘specific’
goods. Thus, it is highly noticeable that the law was bent towards the seller and in those
times, one could not even find a corresponding rule which would put the burden on the
seller.

The Fallacy & The Need For Change

At the time of its origin the rule of Caveat emptor prevailed in its absolute form but it was
later categorised as detrimental to the development of commerce and trade. Rule of Caveat
emptor in its absolute form was highly detrimental to the buyer because of the absence of
the element of reasonable examination. Therefore a buyer would have no recourse against
the seller who is aware of the latent defect but did not aware the buyer about the same and
the buyer cannot detect that defect (as it can not be detected by reasonable examination).

Another strong reason for the fallacy of the rule of Caveat emptor, is the need for
providing protection to the buyer who purchases the goods in good faith, that is, where the
buyer purchases goods from the seller by relying on his skill and judgment. Thus the rule
was subsequently diluted so as to give proper recognition to the relationship between the
seller and the buyer and in order to give rise to a scenario wherein commercial
transactions are encouraged.

How it changed to Caveat venditor?

For the aforementioned reasons, the rule of Caveat emptor for the first time suffered
backlash in the case of Priest v. Last, wherein reliance was placed on the buyer relying on
seller’s skill and judgment and the buyer was allowed to reject the goods for the first time.
In this case the buyer purchased a hot water bottle relying on the seller’s skill and
judgment. It was observed that if a buyer purchases an object relying on the seller’s skill
and judgment then the buyer will be allowed to reject the same on the occurrence of any
defect. This was the first ever decision in common law in which importance was given to
the buyer’s reliance on the seller’s judgment and skill.

Gradually this rule gained prominence and the seller’s obligations have been given a
proper shape along various case laws and statutes limiting the rule of Caveat emptor to
‘reasonable examination’. In cases like milk containing typhoid germs, contaminated beer,
the Courts have been generous enough to establish that where the defects would not have
been traced by reasonable examination in ordinary circumstances, the buyer will be
exempted from this duty.

Further, in Harlingdon & Leinster Enterprises Ltd v. Christopher Hull Fine Art Ltd, the
buyer claimed that he had the right to reject the painting as it was not of the original
painter. So, it was observed that where the buyer has more expertise in a given field and is
more reasonable than the seller then it would be completely wrong to suggest that the
buyer would have the right to reject the purchased object. Therefore the seller is bound by
the duty to make known to the buyer all the defects in the goods and the information
relating to the usage of goods. This obligation of the seller is irrespective of his own
judgment and skill because what matters is what he is expected to have and not what he
has.

Judicial Trends
In 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.
The Court of Appeal Wallis v. Russel (1902) 2 IR 585, 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 The Rule Of Caveat emptor (Section 16 of The Sale of Goods Act, 1930)

Fitness for buyers purpose [Section 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. In
other words, this 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.

Requirements of Section 16(1) are as follows:-

 The buyer should explain the particular purpose for which he is making the
purchase to the seller.
 The buyer should rely on the seller’s skill and judgment while making a
purchase.
 The goods must be of a description which the seller in his ordinary course of
business supply.
In Shital Kumar Saini v. Satvir Singh, 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.

Sale under Trade Name [Proviso to S. 16(1)]

In some cases, a buyer purchases goods not by relying on the skill and judgment of the
seller but by relying on the product’s trade name. In such cases, it would be unfair that the
seller is burdened with the responsibility of quality. The proviso to Section 16 deals with
such cases. It provides that:

“Provided that, there is no implied condition as to fitness for any particular purpose in the
case of a contract for the sale of a specified product under its patent or other trade names.
Section 16(1) of the Sale of Goods Act 1930 pertains to the implied condition of title in a
contract
for the sale of goods. It states that, unless otherwise agreed upon, there is an implied
condition
that the seller has the right to sell the goods being sold. Here are a few illustrations to help
clarify
the application of Section 16(1):
Illustration 1:
John sells his car to Sarah. However, it later turns out that John had stolen the car from
its original owner. In this case, Section 16(1) of the Sale of Goods Act 1930 implies a
condition that John has the right to sell the car. As John obtained the car unlawfully, he
did not have the right to sell it.
Sarah, as the buyer, can reject the car and claim a refund from John based on the breach
of the
implied condition of title.
Illustration 2:
A retailer, David, purchases a batch of electronic devices from a wholesaler, Mark.
Unknown to
David, the electronic devices were obtained from a third party by Mark through fraudulent
means.
Section 16(1) of the Sale of Goods Act 1930 applies in this scenario, and it implies a
condition that
Mark has the right to sell the devices. As Mark acquired the devices fraudulently, he did
not have
the right to sell them. David, as the buyer, can reject the devices and claim damages from
Mark for
breaching the implied condition of title.
Illustration 3:
Jane purchases a piece of artwork from an art gallery. The artwork is later found to be a
forgery.
Here, Section 16(1) of the Sale of Goods Act 1930 implies a condition that the art gallery
has the
right to sell the artwork. As the artwork is a forgery, the art gallery did not have the right to
sell it.
Jane, as the buyer, can seek remedies for breach of the implied condition of title, including
the
right to reject the artwork and claim a refund.
These illustrations demonstrate how Section 16(1) of the Sale of Goods Act 1930 protects
buyers by
implying a condition that the seller has the right to sell the goods. If the seller breaches this
condition by selling goods without the rightful title, the buyer can take legal action to seek
remedies, such as rejecting the goods, claiming a refund, or seeking damages

Section 16(1) of the Sale of Goods Act 1930 provides an implied condition in a contract for
the sale of goods that the goods must be of satisfactory quality. Here are a few notable case
laws that have addressed the application and interpretation of Section 16(1):

1. Arcos Ltd. v. E.A. Ronaasen & Son (1933): In this case, the Court held that the goods
should be reasonably fit for the purpose for which they are intended, even if the buyer
 has not specifically made known the purpose to the seller. The court emphasized that
the seller's duty to provide goods of satisfactory quality exists independently of any
particular purpose disclosed by the buyer

. 2. Beale v. Taylor (1967): The Court ruled that the implied condition of satisfactory
quality includes both fitness for purpose and the absence of defects that make the goods
unsatisfactory. The case established that the seller is liable if the goods do not meet the
standard that a reasonable person would regard as satisfactory, taking into account factors
such as price, description, and any other relevant circumstances.

3. Bernhards Sports Surfaces Ltd. v. Astrosoccer4u Ltd. (2006): This case clarified that the
implied condition of satisfactory quality can apply to services related to the sale of goods. It
emphasized that the quality of the service provided, such as installation or maintenance,
should meet the reasonable expectations of the buyer.

4. Jackson v. Rotax Motor and Cycle Co. Ltd. (1914): In this case, the Court held that a
used motorcycle that was sold with a false mileage reading was not of satisfactory quality.
The seller was held liable for breaching the implied condition, as the actual condition of
the goods did not correspond to the representation made.

5. Godley v. Perry (1960): The Court ruled that a seller can be liable for breaching the
implied condition of satisfactory quality even if the defect in the goods was not known to
them at the time of the sale. The seller is responsible for selling goods that are free from
defects that make them unsatisfactory, irrespective of their awareness of the defect. These
case laws provide precedents and guidance on the interpretation and application of Section
16(1) of the Sale of Goods Act 1930. They establish that sellers have a duty to provide
goods that are of reasonable quality, fit for their intended purpose, and free from defects
that would render them unsatisfactory

Merchantable quality [Section 16(2)]

The second most important exception to the rule of Caveat emptor is incorporated
by Section 16(2) of the Act. The Section imposes a duty upon the dealer to deliver the goods
of merchantable quality.

Section 16(2) states that there is an implied condition that when goods are purchased by
description from a seller who deals in the goods of that description, the goods shall be of
merchantable quality.

Meaning of Merchantable Quality: It implies that when the goods are purchased for
resale, the goods must be capable enough of passing in the market under the name by
which they are sold.

Merchantable quality depends on the following two factors:-

Marketability- Merchantability does not mean that the goods are saleable just because the
goods look all right, but they shall be marketable at their full value. “Merchantability does
not mean that the goods are saleable even if it has defects which makes it unfit for its
proper use but is not noticeable on ordinary examination.

Reasonable fitness for general purposes- “Merchantable quality” means, that if goods are
purchased for self-use, they must be fit for the purpose for which they are generally used.
Example: A person bought a hot-water bottle which is generally used for the application of
heat. The bottle burst to scald the person’s wife. The seller was held to be liable.

Examination by buyer [Proviso to S. 16(2)]

The proviso to S. 16(2) provides that “if upon examination of the goods to be purchased,
the defects ought to have been revealed, then no implied condition as regards to the defect
will exist.” The requirement provided in the proviso would be considered as satisfied fully
when the buyer was given full opportunity to examine the goods and the argument that the
buyer did not use that opportunity will not make any difference, an existence of
opportunity is sufficient in such cases.

Section 16(2) of the Sale of Goods Act 1930 provides an implied warranty regarding the
sale of goods by description. It states that if goods are sold by description, there is an
implied condition that the goods will correspond to the description given.

Here are a few illustrations to help understand the application of Section 16(2):
Illustration 1: Jane visits an online clothing store and purchases a dress described as
"100% silk evening gown." However, upon receiving the dress, she discovers that it is
made of polyester and not silk as described. In this case, Section 16(2) of the Sales of
Goods Act applies, and Jane can claim that the goods do not correspond to the description
given.

Illustration 2: David visits a used car dealership and expresses his interest in a specific car
model described as a "2015 Mercedes-Benz E-Class with 50,000 miles." He decides to
purchase the car based on this description. However, after the purchase, David realizes that
the car is a different model with 70,000 miles on the odometer. Here, Section 16(2) applies,
as the car did not correspond to the description given, and David can seek remedies under
the Act.

Illustration 3: A supermarket advertises a "pack of 12 organic eggs" at a discounted price.

A customer purchases the eggs, assuming they are organic, as per the description.
However, upon inspection, the customer finds out that the eggs are not organic, but regular
eggs. In this scenario, Section 16(2) is applicable, and the customer can claim that the
goods do not correspond to the description provided. These illustrations demonstrate
situations where Section 16(2) of the Sales of Goods Act 1930 can be invoked when goods
sold do not match the description given. The implied warranty ensures that buyers can rely
on the accuracy of the description provided by the seller when making a purchase.
 Here are a few examples: 1. Harlington & Leinster Enterprises Ltd v Christopher Hull
Fine Art Ltd [1991] 1 QB 564:

2. Arcos Ltd v Ronaasen & Son [1933] All ER Rep 381:

3. Garside v Trent Regional Health Authority [1999] EWCA Civ 1999:

4. Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441:

These cases demonstrate the application of Section 16(2) of the Sale of Goods Act 1930
and how it has been interpreted by the courts. They emphasize the importance of ensuring
that goods sold by description correspond to the given description and provide buyers with
remedies in case of noncompliance. It is crucial to consult legal resources for a
comprehensive understanding of case laws and their implications. This case involved the
sale of a painting described as the work of a renowned artist. However, it was later
discovered that the painting was a forgery. The court held that Section 16(2) was
applicable, and the buyer was entitled to a remedy for breach of the implied warranty of
correspondence with the description. In this case, the seller supplied a machine that was
described as being suitable for a particular purpose. However, it failed to perform as
expected. The court held that Section 16(2) applied, and the seller was held liable for
breaching the implied warranty regarding goods sold by description. This case involved the
purchase of a second-hand MRI scanner described as being in good working condition.
However, after the purchase, it was found to be faulty. The court ruled that the seller had
breached the implied warranty under Section 16(2) by providing a misleading description
of the goods. This case dealt with the sale of chicken feed described as "sound barley."
However, the feed contained an excessive amount of urea, rendering it unfit for its
purpose. The court held that the goods did not correspond to the description given, and the
seller was liable for the breach of the implied warranty under Section 16(2).

Section 16(3) of the Sale of Goods Act 1930 states: "Where a contract of sale is not
severable and the buyer has accepted the goods or part thereof, the breach of any condition
to be fulfilled by the seller can only be treated as a breach of warranty and not as a ground
for rejecting the goods and treating the contract as repudiated, unless there is a term of the
contract, express or implied, to that effect."

To illustrate the application of Section 16(3) of the Sale of Goods Act 1930, let's consider
the following scenarios: Scenario 1: Purchase of a Laptop Buyer A purchases a brand new
laptop from Seller B. The laptop comes with a one-year warranty, which is an express term
of the contract. After a month of using the laptop, Buyer A discovers a defect in the screen.
Buyer A notifies Seller B of the defect and requests a repair or replacement. In this
scenario, Section 16(3) of the Sale of Goods Act 1930 applies. Since the contract is not
severable (meaning it cannot be divided into separate parts), and Buyer A has already
accepted the goods (the laptop) by using it for a month, the breach of the condition
(defective screen) can only be treated as a breach of warranty. Buyer A cannot reject the
laptop and treat the contract as repudiated unless there is a term in the contract explicitly
stating otherwise.
Scenario 2: Purchase of a Car Buyer C buys a used car from Seller D. The contract does
not specify any warranties, either express or implied. Shortly after purchasing the car,
Buyer C realizes that the engine is faulty and requires expensive repairs. In this scenario,
Section 16(3) of the Sale of Goods Act 1930 also applies. Since the contract is not severable
and Buyer C has accepted the car, the breach of the condition (defective engine) can only
be treated as a breach of warranty. Buyer C cannot reject the car and treat the contract as
repudiated, unless there is an express or implied term in the contract allowing for such
rejection in case of a breach. These illustrations demonstrate that Section 16(3) limits the
buyer's right to reject the goods and treat the contract as repudiated in certain
circumstances. Instead, the breach of a condition becomes a breach of warranty, which
entitles the buyer to claim damages or seek other remedies but does not allow for the
rejection of the goodsConditions implied by trade usage [Sec. 16(3)]

Section 16(3) gives statutory force to the conditions implied by the usage of a particular
trade. It states:

“An implied condition or warranty as to the quality or fitness for any particular purpose
may be annexed by the usage of trade.”

In the case of Peter Darlington Partners Ltd v Gosho Co Ltd, 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.

Section 16(3) of the Sale of Goods Act, 1930 states that if goods are sold by description,
and the buyer has not had an opportunity to examine them, there is an implied condition
that they will be of satisfactory quality.

While specific case laws may vary based on jurisdiction and legal interpretation, here are
a few notable cases that are related to Section 16(3) of the Sale of Goods Act, 1930:

1. Beale v. Taylor (1967): In this case, the Court of Appeal held that Section 16(3) applies
when goods are sold by description, and the buyer has not had a chance to inspect them
before purchase. If the goods are not of satisfactory quality upon delivery, the buyer has
the right to reject them and seek a refund or compensation.

2. Kursell v. Timber Operators (1939): The case involved the sale of timber described as
"clean logs." However, upon delivery, the logs were found to be partially rotten. The court
held that the seller breached the implied condition of satisfactory quality under Section
16(3), and the buyer was entitled to reject the goods

. 3. Godley v. Perry (1960): In this case, the buyer purchased a second-hand car described
as "in good condition." However, soon after the purchase, the car developed mechanical
issues. The court held that the seller breached the implied condition of satisfactory quality
under Section 16(3) since the car was not in good condition as described, and the buyer
was entitled to a remedy.
4. Inglis v. Stock (2013): The case involved the sale of a horse described

Conclusion
Thus, it can be concluded from the aforementioned analysis that the rule of Caveat emptor
is being taken over by the rule of Caveat venditor and is dying a slow death. 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 help to create a more consumer-
friendly market and an appropriate balance can be maintained between the rights and
obligations of the buyer and the seller. But it should be noted that if this approach is taken
too far, it might end up in becoming extremely pro buyer and then some people might end
up misusing the protection under the law.