Caveat Emptor in Commercial Transactions

Introduction

Caveat Emptor had occupied a preponderant position and endorsed in the commercial arena historically functioning as a reliant concept in trade and business. The blatant meaning of the term denotes, “Let the Buyer be aware” which primarily rests the onus and the usage of the skill and judgment on the consumers or the buyers in any transaction. The buyer must take the final call if the product intended to purchase is satisfactory and suits his criteria and if otherwise, must reject the same product. The Sale of Goods Act, 1893 had relied on the judgment of the buyer through this concept is unavoidable and it reflects that the duty of the seller to produce a satisfactory product is distinctly minimal. Since, the buyer was the price payer, he was considered the ultimate voice against a product and required the buyer to conduct complete examination of the product and this duty was given more preference as opposed to the seller. It was for these inclusions that the concept of a product of a merchantable quality was included, along with adjudging the ‘fitness’ of the product.. Thus, Caveat emptor was extremely seller centric model of law and kept the seller in a privileged position which have been a long transgression from the concept of Caveat Venditor which has been seen in comment of Lord Wright in 1935 as well. The doctrine of Caveat Emptor has been more inclined to the sellers which could pose a sense of arbitrariness as well as hinder the growth of trade and commerce and eliminating the important and responsible position of sellers required much examination in order to restore a fair balance between the two parties. It may so appear that the seller sells a product with full knowledge of the defects that may apply to the product however, such defect may not appear in the light and the buyer might not have sufficient knowledge to check the same and such latent defects may later defy the purpose of the purchase, in that case the sellers will be free from all liabilities, resulting the buyer to suffer the loss due to the biased legislation. This position of buyers has been seen in the case of Ward v. Hobbes (1878) and the judgment was held in favour of the

---

1. Joseph McMullen, “ The Erosion of Caveat Emptor: The Impact of Protectionist Legislative and Judicial Developments in Favour of Legal Certainty and the Subsequent Effects on Freedom of Contract “ < https://microsites.bournemouth.ac.uk/law-review/files/2018/11/BULR-Joe-McMullen-Article-Final-2018-.pdf > accessed on 25th January, 2021
2. Wing, Chau Kwong & Choy, Lennon. (2011). Let the Buyer or Seller Beware: Measuring Lemons in the Housing Market under Different Doctrines of Law Governing Transactions and Information. Journal of Law and Economics. 54. 10.1086/661941.
3. Ward v. Hobbs, 738 F.3d 915 (8th Cir. 2013)
seller simply because of the obligations on the buyer to check goods even if defects existed and freed the seller from any liability following this doctrine.

Caveat Emptor to Caveat Venditor

The approach taken by the courts in adjudicating cases of the obligations of buyers and sellers have been regressive and extremely detrimental to the entire commerce and trade therefore, the whole outlook of the judiciary needed to change and the inclusion of a “reasonable examination” was lacking in such disputes. It is only fair to provide an opportunity for the buyer to take recourse against the seller in cases of just disputes as evident in the case of Ward v. Hobbes. Therefore, the dilution of caveat emptor was much awaited and in the case of Priest v. Last, the comment of Lord Wright had established the position of Caveat Venditor and acknowledged the doctrine of caveat emptor as an “Old Rule” unfit for the climate of modern commerce and trade. The doctrine of caveat emptor was scrutinised and criticised more due to the position of buyers who accrue a purchase in good faith and results in suffering loss. Lord Denning had held in the case of Lewis v. Averay that an innocent buyer with good faith and intention having no knowledge of the fraud committed by the other party must not be deprived of his rights. The doctrine of caveat emptor seem to unreasonably burden the buyer in case of a purchase where the latent defects may be expensive but the innocent buyer is satisfied with the explicit condition, thus executes the process of purchase, in that case, the latent defect will only be an additional burden as was discussed in the case of Phillips v. Brooke. The doctrine of Caveat Venditor which means, “Let the seller beware” took shape and was formally acknowledged through a judicial discourse over a period of time and the case of The Priest. This doctrine introduced the need to secure a reason for the purchase of a particular product which the contract highlights, which would strengthen the position of the buyers if the sellers are aware of the negotiation, the purpose behind the purchase as the onus would shift on the seller and not be reliant on the skill of the buyer alone.
4. Priest v Last [1903] 2 KB 148.
5. Lewis v Averay [1972] 1 QB 198.1
6. Phillips v Brooks Ltd [1919] 2 KB 243
7. Washington Piggeries v. Christopher Hill Ltd

The case of Hamilton v. Paprika had also accentuated the duty of the seller to specify to the buyer the nature of the goods and if the goods will serve a more generalized purpose or specific purpose must be informed to the buyer as it would be unfair to expect the buyer to have awareness of the capacity of the product in such depth. Caveat venditor overturns the ideology of caveat emptor and requires the seller to disclose all information but possible question may arise in case the seller himself is not sufficiently aware of the product and the defect that may arise or latently present. Some have argued against the seller claiming that the seller has the implied duty to have full knowledge of his own goods but several judgments have also brought to light in cases like Harlington & Leinster Enterprises ltd v. Christopher Hull Fine Art Ltd that it is possible for the buyer to have experiences more than the seller and that does not give the buyer the right reject the gods. However, Lord Benjamin’s opinion was given a lot more preference and has stood out as a precedent wherein the prominence over a seller’s knowledge over a good must be considered greater than the buyer’s knowledge over the goods. Thus, subsequently an obligation lies by law on the vender to know about the states of the products being sold and making the purchaser mindful of the equivalent. In the case of in Australian Knitting Mills v. Grant, the products ought to be in a particularly authentic state and that the purchaser must be completely familiar with current realities of the product and, subsequently, realizing that concealed imperfections may have existed which is certainly not restricted to their evident condition, which would get them without the reduction of the cost realistically for such merchandise if such conditions are placed without any terms. This can be considered one of the main tests, however, another test of usefulness or usability was decided in the case of Kendall and Sons v. Lillico and Sons Ltd. where the cases of ‘merchantable quality’ was studied implied that the products offered in the execution of the agreement will be of such kind and quality and in such condition that, having respect to the conditions, that abides by the value of the product as sold where the purchaser had complete information regarding the quality and attribute of the merchandise and in case there are any imperfections in the product as

8. Hamilton v. Paprika [1972] AC 441
9. Harlington & Leinster Enterprises ltd v. Christopher Hull Fine Art Ltd [1991] 1 QB 564
10. Australian Knitting Mills v. Grant HCA 35, (1933) 50 CLR 387
11. Kendall and Sons v. Lillico [1969] 2 AC 3
acknowledged in the execution of the contract. Irrespective of the seller’s knowledge he is obliged to the buyer in providing the desired information.

Conclusion

The doctrine of caveat venditor allows the consumers to have if not superior but with an equal opportunity to protect themselves through this dogmatic approach. This allows the consumers to hold the sellers accountable in cases of not only defective goods but also any unfair terms of contract, any spurious product or claim compensation if such distortion may be insinuated by the sellers. This doctrine may also induce a fair market thus it can be noticed that the shift from caveat emptor from caveat venditor would only encourage fairness and provide a balance between the rights of buyers and sellers. However, it must also be understood that if the caveat venditor become extremely buyer centric, even that may cause a problem and be misused by the buyers.

Continue your journey with our comprehensive guide to Breach of Contract and Sales of Goods Act, 1979.

BIBLIOGRAPHY

Journals/ Articles

• Charles T. LeViness, Caveat Emptor Versus Caveat Venditor, 7 Md. L. Rev. 177 (1943) Available at: https://digitalcommons.law.umaryland.edu/mlr/vol7/iss3/1
• Joseph McMullen, “ The Erosion of Caveat Emptor: The Impact of Protectionist Legislative and Judicial Developments in Favour of Legal Certainty and the Subsequent Effects on Freedom of Contract “ < https://microsites.bournemouth.ac.uk/law-review/files/2018/11/BULR-Joe-McMullen-Article-Final-2018-.pdf > accessed on 25th January, 2021
• Wing, Chau Kwong & Choy, Lennon. (2011). Let the Buyer or Seller Beware: Measuring Lemons in the Housing Market under Different Doctrines of Law Governing Transactions and Information. Journal of Law and Economics. 54. 10.1086/661941.

Cases

• Ward v. Hobbs, 738 F.3d 915 (8th Cir. 2013)
12. Charles T. LeViness, Caveat Emptor Versus Caveat Venditor, 7 Md. L. Rev. 177 (1943) Available at: https://digitalcommons.law.umaryland.edu/mlr/vol7/iss3/1

• Priest v Last [1903] 2 KB 148.
• Lewis v Averay [1972] 1 QB 198.
• Phillips v Brooks Ltd [1919] 2 KB 243
• Washington Piggeries v. Christopher Hill Ltd
• Harlington & Leinster Enterprises ltd v. Christopher Hull Fine Art Ltd [1991] 1 QB 564
• Australian Knitting Mills v. Grant HCA 35, (1933) 50 CLR 387
• Kendall and Sons v. Lillico [1969] 2 AC 3
• Hamilton v. Paprika [1972] AC 441

Statutes

• Sale of Goods Act, 1979
• Sale of Goods Act, 1893