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Cavear Emptor in Sale of Goods

Updated: May 6


Cavear Emptor in Sale of Goods
Cavear Emptor in Sale of Goods


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Section 16 states that under a contract of sale, there is generally no implied warranty or condition regarding the quality or suitability of goods for a specific purpose. This principle aligns with the Latin phrase 'Caveat emptor', which translates to 'let the buyer beware'.


Essentially, it places the responsibility on the buyer to exercise caution when purchasing goods, ensuring they meet their intended use. If the goods turn out to be unsuitable for the buyer's purpose, the seller cannot be held accountable.


For instance, if A buys a horse from B without specifying that it's for riding purposes, and later discovers the horse is only suitable for carriage driving, A cannot reject the horse or seek compensation from B.


Therefore, it's incumbent upon the buyer to carefully select goods that meet their needs. They must acquaint themselves with the qualities and potential defects of the goods they intend to buy. While sellers are not typically obligated to disclose every defect they're aware of, their silence shouldn't be used to deceive the buyer.


Caveat emptor doesn't imply that the buyer must "take chance" in either legal or Latin terms; rather, it signifies that the buyer must "take care". This principle is pertinent when purchasing specific items, such as a horse or a painting, where the buyer typically exercises their own judgement. It also applies when the buyer voluntarily selects what to purchase.


Additionally, it comes into play when it's a condition of the contract, either through customary practice or explicit agreement, that the buyer cannot depend on the seller's expertise or judgement.


Exceptions to Caveat Emptor

Exceptions to the rule of caveat emptor have grown to be more significant than the rule itself. This rule originated in times when most sales occurred in open markets, where buyers and sellers interact directly. Sellers displayed their goods, buyers inspected them, and transactions were completed based on the buyer's liking.


However, with the expansion of trade into global dimensions, it became impractical for buyers to inspect goods in advance, especially as many transactions were conducted via correspondence.


Additionally, the complexity of modern goods often means that only sellers can guarantee their contents and quality.


Consequently, it became necessary to limit the application of the caveat emptor rule by introducing several exceptions.

 
 

Significance of Caveat Emptor


Avtar Singh, in "Sale of Goods" (4th Ed. 1993), highlights the significance of these exceptions. They aim to prevent fraud, protect buyers who may be unaware of the qualities of the commodities they purchase, and incentivize manufacturers and sellers to provide the best possible products.


As articulated by Best CJ in Jones v Bright (1829) 5 Bing 533, the essence of these exceptions lies in the court's duty to establish rules that ensure goods are merchantable, meaning they are fit for some purpose.


Furthermore, if a seller sells goods for a specific purpose, they implicitly warrant that the goods are fit for that purpose.


Quality or Fitness

One exception to the rule of caveat emptor is the implied condition as to quality or fitness.


According to Section 16(1), if the buyer explicitly or implicitly informs the seller of the specific purpose for which the goods are required, indicating reliance on the seller's expertise, and if the goods are of a type typically supplied by the seller in the course of their business, then there is an implied condition that the goods will be reasonably fit for that purpose.


However, there is a proviso to this exception: 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 regarding its fitness for any particular purpose.


The buyer can communicate the purpose to the seller either explicitly or implicitly. When the goods have only one practical purpose, there's no need for the buyer to explicitly state it, as the seller is presumed to be aware.


If the buyer does inform the seller of the purpose, it implies reliance on the seller's skill and judgement.


case Laws

This reliance may exist even if the buyer provides detailed specifications, as demonstrated in the case of Cammell Laird & Co. v Manganese Bronze & Brass Co. (1934) AC 402, where despite providing specifications, the buyer relied on the seller for certain aspects, holding the seller responsible for defects not covered by the specifications.


Similarly, in Raghava Menon’s case (AIR 1962 Ker 318), when a plaintiff purchased a defective wristwatch, the court observed that by purchasing the watch for the common purpose of telling time, the plaintiff implicitly relied on the seller's skill and judgement. As a result, the seller was obligated to either replace the watch or refund the price.


Another instance illustrating this exception is found in Chaproniere v Mason (1905) 21. LTR 633, where a buyer purchased a bun from a bakery, only to find a stone inside that caused damage to their teeth upon biting. The bun was deemed unsuitable for its intended purpose of consumption, thus holding the seller liable.

 
 

Priest v Last


In the case of Priest v Last (1903) 2 K.B.148, the plaintiff brought an action against the defendant for breach of an implied warranty that a hot-water bottle sold by the defendant was reasonably fit for the purpose for which it was sold.


The plaintiff, in this instance, visited the defendant, a chemist, and requested a hot-water bottle without specifying its intended use. When asked if the bottle could withstand boiling water, the defendant showed the plaintiff an American rubber bottle, stating it could withstand hot but not boiling water.


The plaintiff purchased the bottle for his wife to alleviate cramps, but it burst while in use, causing injury to her. The court held the defendant liable for the breach.


The defendant argued that the term "hot-water bottle" merely described the article and did not imply any specific purpose, as hot-water bottles serve various functions.


However, the court disagreed, stating that the transaction constituted a contract to supply an article reasonably fit for use as a hot-water bottle under any circumstances, including the application of heat for pain relief.


Despite the term being a trade description, the plaintiff, who lacked specialised knowledge of hot-water bottles, conveyed to the defendant, whose business included selling such items, that the bottle was intended for a particular purpose – namely, as a hot-water bottle – thus indicating reliance on the seller's expertise.


The court clarified that a "particular purpose" need not be distinct from a general purpose unless the article is capable of serving various purposes. In this case, the term "hot-water bottle" itself implied a specific purpose, demonstrating that the buyer relied on the seller's judgement and skill.


Jones v Padgett 

In the case of Jones v Padgett (1890) 24 Q.B.D. 650, a woollen merchant entered into a contract with a cloth manufacturer for the supply of "indigo blue cloth" without specifying the intended purpose of the cloth.


The dispute arose when the buyer claimed a breach of an implied warranty that the cloth should be fit for the specific purpose of making liveries by tailors.


The court deliberated on whether the supplied cloth met the standard of being merchantable, particularly considering the buyer's assertion of an implied warranty for the cloth's suitability for tailors' liveries.


The court established that when a manufacturer or dealer supplies an article for a specific purpose, and the buyer relies on the manufacturer's judgement, there exists an implied warranty that the article will be reasonably fit for that purpose.


However, crucially, in this case, the manufacturer was not informed, either expressly or implicitly, that the goods might be used by tailors.


Grant v Australian Knitting Mills Ltd.


In the case of Grant v Australian Knitting Mills Ltd. [(1936) A.C. 85], the plaintiff purchased undergarments from a retailer specialising in such goods. These undergarments contained certain chemicals, including free sulphite, which caused the plaintiff to develop dermatitis after wearing them.


Given that the garments were intended to be worn next to the skin, a purpose implicitly known to the seller, there was no explicit need for the buyer to specify their intended use.


Consequently, the buyer had effectively communicated, by implication, the purpose for which they wanted the garments and had relied on the seller's skill or judgement.


Lord Wright emphasised that while it's crucial for the buyer to rely on the seller's skill or judgement, such reliance is often implied from the circumstances rather than expressly stated. When a seller specialises in certain goods, buyers typically trust that the seller has curated their inventory with skill and judgement.


The Privy Council determined that there was a breach of the implied condition that the goods should be reasonably fit for a specific purpose. Therefore, the seller was held liable to the buyer for damages. Additionally, due to the presence of the defect, the undergarments were deemed not to be of merchantable quality.

 
 

Merchantable Quality

The second exception to the rule of caveat emptor is the implied condition of merchantable quality, as outlined in Section 16(2) of the Sale of Goods Act.


This provision states that when goods are purchased by description from a seller who deals in goods of that description, there is an implied condition that the goods shall be of merchantable quality.


It's worth noting that under English law, there exists an implied condition of merchantable quality regardless of whether the goods are sold by description or not.


In the case of Bristol Tramways, the term "merchantable quality" was defined as follows: the article should be of such quality and in such condition that a reasonable person, after a thorough examination, would accept it under the circumstances of the case, in fulfilment of their offer to buy that article.


The court observed that an article may be of merchantable quality yet fail to meet the specific condition of fitness for the particular purpose for which it was purchased. In the case of the Fiat omnibuses, they were deemed merchantable for light work but unsuitable for heavy-duty use, thus not falling under the purview of Section 16(2).


It's important to understand that while there is an implied warranty that the goods sold are reasonably fit or merchantable for the purpose they are purportedly designed for, there is no warranty that they are fit for the particular purpose intended by the purchaser.


Simply being marketable or saleable, as per the dictionary definition, isn't enough. In a legal context, the term "merchantable" carries a relative significance. The crucial test revolves around whether the goods, under the specific description outlined in the contract, meet the standard of being merchantable.


If the goods cannot be sold in the market as items of a certain description, they fail to meet the criteria of merchantable quality. Moreover, merchantability implies that the goods should be capable of being sold at their full value.


Hence, in a case where a buyer sold goods at a reduced price due to receiving damaged goods from the seller, it was determined that the goods did not meet the standard of merchantable quality. Consequently, the seller was obligated to compensate for the loss incurred.


In a case where a buyer requested and purchased a bottle of "Stone’s Ginger Wine" from the seller, but the bottle broke while attempting to open it due to a defect, resulting in injury, it was determined that there had been a sale of goods by description.


In this instance, the bottle did not meet the standard of being of merchantable quality (Moralli v Fitch & Gibbons (1928) 2 KB 636).


Similarly, in another case where goods became damaged by moisture, rendering them unsuitable for sale as the best quality, they were deemed to no longer possess merchantable quality (Shivallingappa v Balkrishna AIR 1962 Mad 426).





Proviso to Implied Conditions

The proviso to Section 16(2) states, "Where the buyer has examined the goods there shall be no implied condition as regards defects, which such examination ought to have revealed."


This means that the implied condition of merchantability is excluded when the buyer has examined the goods and the defect in the goods is obvious, meaning it could have been discovered upon examination by a person of ordinary prudence exercising due care and attention.


However, in the case of latent defects, where the defect is not apparent upon examination, the buyer is still protected.


A latent defect is one that a merchant possessing ordinary skill and using due care would not have anticipated. Such defects often surface only when the goods are put to use, and in such cases, the buyer is safeguarded despite having examined the goods beforehand.


The exclusion of the implied condition of merchantability in the case of patent defects doesn't hinge on the thoroughness of the buyer's examination of the goods. Even a cursory examination suffices for this exclusion.


Put simply, if the defect could have been detected through a proper examination by the buyer (meaning it's a patent defect), the buyer cannot take legal action against the seller.


In the case of Thornett & Fehr v Beers & Sons (1919), the seller took the buyer to the godown and offered to show him the glue (goods). However, due to time constraints, the buyer did not request the opening of any of the casks containing glue.


Subsequently, it was discovered that the glue was defective and did not meet the standard of merchantable quality. The buyer argued that since he hadn't actually examined the goods, the proviso was not applicable.


However, the court ruled differently. They held that the requirement of the proviso is fulfilled when the seller provides the buyer with a full opportunity to examine the goods, regardless of whether the buyer takes advantage of that opportunity or not.


To rule otherwise would essentially shield buyers from the consequences of their own lack of diligence.


Conclusion

While the principle of caveat emptor, or "let the buyer beware," places the onus on buyers to exercise caution and diligence in their purchases, it is not an absolute rule in modern commercial transactions.


Over time, exceptions to this principle have evolved to address the complexities of the marketplace and protect buyers from fraud or unknowingly purchasing unsuitable goods.


These exceptions, such as implied warranties of fitness and merchantable quality, serve to balance the interests of both buyers and sellers.


They ensure that buyers can reasonably expect goods to meet certain standards of quality and fitness for purpose, especially when relying on the expertise of sellers or when purchasing goods described by the seller.

 
 


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