Introduction

Caveat emptor is a Latin term that means "let the buyer beware." Similar to the phrase
"sold as is," this term means that the buyer assumes the risk that a product may fail to meet
expectations or have defects. In other words, the principle of caveat emptor serves as a
warning that buyers have no recourse with the seller if the product does not meet their
expectations.
The term is actually part of a longer statement: Caveat emptor, quia ignorare non
debuit quod jus alienum emit ("Let a purchaser beware, for he ought not to be ignorant of the
nature of the property which he is buying from another party.") The assumption is that buyers
will inspect and otherwise ensure that they are confident with the integrity of the product (or
land, to which it often refers) before completing a transaction. This does not, however, give
sellers the green light to actively engage in fraudulent transactions.
Section 16 of the Sale of Goods Act 1930 incorporates the principle of caveat emptor
which reads as: Subject to the provisions of this act or any other law for the time being in
force there is no implied condition or warranty as to quality or fitness for any particular
purpose of goods supplied.
As defined in Common Law: The position in Common Law is almost same to that of India
scenario. In Ward v. Hobbes1, the House of Lords held that a vendor cannot be expected to
use deception or disguise to conceal the defects in the product sold, since that would amount
to fraud on the vendee; yet the doctrine of caveat emptor does not impose duty on vendor to
disclose each and every defect in the product. The caveat emptor imposes such obligation on
vendee to use care and skill while purchasing such product.
In Wallis v. Russel2, the Court of Appeal explained the scope of caveat emptor: Caveat
emptor does not mean in law that the buyer must take a chance, it means he must take
care. It applies to the purchase of specific things, e.g. a horse, or a picture, upon which the
buyer can, and usually does, exercise his own judgment; it applies also whenever the buyer
voluntarily chooses what he buys; it applies also whereby usage or otherwise it is a term of
the contract, that the buyer shall not rely on the skill or judgment of the seller.

1 (1878) 4 AC 13
2 (1902) 2 IR 585

Under the principle of caveat emptor, for example, a consumer who purchases a
coffee mug and later discovers that it has a leak is stuck with the defective product. Had they
inspected the mug prior to the sale, they may have changed their mind.
A more common example is a used car transaction between two private parties (as
opposed to a dealership, in which the sale is subject to an implied warranty). The buyer must
take on the responsibility of thoroughly researching and inspecting the carperhaps taking it
to a mechanic for a closer lookbefore finalizing the sale.
If something comes up after the sale, maybe a transmission failure, it is not the
seller's responsibility. Garage sales offer another example of caveat emptor, in which all sales
are final and nothing is guaranteed.
It means that buyer should be very careful in a contract of sale. While purchasing the
goods the buyer should check the goods carefully. If a buyer purchases the goods and after it
he comes to know that these are defective. In this case seller will not be responsible for this
defect. The object of this principle is to make the buyer more careful in purchasing. It is his
duty that he should check the quality and fitness of the commodity which he needs.
Example: - Mr. Krishna went to market and purchased a bike to take a part in Bike
race competition. But he did not tell the seller that for which purpose he is buying. When he
reached home, he came to know that this bike is not suitable for bike race competition. Due
to the principal of Caveat Emptor Mr. Krishna can neither reject the bike nor can claim for
compensation.

Protection of Buyers i.e. Exceptions to the Rule

The Sale of Goods Act protects consumers if the seller sells in the course of a business as it
restricts the use of the caveat emptor rule, however this protection varies if the seller is a
private seller as the rule may still apply. Therefore, it could be said that the amended sale of
goods Act 1979 may not protect all consumers from dangerous and shoddy goods, as private
sellers are not included and the consumer may not always be protected. Therefore in order to
ensure that the consumer is adequately protected there must be a clear distinction between a
sale in the course of a business and the sale not in the course of a business. S.14(5) makes it
clear that if someone is selling in the course of a business as an agent for a private seller, then
the seller must make this clear to the buyer in order to avoid liability.

Section 16(1) Fitness for Buyers Purpose

Sub section (1) of Section 16 of the Sale of Goods Act prescribes the circumstances in
which the seller is obliged to supply goods to the buyer as per the purpose for which he
intends to make a purchase. It states that when the seller either expressly or by necessary
implication is aware of the purpose for which buyer makes purchase thereby relying on
sellers skill and judgment and the goods to be purchased are of a description which the seller
in his ordinary course of business supply, then there is as implied condition that the goods
shall be reasonably in accordance with the purpose
Requirements of the Section 16(1) are as follows:

The buyer should make the seller aware of the particular purpose for which he is
making purchase;

The buyer should make purchase on the basis of sellers skill or judgment;

The goods must be of a description which it is in the course of the sellers business to
supply.

In the case of Shital Kumar Saini v. Satvir Singh3, the petitioner purchased a compressor
with one year warranty. The defect appeared within three months. The petitioner asked for a
replacement. The seller replaced it but without providing any further warranty. The State
Commission allowed it to be rejected stating that there was an implied warranty guaranteed
under Section 16 of the Sale of Goods Act, 1930 that the goods should be reasonably fit for
the purpose for which they are sold.
Sale under Trade Name [Proviso to S. 16 (1)]
Sometimes a buyer purchases goods not on the basis of skill and judgment of the
seller but by relying on the trade name of the product. In such case, it would be unfair to
burden the seller with the responsibility for quality. The proviso to Section 16 of the Sale of
Goods Act, 1930 deals with such cases. The proviso says:
Provided that, in the case of a contract for the sale of a specified article under its patent or
other trade name, there is no implied condition as to the fitness for any particular purpose.
Merchantable quality [Section 16(2)]
3 (2005) 1 CPR 401

The second important exception to the doctrine of caveat emptor is incorporated in

Section 16(2) of the Act. The Section provides that the dealer who sells the goods has a duty
to deliver the goods of merchantable quality.
Sub-Section (2) which contains this exception says:
Where the goods are bought by description from a seller who deals in goods of that
description (whether he is the manufacturer or producer or not), there is an implied
condition that the goods shall be of the merchantable quality.
Meaning of Merchantable Quality: Merchantable quality means that if the goods are
purchased for resale they must be capable of passing in the market under the name or
description by which they are sold.
Merchantable quality depends on two factors:

Marketability- Merchantability does not merely mean that the goods shall be
marketable, but that they shall be marketable at their full value. Merchantability does
not mean that the things are saleable in the market because it looks all right; it is not
merchantable in that event if it has defects unfitting it for its only proper use but not
apparent on ordinary examination.4

Reasonable fitness for general purposes- Merchantable quality means, in the

second place, that if the goods are purchased for self-use, they must be reasonably fit
for the purpose for which they are generally used. In the case of Priest v Last5 the
plaintiff bought a hot-water bottle which is ordinarily used for application of heat to
the human. The bottle burst scalding the plaintiffs wife. The seller was held liable.

Examination by buyer [Proviso to S.16(2]

The proviso to section 16(2) declares that if the buyer has examined the goods, there
shall be no implied condition as regards defects which such examination ought to have
revealed. The requirement of the proviso is satisfied when the seller gives the buyer full
opportunity to examine the goods and whether the buyer made any use of the opportunity or
not should make no difference.6
4 Grant v Australian Knitting Mills, 1936 AC 85
5 Priest v Last, [1903] 2 KB 148

Conditions implied by trade usage [Sec. 16(3)]

Sub-Section (3) of section 16 gives statutory force to conditions implied by the usage of a
particular trade. It says:
An implied warranty or condition as to the quality or fitness for the particular purpose may
be annexed by the usage of trade.
In another case of Peter Darlington Partners Ltd v Gosho Co Ltd 7, where a contract
for the sale of canary seed was held subject to the custom of the trade that for impurities in
the seed, the buyer would get a rebate on the price, but would not reject the goods.
However, an unreasonable custom will not, however, affect the parties contract.
Express Terms [ Section 16(4)]
It is open to the parties to include any express conditions or warranties in their
contract. But an express warranty or condition does not negative a warranty or condition
implied by the Act unless the express terms are inconsistent with the implied conditions.
Thus, where sleepers supplied to a railway company were required to be approved by its
experts, it was held that it did not exclude the implied condition of merchnatableness8.

Caveat Emptor in Sale/Transfer of Immovable Property

Section 55 of Transfer of Property Act, 1882 provides Rights and liabilities of buyer and
seller. Sub-clause 1 of Sec 55 reads as follows:
The seller is bound
(a) to disclose to the buyer any material defect in the property 1[or in the sellers title
thereto] of which the seller is, and the buyer is not, aware, and which the buyer could not
with ordinary care discover;
(b) to produce to the buyer on his request for examination all documents of title relating to
the property which are in the sellers possession or power;

6 Thornett and Fehr v Beers & Sons [1919] 1 KB 486

7 [1964] 1 Lloyds Rep 149
8 Steve Hedley, Quality of Goods, Information , and the Death of Contract, (2001) JBL 114

(c) to answer to the best of his information all relevant questions put to him by the buyer in
respect to the property or the title thereto;
(d) on payment or tender of the amount due in respect of the price, to execute a proper
conveyance of the property when the buyer tenders it to him for execution at a proper time
and place;
(e) between the date of the contract of sale and the delivery of the property, to take as much
care of the property and all documents of title relating thereto which are in his possession as
an owner of ordinary prudence would take of such property and documents;
(f) to give, on being so required, the buyer, or such person as he directs, such possession of
the property as its nature admits;
(g) to pay all public charges and rent accrued due in respect of the property up to the date of
the sale, the interest on all encumbrances on such property due on such date, and, except
where the property is sold subject to encumbrances, to discharge all encumbrances on the
property then existing."
The words the buyer is not, aware, and which the buyer could not with ordinary care
discover use in sec.55(1)(a) gave a implied meaning that the vendor has a duty to disclose
only those defects which the vendee dont know and which vendee wouldnt discover with
ordinary care. So this means that if a vendee does nothing more than just listening and
believing the words spoken by the vendee and assuming that there are no other defects unless
disclosed by the vendor, then he might face troubles in future.
For example if A was searching for a land to buy and in that process he met B. B
showed TAJ MAHAL in Agra and offered to sell that property to A for consideration of
Rs.5,00,000 and A readily accepted and paid for that sale. Now in the eyes of law A doesnt
get any right over Taj Mahal because B himself didnt have any title over that property. Now
if he sue B saying that he concealed the fact that his title over the property is defective, he
wont get any relief because a ordinarily prudent person knows that Taj Mahal in the property
of the country and obviously B wont be the legal owner of the same.
Hence according to this sections wordings and the judicial interpretations of that
section a vendee has the duty to take notice of things which he generally expected to do.

Case Summary
Ganpat Ranglal Mahajan vs Mangilal Hiralal And Anr.9
Material Facts: The house in dispute originally belonged to one Ahmad, who had mortgaged
it with Motilal on 2-1.2-1939. Thereafter on 5-10-1944 Ahmad sold the house to one Babu &
Babu mortgaged it in favour of Misrilal & others. In the year 1947-48 Motilal, the first
mortgagee, brought a suit on the basis of his mortgage & obtained a decree for sale, in
execution of which the house was sold and was purchased by the applicant Ganpat on 15-31948. The defendant Ganpat sold the house to the plaintiff by a registered sale deed on 18-61948. In the meantime, Misrilal and others, the second mortgagees, had brought a suit on 183-1948 for the enforcement of their mortgage and Ganpat was also impleaded as one of the
defendants in this suit. The claim was decreed and the property was sold with the result that
the respondents were dispossessed from the house. Accordingly they brought the present suit
for recovery of Rs. 325/- which had been paid by them as the sale price and also claimed Rs.
75/-as damages partly for costs incurred in defending the mortgage suit and partly for repairs
made to the house.

Ahmad
Mortgaged to Motilal
1

Thereafter Sold to Ba
2

Filed suit and got decree to sell it to Ganpat Mortgaged to Misril

4
3

Filed Suit and Ganpat was dispos

5

9 AIR 1962 MP 144

Issue Relating to Duty of Notice

Whether it was the duty of the defendant in present appeal to take notice of the mortgage
relating to the land in dispute or whether it is the duty of appellant to inform the defendant
about such mortgage?
Lower Courts Findings: The plaintiff approached the trial court seeking recovery of Rs.
325/- which had been paid by them as the sale price and also claimed Rs. 75/- for expenses
incurred in defending the mortgage suit and partly for repairs made to the house.
The trial court was convinced with the arguments of plaintiff and decreed the whole amount
i.e. Rs.400/-.
The defendant being aggrieved with the decision of trial court went for a appeal before lower
appellate court. The lower appellate court also gave decision in the favor of plaintiff but
restricted the amount to Rs.325/-.
As the amount decreed is less than Rs. 1,000/-, there is no provision for appeal therefore the
defendant went for revision before the High Court.
Arguments: The defendant in present appeal contended that the appellant has failed to meet
the duty imposed upon him by the virtue of section 55(1)(a) of Transfer of Property Act.
Further there is an express recital, in the sale deed that the property is free from mortgage etc.
Section 55(1)(a) states as follows:
The seller is bound to disclose to the buyer any material defect in the property or in the
sellers title thereto of which the seller is, and the buyer is not, aware, and which the buyer
could not with ordinary care discover;
The appellant contended that by mere presence of express recital that the property is free
from mortgage isn't enough to attract sec. 55(1)(a). To attract the provisions Of Section 55(1)
(a) two conditions are necessary : firstly, that the buyer should not be aware of the existence
of the defect in title; and, secondly, that he could not with ordinary care discover the defect.
The applicant vendor in his written statement pleaded that the buyer was aware of the
existence of the mortgage. Coming to the second condition the vendor contends that the
buyer could have known about the encumbrance by making inquiries in the office of the
Registrar.

Cases Referred/Relied
Harilal v. Mulchand10: If the vendee had knowledge of the defective title of the vendor and if
the vendee enters into the contract of sale with that same vendor then such vendee cant avoid
the contract on the ground defective title of vendor.
Chendrayya v. Hanumayya11: It was held that the liability of the seller to discharge the
encumbrance is absolute and can be avoided only under one circumstance viz., that the buyer
has expressly agreed to purchase the property subject to encumbrances. It is immaterial that
the buyer was aware of the encumbrance.
Mt. Bhagwati v. Banarsi Das12: It was held that if a vendee has paid for some property as a
result of undisclosed encumbrance then such vendee is entitled for reimbursement under
Section 69 of the Indian Contract Act, as the vendor was obliged under Section 55(1)(a) of
the Transfer of property Act to discharge the encumbrance.
Decision: The High Court has decided that section 55(1)(a) can be applied only when the
vendee dont know about the existence of defect in title and when the vendee could not with
ordinary care discover the defect. So here it is the duty of the vendee to find out about the
defects in the title of vendor. In this case the vendee failed to take notice of such presence of
defect in title and hence by applying the doctrine of Caveat Emptor the petition is allowed.

Harilal Dalsukhram Sahiba vs Mulchand Asharam13

Material Facts: Plaintiff-appellant got into a contract with the defendant for the sale of a
land in Ahmadabad. Plaintiff inturn paid the whole amount that is Rs.19000\- and the sale
was duly registered in Sept. 1919 and the possession of the sale land was immediately given
to the plaintiff. In year 1920 Mr.Somnath Motilal filed a suit for redemption of a mortgage
over the land purchased by the plaintiff. Later in year 1920 Mr.Somnath obtained a decree in
favour of him and this resulted in making the title of plaintiff over the disputed land
defective.
10 AIR 1928 Bom 427
11 AIR 1927 Mad 193
12 AIR 1928 PC 98
13 (1928) 30 BOMLR 1149, 113 Ind Cas 27

Arguments: Plaintiff approached Bombay High Court and pleaded for declaring the sale
contract between him and respondent voidable and pleaded for refund of Rs.19000/- i.e. the
consideration of that contract.
Respondent argued that in the suit filed by Mr. Somnath, both the respondent and the
respondent of the present case were the joint respondents. After the trial court decided in
favour of Somnath, the plaintiff of the present case failed to appeal against that decision. This
means that plaintiff have compromised over his title over the disputed land, hence he doesnt
have any right to sue the respondent. Further the respondent argued that under sec.55(1)(a)
the plaintiff owes a duty to take notice of the encumbrance of the land before buying the same
and the plaintiff have failed in taking notice of the mortgage upon that land, hence he does
not have any right to sue the seller/vendor.
Decision: The High Court discarded the first argument of the respondent, which is that the
plaintiff has failed to appeal against the decision of trial court. The HC has held that it is
immaterial in this present case. The HC discarded the second argument of the respondent
saying that sec.55(1)(a) never expressly imposed a duty upon the vendee but it imposes a
duty upon the vendor to disclose all such required legal information regarding the property,
which the vendee generally would be able to know. Here the HC opined that the plaintiff
wouldnt be able to know about the existence of the mortgage over that disputed property
when he is given the immediate possession of such property. Hence the High Court decided
in favour of the plaintiff and ordered the respondent to pay back Rs.19000/- with interest.