Page 144 - DMGT407Corporate and Business Laws

Unit 5: Law of Sale of Goods

Notes
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 adequate protection to the buyer who buys the good in good faith,
which case laws put as, ‘reliance on the skill 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 checks,
the rule was subsequently diluted.
The Dilution Process and Origin of Caveat Venditor

For 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 Priest v. Last wherein for the first time, the
reliance placed by the seller for the purposes of buying a ‘hot water bottle’ was taken 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 seller’s skill and judgment. This proposition of law, however is a settled
principle of law today.
The Priest decision however, was just a beginning of what could certainly be termed as the
diminishing process of the rule of caveat emptor. Where in this decision, the purpose was
expressly mentioned and then taken into account, the courts in subsequent cases, opined
that the need/purpose of the contract would be evident from the nature of the contract, or
might be known 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
requisite for proving reliance on the skill 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. If
one refers to the decisions like that of the House of Lords in the case of Ashington Piggeries
Ltd v. Christopher Hill Ltd , where on one hand the majority opined that a generalized
purpose should be shoehorned within the meaning of a particular purpose thereby meaning
that when the buyer purchases foodstuff meant for animals, he need not mention specifically
the type of animals he would feed with the foodstuff. On the other hand the dissenting
opinion of Justice Diplock, 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 Justice Diplock, is the decision of New Zealand Court of Appeal
in the case of Hamilton v. Paparika 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 generalized purpose in the given case, so any particular purpose should
have been communicated to the seller and he could not have known the same by
implication.
It 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 particularized purpose and the
generalized purpose.’ But this has an equally sound counter-argument, which is that it
should be incumbent upon the seller to specify that his product, which is sold for a
generalized purpose would not suit a particular purpose. Or 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 seller’s part.
Contd...

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