Consumer protection and trade practices

Consumer protection laws deal with laws that have been

developed to regulate the marketplace, in particular the
commercial dealings between consumers and sellers or
manufacturers.

The major objective of consumer protection law is to strengthen the

position of the buyer in the marketplace in everyday transactions for
goods and services.
Common law
Underpinning this area of common law is
the principle of caveat emptor, which
means 'let the buyer beware’. In a fairly
simple marketplace where consumers
could see, touch and often taste the
product prior to purchase, the seller took
no responsibility for the quality or
suitability of the goods purchased.

Today, however, the manufacturing

process is far more sophisticated, the
range of goods more diverse and
complex and the seller is not always the person responsible for the
production of the goods. It is therefore more difficult for consumers to
protect themselves and be compensated at common law for goods and
services that are defective.

Activity 9 – Principle of 'Caveat Emptor'

You are required to answer the following questions:

1. Explain the principle and importance of ‘Caveat Emptor'.

Caveat emptor is a Latin phrase that is translated as “let the buyer beware.” The phrase
describes the concept in contract law that places the burden of due diligence on the
buyer of a good or service. Caveat emptor is a fundamental principle in commerce and
contractual relationships between a buyer and a seller. The caveat emptor principle
arises primarily from the asymmetry of information between a purchaser and a seller. The
information is asymmetric because the seller tends to possess more information regarding
the product than the buyer. Therefore, the buyer assumes the risk of possible defects in
the purchased product. If there is no explicit warranty regarding the product’s quality,
then it is the buyer’s responsibility to gather all the information about the purchased
product. At the same time, the seller must not misrepresent the product or provide the
buyer with false information about the product. Under the principle of caveat emptor, for
example, a consumer who purchases a coffee mug and later discovers that it has a leak
is stuck with the defective product. Had they inspected the mug prior to the sale, they
may have changed their mind. A more common example is a used car transaction
between two private parties (as opposed to a dealership, in which the sale is subject to
an implied warranty). The buyer must take on the responsibility of thoroughly researching
and inspecting the car—perhaps taking it to a mechanic for a closer look— before
finalizing the sale. If something comes up after the sale, maybe a transmission failure, it is
not the seller's responsibility. Garage sales offer another example of caveat emptor, in
which all sales are final and nothing is guaranteed.
 2. How relevant do you think it is in today’s marketplace?

Caveat Emptor is really important in today's marketplace for the reason that there are
increasing number of starting businesses in the market, especially when pandemic
started, a lot of different market have opened and is about to operate with the
consumers. Caveat Emptor will help to prevent unwanted violations and issues, crimes
that have no proof, especially when dealing and negotiating with other businesses. This
would prevent as well frauds in a business. Just for example, I sold a house to a married
couple, and before the negotiation and signing of contract happened, I explained to
them that the kitchen ceiling is already weak even though it had been repaired. After 9
months, the kitchen ceiling fell and cause a lot of damage. Now the married couple want
to sue and make me pay for the renovation. In this case, I am no longer liable for any
expenses as I already told them about the weakness of kitchen ceiling even before they
signed the contract. This means, after the negotiation settled, the seller/owner of the
house being sold is no longer liable for further expenses.