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Mercantile Laws-I

Notes Doctrine of Caveat Emptor

The doctrine of caveat emptor is a fundamental principle of the law of sale of goods. It means
‘CAUTION BUYER’, i.e., ‘let the buyer beware’. In other words, it is no part of the seller’s duty
to point out defects of his own goods. The buyer must inspect the goods to find out if they will

suit his purpose.

Task Raman sold 100 quintals of rice to Suman, who paid by cheque. The cheque was
dishonoured upon presentation. Raman had given a delivery order to Suman. Suman
resold it to Gagan, a buyer in good faith, for consideration, endorsing the delivery order
to him. Raman refuses to deliver the goods to Gagan, on the plea of non-payment. Advice
Gagan.

12.6 Passing of Property in Goods

12.6.1 Meaning of ‘Property in Goods’

The phrase ‘property in goods’ means ownership of goods. The ‘ownership’ of goods is different
from ‘possession’ of goods. The ‘possession’ of goods refers to the custody of goods, though
normally a person who is in possession of the goods shall also be its owner but it need not
necessarily be so.
12.6.2 Rules regarding Passing of Property in Goods from the Seller to the
Buyer

Secs.18 to 25 lay down the rules which determine when property passes from the seller to the
buyer. These rules for different kinds of goods are summarised below:
Specific or ascertained goods. In a sale of specifi c or ascertained goods, the property in them is

transferred to the buyer at such times as the parties to the contract intend it to be transferred. The
intention of the parties is ascertained from the terms of the contract, the conduct of the parties
and the circumstances of the case. Unless a contrary intention appears, the undermentioned rules
are applicable for ascertaining the intention of the parties (Secs.20-24).

1. Specific goods in a deliverable state. In the case of specific goods in a deliverable state,

the property passes at the time the contract (unconditional) is made (Sec.20). The fact that
the time of payment or the delivery of the goods or both are postponed does not affect the
passing of the property. Sec.2(3) states that goods are said to be in a deliverable state when
they are in such a state that the buyer would under the contract be bound to take delivery
of them.

2. Specific goods not in a deliverable state. In the case of specific goods to which something

has to be done by the seller to put them in a deliverable state, property passes only when
such thing is done and the buyer has notice thereof (Sec.21).
Unascertained or future goods. When there is a contract for the sale of unascertained goods,
property in the goods is not transferred to the buyer unless and until the goods are ascertained
(Sec.18).
Sec.23 provides that in the case of sale of unascertained goods or future goods by description,
property passes to the buyer when goods of that description in a deliverable state are
unconditionally appropriated to the contract, either by the seller with the assent of the buyer or
by the buyer with the assent of the seller.

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