Rule of Caveat Emptor

As per Advanced Law Lexicon by P. Ramanatha Aiyar, 3rd Edition. 2005 at page 721: Caveat emptor means "Let the purchaser beware." It is one of the settled maxims, applying to a purchaser who is bound by actual as well as constructive knowledge of any defect in the thing purchased, which is obvious, or which might have been known by proper diligence. This maxim is used with reference to sale or sales of the properties where the buyer is expected to exercise proper diligence and to inform himself as to its quality and encumbrances.

"Caveat emptor does not mean either in law or in Latin that the buyer must take chances. It means that the buyer must take care." See Wallis v. Russell [1902] 2 IR 585

"Caveat emptor is the ordinary rule in contract. A vendor is under no duty to communicate the existence even of latent defects in his wares unless by act or implication he represents such defects not to exist." (See William R. Anson, Principles of the Law of Contract 245 (Arthur L. Corbin Ed.3d. Am. ed.1919) Applying the maxim, it was held that it is the bounden duty of the purchaser to make all such necessary enquiries and to ascertain all the facts relating to the property to be purchased prior to committing in any manner.

Caveat emptor, qui ignorare non debuit quod jus alienum emit. A. maxim meaning "Let a purchaser beware; who ought not to be ignorant that he is purchasing the rights of another. Hob. 99; Broom; Co., Litl: 102 a: 3 Taunt. 439.

As the maxim applies, with certain specific restrictions, not only to the quality of, but also to the title to, land which is sold, the purchaser is generally bound to view the land and to enquire after and inspect the title-deeds; at his peril if he does not.

Upon a sale of goods the general rule with regard to their nature or quality is caveat emptor, so that in the absence of fraud, the buyer has no remedy against the seller for any defect in the goods not covered by some condition or warranty, expressed or implied. It is beyond all doubt that, by the general rules of law there is no warranty of quality arising from the bare contract of sale of goods, and that where there has been no fraud, a buyer who has not obtained an express warranty, takes all risk of defect in the goods, unless there are circumstances beyond the mere fact of sale from which a warranty may be implied. Bottomley v. Bannister(1932) 101 L.J. K.B. 46; Ward v. Hobbs 4 App Cas 13. (Latin for Lawyers)

No one ought in ignorance to buy that which is the right of another. The buyer according to the maxim has to be cautious, as the risk is his and not that of the seller.

See Commr. of Customs (Preventive) v. Aafloat Textiles (I) Pvt. Ltd. and Ors.  (2009)11SCC 18

Exception to the rule of caveat emptor:

The principle of caveat emptor (let the purchaser beware), however, has no application if vendor has practised fraud to induce the purchaser to accept the offer of sale 'A Selection of Legal Maxims' : Herbert Broom; Tenth Edn., (1939), Sweet & Maxwell, pp. 528-529. In case of fraud, the vendor cannot maintain any action against the purchaser. The legal maxim 'ex dolo malo non oritur actio' applies and the vendor who knowingly committed an act declared by the law to be criminal cannot maintain action against the purchaser who refuses to take the title conveyed under the deed. The maxim 'dolus malus' vitiates all transactions effected by fraud ibid pp. 497; 540. Insofar as the buyer is concerned, as observed by Herbert Broom in his compilation of Legal Maxims (p. 540), he may abide by the contract induced by fraud and bring an action for deceit (i.e., cheating in Indian law), for the damages sustained by the fraud. The buyer may also rescind the contract returning the goods if already accepted and recover the price paid.

See Yanala Malleshwari and Ors. vs. Ananthula Sayamma and Ors. 2006(6)ALT523

The High Court of Kerala in Eternit Everest Ltd. vs. Abraham reported in AIR2003Ker273 held that Section 16 of the Sale of Goods Act is an exception to the rule of 'caveat emptor'. Para 12 of the decision which reads as under:

“……….The rule of 'caveat emptor' applies whenever the buyer voluntarily chooses what he buys. But it does not mean that the buyer should 'take chance' but it means he should 'take care'. The most important exception to the rule of 'caveat emptor' are the implied condition of fitness for a particular purpose and the merchantableness of the product. When a man sells an article, he thereby warrants that it is merchantable ie., it is fit for some purpose and if he sells it for some particular purpose, he thereby warrants it for that purpose. In order to attract Section16 it has to be proved that the buyer expressly or by implication had made known to the seller the particular purpose for which the goods were purchased……….”