Caveat Emptor Rule

بسم اللہ الرّحمن الرّحیم

Rule of Caveat Emptor

[Justice ® Dr. Munir Ahmad Mughal]

Caveat emptor is a combination of two Latin words. Caveat means caution or warning or beware; and Emptor means the buyer, the purchaser. Caveat emptor means: Let the purchaser beware.

Disclaimer of liability for buyer’s disappointment. It is one of the settled maxims, applying to a purchaser who is bound by actual as well as constructive knowledge of any defect in the thing purchased, which is obvious or which might have been known by proper diligence.

Caveat emptor does not mean either in law or in Latin that the buyer must take chances, it means that the buyer must take care. [Wallis v. Russell (1902) 21 R 585, 615].

Caveat emptor: qui ignorare non debuit quod jus alienum emit. A maxim meaning “Let purchaser beware; who ought not to be ignorant that he is purchasing the rights of another [Hob 99; Broom: Co. Litt. 102 a; Taunt 439]

As the maxim applies, with certain specific restrictions, not only to the quality of , but also to the title to, land which is sold, the purchaser is generally bound to view the land and to enquire after and inspect the title-deeds, at his peril if he does not.[Latin for Lawyers].

Upon a sale of goods the general rule with regard to their nature or quality is caveat emptor, so that, in the absence of fraud, the buyer has no remedy against the seller for any defect in the goods not covered by some condition or warranty, expressed or implied. It is beyond all doubt that, by the general rules of law there is no warranty of quality arising from the bare contract of sale of goods, and that where there has been no fraud a buyer, who has not obtained an express warranty, takes all risk of defect in the goods, unless there are circumstances beyond mere fact of sale from which a warranty may be implied. [Bottomley v. Bannister, [1932] 1 KB 458; Ward v. Hobbs, 4 App Cas 913). Latin For Lawyers].

In Pakistani Law the rule of Caveat Emptor has been embodied in section 16 of the Sale of Goods Act, 1930, which states:

“ Subject to the provisions of this Act and any other law for the time being in force there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale.”

The doctrine of caveat emptor passes the responsibility on the shoulder of buyer. It puts emphasis on the buyer to check, examine and test the goods to save him from being deceived. A buyer must employ best of his discretion, not less than the discretion of a common man, while purchasing goods.

No one ought to ignore to buy that which is the right of another. The buyer according to the maxim has to be cautious, as the risk is his and not that of the seller.

EXCEPTIONS TO THE RULE OF CAVEAT EMPTOR

There are eight exceptions to this rule of caveat emptor. They are:

1.PURCHASE BY DESCRIPTION

The rule of caveat emptor does not apply in a case where goods are bought by description from a seller. In such a situation there is an implied condition that the goods shall correspond with the description. It is a condition which goes to the root of the contract, and the breach of it entitles the buyers to reject the goods.

2. PURCHASE BY SAMPLES AND DESCRIPTION

Where goods are bought by sample as well as by description and the bulk of goods do not correspond with the sample or with the description, the buyer is entitled to reject the goods.The rule of caveat emptor shall not apply in such a case.

3. FITNESS FOR PURPOSE

Where the buyer informs the seller the particular purpose for which the goods are required and relies upon the seller’s skill or judgment there is in that case, an implied condition that the goods shall be reasonably fit for the purposes for which they are required.

4. TRADE NAME

In the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose.

5. MERCHANTABLE QUALITY

Where the goods are bought by description from a seller who deals in goods of that description whatever he is manufacturer or producers or not, there is an implied condition that the goods shall be of merchantable quality.

6. USAGE OF TRADE

Where the usage or trade annexes an implied condition or warranty as to quality or fitness for a particular purpose and seller deviates from that, then this rule (of caveat emptor) does not apply.

7. SALE BY SAMPLE

In a sale of goods by sample, the rule of caveat emptor does not apply if the bulk does not correspond with the sample or if the buyer is not given an opportune ity to compare bulk with the sample.

8. CONSENT BY FRAUD

Where the seller makes a false statement intentionally to the buyer and the buyer relies on it or where the seller knowingly conceals the defects in the good, the doctrine of caveat emptor does not apply.

Contracts are made up of various statements and promises which differ in character and importance; the parties may regard some of them as vital , as subsidiary or collateral to the main purpose of the Contract. 

Where parties regard the term essential it is a condition. Where parties do not regard it as essential it is warranty. The general rule is that where a stipulation in contract of sale with reference to goods which are the subject thereof may be a condition or a warranty.

A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated.

A warranty is also a stipulation but it is not essential to the main purpose of the contract. Rather it is collateral to the main purpose of the contract and the breach of it gives rise to a claim of damages but not to a right to reject the goods and treat the contract as repudiated.

A condition is a vital term of the contract. A vital term is that term which goes to the root or substance of the contract.Its non fulfillment causes irreparable loss to the injured party. In case of violation of a condition the injured party gets a right to cancel the contract.The party can refuse to accept the goods. If the injured party has already paid the price he can recover it. A breach of condition may be treated as a breach of warranty.The buyer in case of breach of condition has an option to claim damages instead of repudiating the contract.

A warranty is not a vital term of the contract. It does not go to the root or substance of the contract. In case of violation of a warranty the injured party has a right to recover damages only. The party cannot refuse to accept the goods nor can he reject the contract. A breach of warranty cannot be treated as breach of condition.The buyer in case of breach of warranty cannot repudiate the contract; his only right is that he can claim damages.

Conditions when incorporated in clear words in a deed by a party those are called express conditions. Where conditions are not incorporated in the contract but the law presumed their existence in the contract they are called implied conditions. Thus unless otherwise agreed, the law includes the following into a contract:

(i) Implied conditions as to titles:

In every contract of sale there is an implied condition that the seller has a right to sell the goods and in an agreement to sell he has a right to sell the goods at the time when the property is to pass. The transfer of tilte to the goods can only be made either by the owner or an agent.

(ii) Sale by description:

Goods must correspond to the description.

(iii) Sale by Sample:

Goods must be according to the sample agreed upon. In the case of Lorymer v. Smith the seller sold two parcels of wheat by sample and showed only one parcel and refused to show the other . the buyer examined it after a week and the Court held that buyer can cancel the contract.

(iv) Sale by sample and description:

Goods must correspond to both. If they they correspond to only sample or only description the buyer is entitled to reject the goods.

(v) Fitness or Quality:

Where buyer expressly or by implication makes known to the seller that goods are required for a particular purpose and that he relies on the skill or judgment of the seller in that behalf and the goods are of a description which it in the course of seller's business to supply then there is an implied condition that  the goods shall be reasonably fit for such purpose.

(vi) Merchantability:

Where goods are bought from a seller who deals in goods of that description, whether  he is the manufacturer or producer or not,there is an implied condition that the goods shall be of merchantable quality.

(vii) Wholesomeness:

In a contract of sale of eatables and provisions goods must be merchantable and wholesome also.

Implied Warranties:

(i) Quiet Possession to be given to the buyer.

(ii) Free from any charge or encumbrance; and

(iii) Usage of trade: An implied warranty as to quality or fitness for a particular purpose may be annexed by usage of trade.