IRJMSH Vol 5 Issue 5 [Year 2014] ISSN 2277 – 9809 (0nliine) 2348–9359 (Print)

CAVEAT EMPTOR TO CAVEAT VENDITOR IN THE PROCESS....

- Ms. Sowmya Christina

(Asst.Prof, Jyoti Nivas College Autonomous &
Research Scholar in Jain University)

- Dr. Prakash Munishamappa

(Principal, Seshadripuram College)

ABSTRACT

The study focuses on the principle of Caveat Venditor (Sellers Beware), the reasons behind the
emergence of this concept and its implications. With Caveat Venditor gaining more and more
importance, are we moving towards consumer sovereignty? In order to understand this principle,
one must know the reasons for decline of Caveat Emptor (Buyers Beware) with cases which
paved way to the rule of Caveat Venditor.

The study discusses cases and situations which led to different judgment in every case and in
turn leading to the gradual change in the rule. In the long run for the commercial transactions to
run smoothly, it is important that the buyer and the seller are true to themselves.

KEY WORDS

Caveat Emptor, Caveat Venditor, Cases, Consumer Sovereignty

INTRODUCTION

The Reserve Bank of India is in the process of formulating strict guidelines to discourage lenders
from mis-selling and to hold them accountable for all products being offered with a view to
protect banking consumers.

“The current system of government regulations with respect to sale of financial products and
services is based on Caveat emptor as a doctrine”, said Joshi who handles the departments of
customer service, rural planning and credit at the RBI.
The framework governing customer protection should consist of fairness; transparency of rules
and conditions; suitability of products that matches customer needs, ability to repay; existence of
a grievance redress process; clear conditions of liability if things go off beam; simplicity of the
product and duty to update about the changes in the product.

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Principle of “Let the Buyer Beware” is derived from the Latin word caveat emptor. It is derived
from the principle that the buyer alone is responsible for checking the quality and suitability of
goods before a purchase is made.
In other words, buyers need to know their rights and be vigilant while making any purchase.
As per Advanced Law Lexicon, Caveat emptor means "Let the purchaser beware."
It is one of the rule, applying to a buyer who is bound by actual as well as constructive
knowledge of any fault in the thing purchased, which is evident, or which might have been
known by proper diligence. This rule is used with reference to sale or sales of the properties
where the purchaser is expected to exercise proper caution and to inform himself as to its quality
and encumbrances.

"Caveat emptor does not mean either in law or in Latin that the buyer must take chances. It
means that the buyer must beware."
On the other hand, Caveat Venditor is a rule, transmitting the accountability for defects
or deficiencies upon the supplier of goods, and conveying the exact contrary of the common
law rule of Caveat Emptor. According to Wright v. Hart, 18 Wend. (N. Y.) 449, " The rule of the
civil law is Caveat Venditor, and therefore, if the seller wishes to secure himself from the future
responsibility, in case the articles sold later found to be different in kind or quality from what the
parties supposed it to be, he must take care or provide against for such liability, by a particular
contract with the buyer. The rule of common law, on the contrary, Caveat emptor, which implies
that the purchaser must take care to examine and ascertain the kind or quality of the article he is
purchasing, or provide against any loss he may sustain form his ignorance of the kind or quality
of the article sold, or from his inability to examine it fully, by an express agreement of
warranty".

Caveat Venditor is used as expressing, in a rough way, the rule which governs all those cases of
sales to which Caveat Emptor does not apply.

NEED FOR THE STUDY

The increase in the density of modern commerce has placed the buyer at a disadvantage with the
rule of Caveat Emptor. There seems to be a decline in the rule and which is due to the changes in
the market situations. The trend is moving from consumer oriented to consumer sovereignty.
With this trend in mind, what are the rationale that lead to change in the rule? Are the consumers
given more importance?

OBJECTIVES

To study the reasons that lead to the decline of Caveat Emptor.

To find out the starting point that led to the rule of Caveat Venditor.

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SOURCES OF DATA

The data used in the research are secondary in nature and has been collected from the relevant
websites, journals, magazines and some periodicals.

ANALYSIS AND INTERPRETATION

History of Caveat Emptor:

The philosophy behind the rule of Caveat Emptor was basically the reliance placed by the buyer
on his own skill and judgment. It is based on the fundamental premise that once a buyer satisfies
himself with respect to the suitability of the product for his use, he would later have no right to
decline the same.

Concepts like fitness of goods and merchantability which plays an important role in purchase of
goods where neglected and the buyer could not rejects goods on such grounds. Caveat Emptor in
its initial stage was rigid.

In case Laidlaw v. Organ, the seller was aware of the price change in commodity which would
happen due to peace news between America and Britain but the seller remained silent when the
buyer asked about any price changes. Ultimately the buyer was at loss due to this transaction.
The court held that the seller was not bound to communicate as the information was equally
accessible by both the parties.

According to the above case and English Sale of Goods Act, 1983, it is quite evident that the
sellers duty as to disclosure requirements when a product is sold was minimal. The buyers
examination of the goods was given utmost importance when compared to the sellers duty to
inform about the goods sold. Another important proposition was according to the Section
11(1)(c) of the Act, said that the cases where there was sale of 'specific' goods, the purchaser
could not reject the merchandise on any grounds.

Thus it can be noted that the law was bent in the favor of sellers, mainly to encourage trade and
development. And in those days one could not think of a rule which would in turn put the burden
on the seller.

Reasons for need of change of the Principle:

In case Ward v. Hobbs 1878, the seller sold pigs "with all faults". Though the seller knew while
selling the pigs they had typhoid, he was not liable. As it was held that he had made no
misrepresentation. Mere silence (even as to known defects) does not normally amount to
misrepresentation.
This rule is another application of the Caveat emptor principle: in theory, the cautious buyer
should protect himself by asking questions. It is therefore a scenario wherein a buyer would not
have any choice against a seller who has in spite of being aware of a hidden defect (one which

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cannot be detected by reasonable examination) not informed the buyer about the same, would
certainly not encourage buyer to go for any future commercial transactions.

Another reason for dilution of the principle of Caveat emptor is that it does not provide adequate
protection to the buyer, who buys the goods in good faith i.e. buying in reliance on the skills and
judgment of the seller. The relationship between the buyer and seller should be given equal
importance. But the rule of Caveat Emptor is more lenient to the seller.

Shift in the conceptual thinking and the origin of Caveat Venditor:

Priest v. Last Case, the buyer asked for a hot water bottle to the seller, retail chemist. The bottle
supplied burst after few days use and injured buyer's wife. The court held that seller was liable
for the breach of implied condition because buyer had made known to the Chemist the purpose
for which he was in need of the bottle.

It is one of the first traceable decision in common law, which gave significance to the trust
placed by the buyer on the seller's skill and judgment. And which marked as a blow to Caveat
Emptor. However it was just the beginning of what could be termed as the thinning process of
the rule of Caveat Emptor. Further based on this case, the courts in subsequent cases expressed a
view that it is not necessary for the buyer to express in clear terms the use of product or service
in the contract as it is evident from the nature of contract or in the course of negotiations the
reason behind the purchase (in the above case when the buyer asked for hot water bottle, it is
understood that it will be used to store hot water)

With its origin being traced in the need for disclosure of information for the purposes of
facilitating the reason for purchase of the buyer, little by little this rule has gained importance
and the obligations of the seller have been given more importance along with various statutes
and case laws limiting the rule of Caveat emptor to „reasonable examination‟. For example milk-
containing typhoid germs or beer contaminated with arsenic do not come under 'reasonable
examination'.

With the above obligation of the seller to make proper disclosure, the question arises what would
be the position of a seller if he himself is not aware of the defect in goods?. This situation is
explained in Harlingdon and Leinster v. Christopher Hull Fine Art Ltd. In the case, claimant
purchased a painting from the defendant. The painting was described in the auction catalogue as
being German impressionist artist Gabrielle Munter. The sellers were not experts on German
paintings while the buyers specialised in German paintings. The buyer sent their experts to study
the painting before approving to purchase. Subsequent to the sale the buyers discovered that the
painting was a fake and was worth less than half the amount paid. They filed a case based Sale of
Goods Act, Sec.13, that the painting was not as described. But it was held that by sending their
experts to inspect the painting, the sale was no longer by description. Sec. 13 of Sale of Goods
Act applies only to goods sold by description and therefore the buyers had no protection.

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Later this proposition was opposed by Justice Smith saying that it is the duty of the seller to be
aware of the conditions of the goods being sold and making the buyer aware about the same.

The Law Commission of India has come up with its own test for merchantable quality after
considering the above cases. Merchantable quality means the goods tendered in performance of
the contract shall be of such type and quality and in such condition that , having regard to the
circumstances, as well as the value and description under which the goods are sold, a purchaser
with full information of the quality and characteristics of the goods, including knowledge of any
flaw, would accept the goods in performance of the agreement. In simple words it means that the
buyer having full information including the defects in the goods would acting reasonably buy the
same. So it is the sellers duty to make the buyer aware of all the defects in the goods being sold
and all information relating to the usage of the goods.

CONCLUSION

The rule of „Caveat Emptor‟ is being slowly taken over by „Caveat Venditor‟, the transform
being recognized to a more consumer sovereign market wherein commercial transactions are
being encouraged. Such a change, no doubt would help to create an appropriate balance between
the rights and obligations of the seller and the buyer. In this context the comments of Lord
Wright which are relevant reproduced here: The "old rule" of Caveat emptor had been
superseded by Caveat Venditor, such change being "rendered necessary by the conditions of
modern commerce and trade" Let the buyer beware‟ is not a phrase that judges use very often
nowadays. The ancient rule of Caveat emptor rule, which has its origin in the law, has over the
period undergone foremost changes. As the rule was being given a solid shape, its exceptions
also grew with time. Therefore this conceptual change would center around the balancing point
of the necessity of disclosure of information by the seller on one side and implications of
reasonable inspections done by the buyer on the other. But it should be noted that of this drift of
change is taken too far, we might end up in retarding dealings due to the approach, then
becoming particularly pro-buyer, who might misuse the shield under law.

REFERANCES

Cases

- Wallis v. Russell [1902] 2 IR 585

- Laidlaw v. Organ 15 U.S. 178 (1817)
- Ward v. Hobbs. (1878) 4 A.C. 13
- Priest v Last (1903)2K.B.148
- Harlington & Leinster v Christopher Hull Fine Art [1991] 1 QB 564

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- Wright v. Hart, 18 Wend. (N. Y.) 449

Books

- P. Ramanatha Aiyar, Advanced Law Lexicon, page 721, 3rd Edition, 2005
- T S Venkatesa Iyer, The Law of Contract, Vol. 2, 5th Edition.
- Michael Bridge, Sale of Goods, 2nd Edition, 2009
- P. Ramanatha Aiyar, revised by Shrinivas Gupta, Law of Sale of Goods Act, 9th Edition,
2010
- William Livesey Burdick, The Principles of Roman Law and Their Relation to
Modern Law, Page 445-446, Law Book Exchange Ltd, 3rd Edition, 2007
- Robert W Emerson, Business Law, 4th Edition, 2004

Websites

- Sreekumar C Nair, Implied Conditions in the sale of goods,

<http://www.lawyersclubindia.com/articles/implied-conditions-in-the-sale-of-goods--
379.asp#.U4iSwfmSwl1>
- Sameer Sharma, Rule of Caveat Emptor,
<http://www.lawyersclubindia.com/articles/Rule-of-Caveat-Emptor-
5399.asp#.U4iTC_mSwl1>
- Enrique (Henry) Saldana, <http://www.sac-be.com/caveat_emptor.shtml>
- Legum Aegis, Concept of Caveat Emptor in Indian Law,
<https://www.facebook.com/LegumAegis/posts/501022829955327>
- The Hindu, Reserve Bank hints at stricter customer protection norms, 20th May 2014 <
http://www.thehindu.com/business/Economy/reserve-bank-hints-at-stricter-customer-
protection-norms/article6030257.ece>
- K P C Rao, A paradigm shift from caveat emptor to caveat venditor- owing to the
demands of modern trade and business in global arena, <
http://kpcraoindia.blogspot.in/2012/04/paradigm-shift-from-concept-of-caveat.html>
- Caveat emptor, < http://en.wikipedia.org/wiki/Caveat_emptor>
- Alan M Weinberger, Let the buyer be well informed?-Doubting the demise of Caveat
Emptor,
<http://digitalcommons.law.umaryland.edu/cgi/viewcontent.cgi?article=2986&context=
mlr>
- Caveat Venditor, < http://en.wikipedia.org/wiki/Caveat_venditor#Caveat_venditor>
- Consumer Sovereignty, < http://en.wikipedia.org/wiki/Consumer_sovereignty>
GLOSSARY

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Caveat Emptor: it is a latin for 'Let the buyer Beware'. It is the contract law principle that
controls the real sale of property after the date of closing, but may also apply to sale of other
goods.
Caveat Venditor: it is latin for "let the seller beware." It is a counter to caveat emptor and
suggests that sellers can also be deceived in a market transaction. This forces the seller to take
responsibility for the product and discourages sellers from selling products of unreasonable
quality.
Consumer Sovereignty: is the assertion that consumer preferences determine the production
of goods and services. The term was coined by William Harold Hutt in his book Economists and
the Public (1936)

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