At a very early date in the English law it was held that a seller of personal property as distinguished from real property impliedly warranted that he had title to the product sold and that he had a right to sell the same.
Likewise there also arose the concept of implied warranties of wholesomeness or fitness for human consumption in the case of a sale of food, and conformity to sample where a bulk of goods was sold by sample. Traditionally the doctrine of implied warranties has not been extended to sales of real estate. All of them have something to do with what is believed to be the intention of the parties. The buyer usually makes a careful examination of the real estate he buys and relies upon his own judgment, or else he relies upon the advice of a trusted consultant.
The seller did not manufacture the land and usually did not erect the buildings upon it; therefore, he is not in a position to have the same kind of special knowledge of its quality and fitness as could be expected from the grower or manufacturer of a product such as a bushel of potatoes or a suit of clothes. Furthermore, there is a lack of uniform specifications concerning land or buildings; and it is not unusual for a buyer, especially one who is young or of limited financial means, to deliberately look for a somewhat dilapidated house which is within his price range and which he can improve with his own hands to the point where it is both more useful to him and capable of bringing a better price when he is ready to sell.
But it is in the buying and selling of real estate that the law frequently shows its capacity to grow and to adapt itself to the changing customs of the market. An illustration of such an adaptation is currently in process in the real estate market. There was a time when the housing consumer in search of a new home was likely to buy a lot and employ a contractor to build a house. In that instance the consumer dealt directly with the contractor and the contractor was liable to the consumer for a workmanlike performance of his contract to build.
In present-day society it is becoming more likely that the building of the house will be accomplished by a real estate developer who buys a large tract of land, divides it into lots, and builds houses on the various lots without having particular buyers in mind. He then offers the completed houses for sale. The housing consumer buys his house from the developer and has little or no connection with the actual building process.
The builder and the seller are one and the same. Even in that situation, traditional real estate law would seem to dictate that the developer would be liable to the consumer for any express promises or guarantees he might make concerning the quality or fitness of the house sold but that no such promises would be implied. Recent Change. But within the last decade there has developed a trend toward recognition that the nature of the transaction between buyer and seller has so changed that the law must adapt itself to cope with the change.
The developer has placed himself more in the position of a manufacturer offering a product of his own making for sale. Under these circumstances, it is more likely that the developer, by his very acts, manifests an intent to create an impression in the buyer that the house being sold was built in a workmanlike manner and that it is reasonably fit for the purpose for which it is intended, namely, human habitation.
It is also likely that the buyer purchased in reliance upon that implied representation. The situation has become an appropriate one for the implication of certain warranties by the seller, and a number of courts have so held. Such judicial recognition of implied warranties in this area where there were no implied warranties before does not affect nor is it affected by the doctrine of caveat emptor.
Rather it is an adaptation of an old principle to a new business condition. It is a recognition that as modern vendors of housing move into a market where they are becoming manufacturers, they are tending to place themselves in the same legal position as the manufacturers of other consumer goods. By their acts, they are now making certain kinds of implied promises which housing vendors had not made before, either expressly or by implication.
But they are promises actually made and resting upon the actual intent of the parties to the particular transaction. Enforcement of such promises is unrelated to the doctrine of caveat emptor which is nothing more than a doctrine that the seller will not be held liable for promises he did not make or purport to make in any manner whatever.
He is not required, as a matter of law, to guarantee the goods sold. Neither does the doctrine apply in any instance where the intent to guarantee can be shown either by the words used or by the acts done. If the intention cannot be shown by either of these methods, then caveat emptor; that is to say, let the prospective buyer who is contemplating a purchase of an article examine it, make his own judgment as to its suitability for his purposes, and then let him decide for himself the terms on which he is willing to buy or decline to buy the article.
And if the buyer is not permitted to exercise his own judgment as to the suitability of a product for his purposes, who is to make that judgment for him? That is the critical question too often ignored by those who would deprive the consumer of his dominant role in the market place. And the consumer does play the dominant role in the market place as long as he is permitted to exercise his own judgment as to what goods he will buy. The interventionists who prefer having some form of government agency in control of the market offer numerous reasons why the consumer cannot be trusted to play that role.
But when their various reasons are examined, it will be found that they can all be summarized in just two points. First, the consumer is not in a position to make wise decisions. Second, even if the consumer could make such decisions, he would have no way of getting the producer to listen. Pity the Consumer. A few years ago consumers were competing with each other to see which one could have the highest fins on his automobile.
If a producer expected to sell automobiles, he had to put fins on them. This was interpreted in some circles as an unscrupulous effort by the producers to trick consumers into paying for frills that failed to add anything to the functional qualities of the automobile. Some even suggested that there ought to be a law prohibiting producers from manufacturing and selling automobiles with fins; that is to say, a law to prevent producers from offering the consumer what the consumer wanted.
The ridiculousness of the whole issue was that no one could be found who ever believed or claimed that fins added anything to the functional qualities of the automobile in the first place. The customer wanted fins.
That was all there was to it. And if the consumer wanted fins, the producer was ready to supply fins. Whether or not there should be a law on the subject was a question of whether the consumer or some third party should decide what would best satisfy the consumer.
If the consumer was to be allowed to make his own choice, no law was needed. His willingness or unwillingness to purchase spoke for itself, and it spoke in language the producer could understand. If the choice was to be in the hands of a third party who was necessarily a stranger to the transaction, a law accompanied by a whole body of enforcement machinery would be needed.
The high fins gradually disappeared from automobiles without their ever being prohibited by law. But worse things than the passage of an anti-fin law have happened since.
A whole swarm of consumer protectionists have entered the field. Each one insists that he knows better than the consumer how to make decisions for the consumer.
And laws are being passed. The most unfortunate victim of all this is the American housewife. At least she is being maligned more than anybody else. It has become fashionable for interventionists, bureaucrats, and academic theoreticians to demean her as being one of the most stupid creatures who ever entered a supermarket.
Bewildered Housewives? According to some of these self-proclaimed protectors of the American consumer, the bewildered housewife never has any idea what she wants when she enters a grocery store, nor is she at all adequate to the task of making her own selections when she gets there. The idea of permitting an ordinary, uninstructed housewife to examine an article she is buying and act on her own judgment is totally repulsive to the interventionist. It is doubtful if the American housewives are quite as incompetent as the interventionists seem to believe.
It is also a bit surprising that some kind of retaliatory measures have not been taken by the American Housewives Association, or some similar body if no organization under that name exists. At least it would appear that the ladies should be given an opportunity to offer evidence that they do know the difference between pounds and ounces and that they are almost as proficient at comparative shopping and price calculation as some of the interventionists who worry so much about them.
Even after the shopper has made her careful calculations of price, with or without the help of the ever-present officeholder, is there any assurance that her needs will be met by the box of detergent or the bottle of real lemon juice that gives her the absolutely lowest per unit price of merchandise?
Is it possible that she might choose to pay a little more in order to get the size that is more convenient for her? Not all kitchen cabinets are of uniform size or design. And even if the lady doing the buying has no reason whatever for selecting a particular package except that she prefers the looks of the containers of that particular size or shape, why should some intervening government official be appointed to frustrate her choice? The selection is being made to satisfy a particular customer, and who can possibly know more about what will satisfy that particular customer than the customer herself?
Photo by Chris Barbalis on Unsplash. The suggestion that caveat emptor be changed is not new. To this significant extent the caveat emptor rule should be reversed. However, this suggestion was later rejected as the Law Commission noted in its 24 th Annual Report and instead a number of other reforms were put forward including searches being carried out by sellers and the provided to buyers.
These provided property information 'upfront' including initially a home condition report, but this requirement was subsequently dropped as there was some suspicion by buyers that as the reports were provided by the seller, they may not be impartial.
In addition, they would have been of little value for off plan purchases. In Scotland, where a survey must form part of the information in the Home Report provided by a seller to a buyer, there is an exception for new properties that are being sold off-plan or to the first occupier. Following a phased implementation, HIPs were fully introduced by April However, they were widely criticised and suspended by the incoming Coalition Government in May The Coalition Government supported a voluntary, industry-led approach to improving the home buying and selling process, believing that improvements would be driven by the market led development of innovative products.
According to this rule, there is an implied warranty existing in each product and the buyer need not perform due diligence to check the quality of such products. The onus is now on the sellers to make sure the buyer makes a reasonably informed choice and to compensate for defective products. Through this article, the author argues that with the new consumer protection act in force, India has successfully completed its transition from caveat emptor to caveat venditor and kept up with the progressive principles necessary for the conditions of modern trade and commerce.
The Act establishes a Central Consumer Protection Authority to protect and enforce the rights of consumers under Section The authority will act like a regulatory body which can initiate action against unfair trade practices, recall unsafe goods and impose penalties for false and misleading advertisements.
In the Act of , there was no provision pertaining to unfair contractual terms. However, under the new law, unfair contracts which are in favour of manufacturers and are averse to the interests of the consumers, can be challenged.
In furtherance to all such provisions, this Act lays down a comprehensive set of fines and imposition of penalties for any violation by the seller or manufacturers.
The act in its spirit is based on the principle of caveat venditor. This is because it not only prioritises the rights of consumers but at the same time seeks to empower them through a dogmatic approach. This is done by providing for an inclusive definition which increases the number of persons who come under the ambit of consumers in the modern world and also by expanding the scope of grievances that the consumers can seek redressal against.
The biggest takeaway for consumers is to complain and receive compensation for not only defective goods and deficient services, but also spurious goods, unfair contract terms and for harm caused through product liability. False and misleading advertisements made by sellers are also punishable under the act. This shows the obligations that sellers and manufacturers have to fulfil in order to avoid being dragged to dispute redressal commissions which essentially requires for the seller to beware.
The framework of the law adopts a design which can systematically advantage the consumer. Consumers can now file complaints from where they reside, thus significantly changing its stance from the earlier law wherein it was necessary for the complaint to be initiated only where the transaction took place. The act also provides for filing of complaints electronically. The term is commonly used in real property transactions—as it relates to the sale of real estate property after the date of closing—but it also applies to the transactions of other types of goods, such as cars.
The inclusion of a caveat emptor disclaimer is intended to resolve disputes arising from information asymmetry , a situation in which the seller has more information than the buyer about the quality of a good or service. For example, if Hasan wants to buy a car from Allison—under the caveat emptor principle—he is responsible for gathering the necessary information to make an informed purchase.
In order to gather this information, Hassan may decide to ask Allison how many miles the car has on it, whether any major components need to be replaced, whether it's been serviced regularly, etc.
If he buys the car for the asking price and makes little or no effort to assess its true value, and the car subsequently breaks down, Allison is not technically liable for damages under the principle of caveat emptor.
In practice, there are many exceptions to this principle. For example, if Allison lied about the car's mileage or maintenance needs, she would have committed fraud, and Hasan would, in theory, be entitled to damages.
Market forces act to reduce the applicability of caveat emptor in some cases. Warranties are guarantees of quality or satisfaction that sellers issue voluntarily to buyers; if the sellers provide a quality product, they will not need to provide refunds or replacements very often, and buyers will be inclined to choose these vendors based on a perception of quality. Governments also push back against the principle of caveat emptor in order to protect consumers' interests.
Informal transactions like the one between Allison and Hasan are mostly unregulated, but in industries such as financial services — especially since the financial crisis — the buyer is often entitled to clear, largely standardized, information regarding the product. Many investors are familiar with what is colloquially called the "safe harbor statement," which complies with safeguards against companies that would deceive potential buyers about the quality of their stock.
At the same time, such statements, as well as the legally mandated quarterly reports they accompany, reinforce the principle of caveat emptor, cementing the expectation that the buyer has access to all the information they need to make a reasonably informed decision.
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