The term ‘Caveat Emptor’ means ‘buyer beware’ i.e. in sale of goods, the seller is under no duty to reveal unflattering truths about the goods sold. Therefore, when a buyer buys some goods, he must examine them thoroughly. If the goods turn out to be defective or do not suit his purpose, or if he depends upon his own skill and judgment and makes a bad selection, he cannot blame anybody excepting himself.
For eg. H bought oats from S a sample of which had been shown to H. H erroneously thought that the oats were old. However the oats were new. Held, H could not avoid the contract. (Smith vs. Huges)
The doctrine of Caveat Emptor has certain important exceptions as under –
1. Fitness for buyer’s purpose – Where the buyer, expressly or by implication makes known to the seller the particular purpose for which he needs the goods and depends upon the skill and judgement of the seller whose business it is to supply goods of that description, there is an implied condition that the goods are reasonable fit for that purpose. [Section 16(1)]. For eg. An order was placed for some lorries to be used “for heavy traffic in a hilly area”. The lorries supplied were unfit and broke down. Held, there is a breach of condition as to fitness.
2. Sale under a patent or trade name – 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 that the goods shall be reasonably fit for any particular purpose.
3. Merchantable quality – Where goods are bought by description from a seller who deals in goods of that description, here is an implied condition that the goods are of merchantable quality. But if the buyer has examined the goods, there is no implied condition as regard defect which such examination ought to have revealed. [Section 16(2)]
4. Usage of trade – An implied warranty or condition as regards quality or fitness for a particular purpose may be annexed by the usage of trade. [Section 16(3)]
5. Consent by fraud – Where the consent of the buyer, in a contract of sale, is obtained by the seller by fraud or where the seller knowing conceals a defect which could not be discovered on a reasonable examination, the doctrine of Caveat Emptor does not apply.