EXCEPTION TO THE RULE OF CAVEAT EMPTOR

The Doctrine of Caveat Emptor and its Exceptions

 Introduction

To understand the concept of Caveat emptor, let us ponder upon the following illustrations:

• A purchases a house from B. Before the purchase, A asked B about the defects in the house. B told him that there was a leak in the bathroom upstairs, but it was fixed already. However, B also cautioned him that despite the repairs, a small leak could occur from time to time. A failed to inspect the bathroom properly but still decided to buy the house. After three months, there was a big leak that damaged the floor in the bathroom and the ceiling in the dining room downstairs. A decided to sue B and recover damages from him. However, the court decided that A is not entitled to any remedy because the caveat emptor principle is applied. A did not perform due diligence/ reasonable care to make sure that the fault in the bathroom could not cause any damage in the future.
• While selling apples to A, seller B did not mention that these apples were not juicy. This meant A could not extract their juice for his restaurant the next day. In this case, the seller is not at fault. A did not mention his reason for buying the apples. 

The doctrine of caveat emptor is specifically defined in Section 16 of the Sale of Goods Act, 1930. This provision corresponds to Section 14 of the English Act of 1893, originally enacted by the English law and made applicable in India also. Caveat Emptor is a substantial part of the Sale of Goods Act. The meaning of the phrase is to “let the buyer beware”. This means it lays the responsibility of their choice on the buyer themselves.

This provision of the act states that “there is no implied warranty or condition as to the quality or the fitness for any particular purpose of goods supplied under such a contract of sale”. This is what is called the theory of Caveat Emptor. 

According to this doctrine if the buyer is once satisfied with the product’s suitability, henceforth he has no right to reject such product. Here the seller has no obligation to disclose the defect of the goods, but the buyer is free to perform the due diligence before purchasing. 

In order to comprehend what the doctrine is all about let us first understand the two types of quality and fitness of goods:

1. Quality and fitness of goods for a common purpose – This means that goods must be suitable to perform the fundamental purpose they are designed for; it is always the responsibility of the seller. 

E.g. – A watch must tell time, a grinder should grind.

2. Quality and fitness of goods for a particular purpose – The goods should fulfil the particular purpose for which they are bought, i.e. the requirement specifically stated by the consumer. 

E.g. – A bottle which has been bought to keep the water hot and the seller knows of it, Caveat Emptor is applied wherein as a general rule, the responsibility is of the buyer regarding fitness or quality of goods regarding purpose.

 The Legality of the doctrine:

As we are aware that Caveat emptor is basically “buyer beware” which means that the buyer needs to be vigilant while buying any good. So this comes under the duties of the buyer in sale of goods act. Section 16 of the Sale of Goods Act 1930 incorporates the principle of caveat emptor which reads as-

“Subject to the provisions of this act or any other law for the time being in force there is no implied condition or warranty as to quality or fitness for any particular purpose of goods supplied.”[1]

Exceptions to The Rule of Caveat Emptor:

1. Fitness of Product for buyers’ purpose: Section 16(1) reads: “Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller’s skill”.[2]

This section explains that after the buyer informs the seller the purpose of buying the goods, either expressly or by necessary implication, it implies that he is relying on the seller’s judgement. It is then his duty to make sure that the goods serve the buyer’s purpose. The requirements of this section are as follows:

·        The buyer should inform the seller of the specific purpose for which he is making the purchase.

·        When making a purchase, the buyer should rely on the seller’s ability and judgment.

·        The items must be of a type that the seller supplies in his normal course of business.

The petitioner in Shital Kumar Saini v. Satvir Singh[3] purchased a compressor with a one-year guarantee. Within three months, the product’s flaw was discovered. The seller replaced it without providing a further guarantee. But it was ruled that an implied guarantee was protected by Section 16 of the Sale of Goods Act of 1930.

2.     Sales under Brand name: Section 16(1) also states that: “Provided that, 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.” [4]

If the buyer decides to purchase a certain good under a particular trade name or a brand, the seller cannot be burdened with the authority of quality. So, there is no implied condition that the goods will be fit for the intended use of the buyer. 

3.     Sales under the description:  There will be an exception if the buyer purchases the products only based on the description. In such a situation if the goods do not match the description, the seller will be responsible for the goods. The seller will be held liable only if he provides an incorrect description of the goods. 

4.     Goods of Merchantable quality: In Section 16(2) it states that, “Where goods are bought by description 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.” [5]

This section implies the dealer who is selling goods of merchantable quality i.e., capable of passing the market standards. It signifies that the item is of such quality and in such condition that under the circumstances of the case, a reasonable man acting reasonably would accept it after a thorough examination. However, if the buyer has had a reasonable chance to examine the product, then this exception will not apply.

5.     Sales by Sample Inspection: This rule doesn’t apply if the goods supplied by the seller are different from that sample inspected by the buyer before making the purchase. For Example- A carpet manufacturer would be accountable if a buyer witnessed a difference in the quality of the sample shown and the product delivered.

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

“An implied warranty or condition as to the quality or fitness for the particular purpose may be annexed by the usage of trade.” [6]

This rule doesn’t apply if the seller deviates from the implied condition or warranty about the quality or fitness of goods. For example, in an auction of a ship’s contents, A purchased things from B. However, because B failed to inform A that the contents were marine damaged, the doctrine’s restrictions will not apply.

 In the case of Peter Darlington Partners Ltd v Gosho Co Ltd[7], where a contract for the sale of canary seed was held subject to the custom of the trade that for impurities in the seed, the buyer would get a rebate on the price, but would not reject the goods. However, an unreasonable custom will not, however, affect the parties’ contract.

7.     Fraudulent representation by the seller: This is another important exception. Seller is also considered guilty if he provides fraudulent information or conceals from the buyer any material defects of the goods which are later discovered or if the seller obtains the consent of the buyer by fraud then caveat emptor will not be applicable. Sub-section 4 of section 16 talks about the misrepresentation by the seller, it reads that, “An express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith”[8]

In Ward v. Hobbes[9], it was held that a seller cannot use misrepresent or disguise in order to conceal the defects in the products as it would amount to have committed fraud by the dealer against the purchaser. But the doctrine does not impose a duty to disclose all the defects in the products sold, on the seller. 

Conclusion:

Accordingly, by enactment, the pendulum is oscillating towards the purchaser. The well-established standard of caveat emptor may now vanish in the favour of the new rule of caveat venditor that coordinates with the new Consumer Protection System. Such a change won’t just harmonize the buyer-seller relationship but also prove to get a better balance between their rights and obligations. 

Bibliography

• Section 16, Sale of Goods Act, 1930.
• Section 16 (1), Sale of Goods Act, 1930.
• Shital Kumar Saini v. Satvir Singh, (2005) 1 CPR 401
• Section 16(2), Sale of Goods Act, 1930.
• Section 16(3), Sale of Goods Act, 1930.
• Section 16(4), Sale of Goods Act, 1930.
• Peter Darlington Partners Ltd v Gosho Co Ltd, (1964)
• Ward v. Hobbes, 738 F.3d 915, (8th Cir. 2013)

[1] Sale of Goods Act, 16, No. 3, Acts of Parliament, 1930 (India)

[2] Sale of Goods Act, 16(1), No. 3, Acts of Parliament, 1930 (India)

[3] Shital Kumar Saini v. Satvir Singh, (2005) 1 CPR 401

[4] Sale of Goods Act, 16(1), No. 3, Acts of Parliament, 1930 (India)

[5] Sale of Goods Act, 16(2), No. 3, Acts of Parliament, 1930 (India)

[6] Sale of Goods Act, 16(3), No. 3, Acts of Parliament, 1930 (India)

[7] Peter Darlington Partners Ltd v Gosho Co Ltd, (1964)

[8] Sale of Goods Act, 16(4), No. 3, Acts of Parliament, 1930 (India)

[9] Ward v. Hobbes, 738 F.3d 915, (8th Cir. 2013)

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