Page 143 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes Self Assessment

Fill in the blanks:
19. Doctrine of caveat emptor which is a fundamental principle of the law of sale of goods
means ……………………………

20. The rule of Caveat emptor does not apply where the consent of the buyer, in a contract of
sale, is obtained by the seller by ……………or where the seller actively conceals a defect
in the goods.

Case Study Caveat Emptor or Caveat Venditor: Where are we
Heading?

et 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
Ltimes undergone major changes. As the rule was being given a concrete shape, its
exceptions also grew with time. This article however, seeks to analyze the gradual death
of the rule of caveat emptor and its replacement with a rule, which has subsequent origin
i.e. caveat venditor (let the seller 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 skill or judgment . It is based on the
fundamental premise that once a buyer satisfies himself as to the suitability of the product
for his use, he would subsequently have no right to reject the same. The rule of caveat
emptor, as it prevailed at the times of its origin, was quite rigid.

If one peruses through the English Sale of Goods Act, 1893, it is not only noticeable but
quite evident that the seller’s duties as to disclosure requirements when a product is sold
was minimal. Buyer’s examination of the goods was considered over and above any duty
upon the seller to provide information. Concepts like ‘fitness of goods’ and
‘merchantability’, which could be used to shift the burden as to quality and fitness on the
seller, were not encouraged. Another strong proposition, which was present in the act,
was in the form of Section 11(1)(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 and the Need for Change
The approach, which was being adapted when the rule of caveat emptor prevailed in its
absolute form, was later characterized as one detrimental to the development of trade and
commerce. It is submitted that their lordships were quite correct in saying so because;
caveat emptor in its absolute from would certainly be detrimental to the buyer’s 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
Contd...

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