What is Doctrine of Caveat Emptor?
The Doctrine of Caveat Emptor simply means – ‘Let the Buyer Beware‘. According to this principle, when the seller showcases products in the open market, it is the duty of the buyer to appropriately check the goods and also ensure that the product conforms to his/her requirements, before going for the purchase and make the right selection. And if any defects detected, later on, the seller cannot be held liable, for the wrong selection made by the buyer.
In a sale transaction, every buyer must have to be careful at the time of purchasing goods of his/her needs. Additionally, the seller is also liable to allow the buyer to check the goods properly. However, the seller is not bound to tell every defect in the product, if it is not asked by the buyer specifically.
That is to say, the buyer before making the purchase must confirm that the quality of the item is up to the mark and the purpose is fulfilled.
Concept of Doctrine of Caveat Emptor
Section 16 of the Sale of Goods Act, 1930 is concerned with the Doctrine of Caveat Emptor. Further, it is countermanded by the Doctrine of Caveat Vendor.
This mainly covers those items which are not covered under a specific warranty, i.e. when there is no explicit warranty as to the quality of the product, the buyer must collect the relevant information about the product before buying it. Nevertheless, it does not discharges the seller completely from the liability. The seller should also provide genuine and relevant information regarding the product to be sold.
The doctrine of Caveat Emptor implies that it is the responsibility of the buyer to diligently examine the property he/she is buying, i.e. the buyer is expected to be careful, in a contract of sale. And so, the buyer cannot blame the seller for selling inferior quality goods, except when there is a case of fraud.
- The intent of the doctrine is that the buyer must safeguard his/her own interests at the time of purchase.
- The purchase should be made only when the buyer is satisfied with the product’s specification and condition, and then he/she will have no right to refuse to accept the product.
- The doctrine came to existence, to resolve the issues occurring between buyers and sellers in the cases when the buyer is disappointed with the condition or quality of the goods.
- As per the doctrine, under the sale of goods act, when there is a sale of a particular item, the buyer is ready to buy the item, at their own risk, as to the condition or quality.
- And if the buyer fails to perform the examination of goods thoroughly, the buyer cannot sue the seller afterwards to make good the loss suffered, in case the item comes out to be defective, inappropriate or substandard.
Therefore, the basic principle of this doctrine is that it supports the vigilant and not the dormant.
The doctrine of caveat emptor acts as a disclaimer to settle the conflicts arising due to the information asymmetry. Information Asymmetry is a theory in economics, concerned with the decisions in the transactions in which one party to the contract possesses more and relevant material, as compared to the other party. In this way, it results in the variance in powers.
Exceptions to the Doctrine of Caveat Emptor
There are instances in which the seller can be held liable for the defect in goods:
- Fitness regarding the quality or use: When the buyer tells the seller the purpose for which product is required by him, to exhibit that he relies on the seller’s judgement. Also, the description of the product is such that it can be supplied by the seller. Hence, it is the duty of the seller to supply those goods which suit the buyer’s purpose.
- Items purchased under patent or brand name: If the products are bought under a patent or brand name, then no implied condition exists that the goods shall be suitable for any particular purpose.
- Product sold by description: When the goods are purchased from a seller who offers a specific class of items, then also an implied condition exists that the items possess the desired quality and when it fails to match the same, the seller will be held liable.
- Items with Merchantable Quality: When the buyer purchases the goods by description, from a vendor who sells goods of that description, then an implied condition exists that they are of merchantable quality. Here, the term merchantable quality means goods are suitable for the purpose for which such goods are usually purchased, as one can reasonably expect concerning the details applicable to it.
- Sample Sale: In case of goods are purchased by sample, the rule will not be applicable if the bulk does not match the sample.
- Goods sold by sample and description: The rule is also not applicable when the goods are bought by sample and description, and it does not correspond either to both or any one.
- Trade usage: There exists an implied condition regarding the quality or fitness for a definite purpose associated with the trade usage, and when the seller fails to correspond the same, the rule will not be applicable.
- Fraud or misrepresentation: The rule will not apply when the seller deliberately hides certain facts or defects from the buyer or he himself has no idea of the defect in the product, and the buyer relies on it. When the seller purposely conceals the defect in the item so that it could not be identified with reasonable examination or when false representation is made by the seller and purchaser acted accordingly. In that case, the buyer can avoid the contract and is entitled to recover the damages from the seller.
So, it is the duty of the buyer to make certain the quality and fitness of the goods, at the time of purchase itself. Hence, when the buyer does not choose the right product without performing inspection, only he will be responsible for the same if there is no misrepresentation or fraud from the seller’s side.