Caveat Emptor and Caveat Venditor

Caveat Emptor Let the buyer beware is not a phrase that judges use very often nowadays. The age-old rule of caveat emptor rule, which has its origin in common law, has over the times undergone major changes. As the rule was being given a concrete shape, its exceptions also grew with time. This article however, see s to analy!e the gradual death of the rule of caveat emptor and its replacement with a rule, which has subse"uent origin i.e. caveat venditor #$eller beware%. This analysis 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. The History: Caveat Emptor (When it originated) As one would trace by its origin, the philosophy behind the rule of caveat emptor was basically the reliance placed by the buyer on his own s ill or judgment. &t is based on the fundamental premise that once a buyer satisfies himself as to the suitability of the product for his use, he would subse"uently have no right to reject the same. The rule of caveat emptor, as it prevailed at the times of its origin, was "uite rigid. &f one peruses through the 'nglish $ale of (oods Act, )*+,, it is not only noticeable but "uite evident that the sellers duties as to disclosure re"uirements when a product is sold was minimal. -uyers examination of the goods was considered over and above any duty upon the seller to provide information. .oncepts li e /fitness of goods and /merchantability, which could be used to shift the burden as to "uality and fitness on the seller, were not encouraged. Another strong proposition, which was present in the act, was in the form of

$ection ))#)%#c%, which mandated that in cases where there was sale of /specific goods, the buyer could not reject the goods on any ground. Thus it can be noted that the law being bent in the favor of the seller, and in those times, one could not even contemplate a corresponding rule, which would put the burden on the seller #caveat venditor%. The Fallacy & the Need for Change The approach, which was being adapted when the rule of caveat emptor prevailed in its absolute form, was later characteri!ed as one detrimental to the development of trade and commerce. &t is submitted that their lordships were "uite correct in saying so because0 caveat emptor in its absolute from would certainly be detrimental to the buyers cause, because till then, the element of /reasonable examination was not introduced. Therefore a scenario wherein a buyer would not have any recourse against a seller who has in spite of being aware of a latent defect #one which cannot be detected by reasonable examination% not informed the buyer about the same, would certainly not encourage commercial transactions. Another sound reason, which can be thought of for the dilution of the rule of caveat emptor, is to provide ade"uate protection to the buyer who buys the good in good faith, which case laws put as, /reliance on the s ill and judgment of the seller. Thus in order to give proper recognition to the relationship between the buyer and the seller and to generate a scenario wherein commercial transactions are encouraged by the means of proper chec s , the rule was subse"uently diluted. Caveat Venditor rigin of Caveat Venditor

1or the reasons stated above, the rule of caveat emptor, as far as judicial precedents goes, for the first time suffered a blow by the case of 2riest v. Last wherein for the first time, the reliance placed by the seller for the purposes of buying a /hot water bottle was ta en into account for the purposes of allowing the buyer to reject the goods. This decision was the first traceable decision in common law which gave importance to the reliance placed by the buyer on the sellers s ill and judgment. This proposition of law, however is a settled principle of law today. The 2riest decision however, was just a beginning of what could certainly be termed as the diminishing process of the rule of caveat emptor. 3here in this decision, the purpose was expressly mentioned and then ta en into account, the courts in subse"uent cases, opined that the need4purpose of the contract would be evident from the nature of the contract , or might be nown to the seller from the course of negotiations between the parties. Thus express mention of the purpose behind a purchase of goods was no longer considered a re"uisite for proving reliance on the s ill and judgment of the seller, which signified a further shift of law in favor of the buyer. This imposition of obligations upon the seller was also not a smooth process in itself. &f one refers to the decisions li e that of the 5ouse of Lords in the case of Ashington 2iggeries Ltd v. .hristopher 5ill Ltd, where on one hand the majority opined that a generali!ed purpose should be shoehorned within the meaning of a particular purpose thereby meaning that when the buyer purchases food-stuff meant for animals, he need not mention specifically the type of animals he would feed with the food-stuff. 6n the other hand the dissenting opinion of 7ustice 8iploc , while rejecting the majority opinion, clearly said that /the swing from caveat emptor to caveat venditor had gone too far. Another decision, which goes with the opinion of 7ustice 8iploc , is the decision of 9ew :ealand .ourt of Appeal in the case of 5amilton v.

2apari a wherein the court refused to accept the contention that a water supplier supplying water to horticulture farms should ensure that its water would not harm a specific crop i.e soil less cherry tomato. The court opined that since the water was serving the generali!ed purpose in the given case, so any particular purpose should have been communicated to the seller and he could not have nown the same by implication. &t is submitted that the valid argument which can be construed out of these case laws is that concerning the variation between the nature of the particulari!ed purpose and the generali!ed purpose. -ut this has an e"ually sound counterargument, which is that it should be incumbent upon the seller to specify that his product, which is sold for a generali!ed purpose would not suit a particular purpose. 6r that the product would have to be used in a particular manner in order to serve a particular purpose. This counter-argument is where one can trace the origin of caveat venditor i.e. the need for disclosure on the sellers part. Caveat Venditor: !evelopment of the "eller#s $ligation

3ith its origin being traced in the need for disclosure of information for the purposes of facilitating the reason for purchase of the buyer, gradually this rule has gained prominence and the obligations of the seller have been given proper shape along with various statutes and case laws limiting the rule of caveat emptor to /reasonable examination. 'xamples li e beer contaminated with arsenic, mil -containing typhoid germs are good enough to establish that courts have been generous enough to exempt the buyer from the duty to examine the goods where the defects could not have been traced in ordinary circumstances.

Another major debate which arises from the above obligation of the seller to ma e proper disclosure is concerning cases where the seller himself does not come to now of the defect. Therefore a duty does lie by law on the seller to be aware of the conditions of the goods being sold and ma ing the buyer aware of the same. The various tests for merchantable "uality of goods also go on to indicate the same when they emphasi!e on the /full nowledge of the buyer as to the "uality of the goods. The first test which was accepted by the law commission was the statement of 7ustice 8ixon in Australian ;nitting <ills v. (rant= (the goods) should be in such an actual state that the buyer fully acquainted with the facts and, therefore, knowing that hidden defects existed and not being limited to their apparent condition would buy them without abatement of the price obtainable for such goods if in reasonably sound order and condition and without any special terms. The second test was the /usability test by the Law .ommission comes from the verdict of Lord >eid in the case of ;endall ? $ons v. Lillico ? $ons Ltd. = /What subsection (2) now means by merchantable quality is that the goods in the form in which they were tendered were of no use for any purpose for which goods which goods which complied with he description under which these goods were sold normally to be used, and hence not sellable under that description. &t is submitted that from the above mentioned three tests for merchantable "uality, it can said that if the goods are supposed to be termed as those of merchantable "uality, the buyer having /full nowledge about them, would /acting reasonably buy the same. Therefore, the sellers duty is to ma e the buyer aware of all the defects in the goods being sold and all the information relating to the usage of the goods.

Therefore, the rule of caveat emptor is dying a slow death and is being ta en over by the subse"uent rule of caveat venditor, the change being attributed to a more consumer oriented mar et wherein commercial transactions are being encouraged. $uch a change, it is submitted will not only help create an appropriate balance between the rights and obligations of the seller and the buyer. -ut it should be noted that if this trend of change is ta en too far, we might end up in retarding transactions due to the approach then becoming extremely pro-buyer who might misuse the protection under law.