The Doctrine of Caveat Emptor: Meaning & Exceptions

Meaning

The doctrine of Caveat Emptor means “let the buyer beware.” The doctrine of caveat emptor is enshrined in Section 16 of the Sale of Goods Act, 1930. This provision corresponds to Section 14 of the English Act of 1893. This doctrine of caveat emptor is based on the fundamental principle that once a buyer is satisfied with the product’s suitability, then he has no subsequent right to reject such a product. The objective of introducing this provision was to ensure that the buyer purchases the product at his own risk after being assured of the quality of the product. He is required to use his own skill and judgment except in cases of fraud where the doctrine of caveat emptor does not apply.

For example, A bought a horse from B. A wanted to enter the horse in a race. Turns out the horse was not capable of running a race on account of being lame. But A did not inform B of his intentions. So, here B will not be responsible for the defects of the horse. The Doctrine of Caveat Emptor will apply.

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Exceptions to The Doctrine of Caveat Emptor

1] Fitness of Product for the Buyer’s Purpose

When the buyer informs the seller of his purpose of buying the goods, it is implied that he is relying on the seller’s judgment. It is the duty of the seller then to ensure the goods match their desired usage.

Say for example A goes to B to buy a bicycle. He informs B he wants to use the cycle for mountain trekking. If B sells him an ordinary bicycle that is incapable of fulfilling A’s purpose the seller will be responsible.

2] Goods Purchased under Brand Name

When the buyer buys a product under a trade name or a branded product the seller cannot be held responsible for the usefulness or quality of the product. So there is no implied condition that the goods will be fit for the purpose the buyer intended.

3] Goods sold by Description

When the buyer buys the goods based only on the description there will be an exception. If the goods do not match the description then in such a case the seller will be responsible for the goods.

4] Goods of Merchantable Quality

Section 16 (2) deals with the exception of merchantable quality. The sections state that the seller who is selling goods by description has a duty of providing goods of merchantable quality, i.e., capable of passing the market standards.

So, if the goods are not of marketable quality then the buyer will not be the one who is responsible. It will be the seller’s responsibility. However, if the buyer has had a reasonable chance to examine the product, then this exception will not apply.

5] Sale by Sample

If the buyer buys his goods after examining a sample then the rule of Doctrine of Caveat Emptor will not apply. If the rest of the goods do not resemble the sample, the buyer cannot be held responsible. In this case, the seller will be the one responsible.

For example, A places an order for 50 toy cars with B. He checks one sample where the car is red. The rest of the cars turn out orange. Here the doctrine will not apply and B will be responsible.

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6] Sale by Description and Sample

If the sale is done via a sample as well as a description of the product, the buyer will not be responsible if the goods do not resemble the sample and/or the description. Then the responsibility will fall squarely on the seller.

7] Usage of Trade

There is an implied condition or warranty about the quality or the fitness of goods/products. But if a seller deviated from this then the rules of caveat emptor cease to apply. For example, A bought goods from B in an auction of the contents of a ship. But B did not inform A the contents were sea damaged, and so the rules of the doctrine will not apply here.

8] Fraud or Misrepresentation by the Seller

This is another important exception. If the seller obtains the consent of the buyer by fraud then caveat emptor will not apply. Also, if the seller conceals any material defects of the goods which are later discovered on closer examination then again, the buyer will not be responsible. In both cases, the seller will be the guilty party.