Doctrine of Caveat Emptor in Indian Law: Meaning, Applicability, Case Laws & Exceptions

Shahnaz Begum | Legal Thikana

The phrase “Caveat Emptor” meaning “Let Buyer Beware” is widely used in commercial or property transactions. It emphasizes the fact that liability lies upon the buyer of goods to check the quality of those goods before buying it. The buyers are expected to act with caution while buying any property or goods. If a buyer receives a faulty product or property with a defective title then he cannot blame the seller as the rule of Caveat Emptor becomes applicable in that case. The Seller can completely avoid any kind of liability after the completion of sale as he has no responsibility as per this doctrine if the buyer spots any defect later on relating to the product purchased. This is because the doctrine puts the burden on the buyer to exercise due diligence and caution while buying something.

Applicability of this doctrine In Contracts:

In a contract for sale of goods it is the responsibility of the buyer to check that the goods meet the standard quality required by him. In the event of loss due to absence of proper inspection of the goods purchased by the buyer there arises no liability for payment of compensation to such buyer by the seller. In the context of Indian laws this doctrine is directly reflected in Section-16 of the Sales of Goods Act, 1930. This section uses the doctrine of Caveat Emptor by imposing an obligation on the buyer to check fitness or quality of the goods before making a purchase. Purchasing a good does not ipso facto provide implied guarantee to the buyer regarding fitness and quality of the good in absence of express guarantee.

Property Transactions: This doctrine is significantly relied upon by the Indian courts while deciding matters relating to disputes related to property transactions. This maxim is also used interchangeably or in addition to another similar maxim which is – ‘Qui Ignorare non debuit quod jus alienum emit’ and translates as ‘Let the purchaser beware who ought not to be ignorant that he is purchasing the rights of another’.

This maxim similarly warns the buyer to be diligent before making a purchase and is primarily used in connection to property dispute matters by courts. It is the duty of property buyers to do thorough research of a land, house or such other real estate property to check the title or ownership of the seller, encumbrance over such property or any defect related to such property. Any dispute arising out of the property transaction due to the own negligence of the buyer to exercise the required diligence while buying the property shall render it less likely for such buyer to be able to claim any relief or compensation in court due to application of the doctrine of Caveat Emptor, Qui Ignorare non debuit quod jus alienum emit.

Case Laws applying the doctrine of Caveat Emptor

Chandelor vs. Lopus 79 Eng. Rep. 3 (1603) It was one of oldest English case law related to the principle of Caveat Emptor. In this case the plaintiff bought a ‘Bezoar Stone’ from the defendant who was a jeweller. The stone was not a Bezoar Stone. The court stated that there was absence of warranty related to quality of stone and hence found it fit to apply the doctrine of Caveat Emptor.

Ward vs. Hobbs (1878) 4 APP Cas 13 The fact of this case was that the plaintiff bought pigs in an auction. The seller i.e the defendant did not give any guarantee expressly for the quality and quantity of the pigs in the auction. It was later found that the pigs bought from the said auction were suffering from typhoid fever and also subsequently infected the plaintiff’s own pigs. The plaintiff instituted a suit against the defendant claiming damages. The court rejected the claim for damages and held that the seller had no obligation to disclose illness of the pigs sold in auction by applying the doctrine of Caveat Emptor.

Wallis vs. Russell (1902) 21 R 585, 615 In this case the court discussed the meaning of Caveat Emptor. The court stated that the phrase Caveat Emptor does not imply that the buyer must take chances but it means that he must take care while buying. Exceptions to the applicability of the doctrine of Caveat Emptor The doctrine of Caveat Emptor has certain exceptions. These exceptions are provided below:

Implied Conditions (As per Sale of Goods Act, 1930):

a) Sale by Description - Sometimes there is a contract for sale of goods by description where the seller provides a certain description related to the goods to the buyers. In such a case there shall be an implied condition that the goods bought shall correspond with the given description (Section-15).

b) Sale by description as well as sample - There shall be implied condition or warranty of both description as well as sample when there is a contract of sale of goods through description and sample of goods. In such a case it would not be sufficient that the bulk corresponds with the sample without corresponding with the description (Section-15).

c) Goods for a particular purpose - In certain contract of sale of goods –

(1) a buyer may require goods for a particular purpose,

(2) such buyer makes it known to the seller that he requires those goods for that particular purpose,

(3) such buyer shows that he relies on the skill and judgment of the seller,

(4) description of goods corresponds with the goods supplied by the seller in the usual course of his business. In case of existence of the aforesaid conditions there shall be implied condition that the goods are fit for the particular purpose {Section- 16(1)}.

(d) Merchantable quality - In contract of sale of goods, when goods are bought by description from a seller dealing with goods which comprehends with the description provided, there is an implied condition that the goods shall be of merchantable quality {Section-16(2)}.

(e) Annexed by Usage - In some contracts of sale of goods there is implied condition annexed by usage of trade related to quality and fitness for a particular purpose {Section-16(3)}.

(f) Sale by sample (Section-17) - In contract of sale of goods by sample there would be few implied conditions and those are: That bulk would correspond with the sample in quality. That the buyer shall be given reasonable opportunity for comparing the bulk and sample. That the goods are free from any defect making the goods un-merchantable and such defect is not apparent even after reasonab

le examination.

Misrepresentation or Fraud: Another exception to the doctrine of Caveat Emptor is misrepresentation or fraud. The buyer of goods may not be able to derive certain important information or defects related to such goods in spite of exercising due diligence and care due to the seller’s efforts in deliberately misrepresenting and actively concealing the defects. The seller luring buyers to enter a contract of sale of goods through such fraud or misrepresentation cannot take the advantage of Caveat Emptor and shall be liable to compensate or refund the buyer. Changing dynamics of the use of the doctrine of Caveat Emptor In the olden days when laws were just evolving in the society, the laws were mainly enacted to address disputes efficiently without taking note of the complexities of society.

The philosophy of Caveat Emptor burdened the buyers with more responsibility while giving the sellers unrestrained ways to escape liabilities regardless of their manipulative and careless attitude. The need to incorporate various laws and regulations in a multifaceted manner was acknowledged by the legislature with the changing times. Subsequently, the consumers or buyers were given prominence over the sellers and laws began to be framed to accommodate the rights of buyers. Such changing circumstances led to the creation of the concept of “Consumerism”.

Consumerism can be described as a social movement which led to the rise in consumer rights movement and increase in awareness of consumers against discriminatory, unfair and arbitrary practices in sales of goods, services, etc.

This movement advocates for the rights of consumers or buyers and gives them a better opportunity to safeguard their interest. It led to the development of the phrase “Caveat Venditor” which translates as – “Let Seller Beware”.

This changing perspective has also been resulted due to technological advancements of modern society. Misleading advertisements, poor quality of products, monopolistic and competitive market, etc. has increased the complexity of the Indian market for buyers. Sophisticated electronic goods such as Computers, TV, cannot be perfectly judged even by educated buyers. Hence, in India a strong inclination has been created towards Caveat Venditor.

Recognising this inclination the Indian legislature enacted consumer welfare laws such as the Consumer Protection Act, 1986 and subsequently, the Consumer Protection Act, 2019. Presently, the consumers in India are entitled to various rights which are cited below:

• Right to safety

• Right to be informed

• Right to choose

• Right to be heard

• Right to seek redressal

• Right to consumer education