Caveat Emptor Meaning, Origin, Application and Important Case Laws

Legal maxim “Caveat Emptor” is used in legal contacts as a disclaimer which means, let the buyer beware. In this article, Sahajpreet Bhusari explains the meaning of the Latin maxim with illustration and case laws.

Origin and Meaning

Caveat Emptor is a legal term of Latin origin. It literally means ‘let the buyer beware‘.

Explanation

Caveat emptor is a kind of disclaimer/ warning included so as to resolve disputes which might come up in future due to information asymmetry. Case of information asymmetry is one in which the seller has more information about the quality of the goods or services than the buyer.

However, there are certain exceptions to the same. Market forces may reduce the applicability of caveat emptor in some cases. Additionally, in order to protect the interests of consumers, the government also pushes back against the maxim.

Application

Although this phrase is sometimes used as a proverb in English, it is also used as a disclaimer in legal contracts which warns the buyer.

The disclaimer is intended to resolve disputes caused by information asymmetry, that is, the situation where the seller has more information about the quality of goods or services than the buyer.

Illustration

If A wants to purchase a motorbike from B. Under the principle of caveat emptor, A has the duty to gather all the necessary information to make sure that the motorbike is in the correct state.

If the buyer does not ask for information other than the price and the car subsequently breaks down, as per the principle of caveat emptor, A would be liable for the damages.

Important Case Laws

In the case of Peter Darlington Partners Ltd. v. Gosho Co. Ltd[1], there existed a sale contract for canary seed. It was held that the contract is believed to be subject to commercial customs of the trader and the buyer must receive a rebate for impurities in the seed, but the entire merchandise cannot be rejected.

Additionally, it was said that any unreasonable business habit does not affect the contract between the two parties.

In Shital Kumar Saini v. Satvir Singh[2], a compressor purchased by the petitioner with a one-year warrant turned out to be defective within three months of purchase. When the buyer requested a replacement, it was replaced without further warranty. It was held that the goods must be reasonably fit for the use for which they are sold and that in this case there is an implied warranty.

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Reference

[1] (1964) 1 Lloyd’s Rep. 149.

[2] (2005) 1 CPR 401.

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