The phrase caveat emptor arises from the fact that buyers often have less information about the good or service they are purchasing, while the seller has more information. Defects in the good or service may be hidden from the buyer, and only known to the seller. Thus, the buyer should beware. This is called information asymmetry.
Under the principle of caveat emptor, the buyer could not recover damages from the seller for defects on the property that rendered the property unfit for ordinary purposes. The only exception was if the seller actively concealed latent defects or otherwise made material misrepresentations amounting to fraud.
Before statutory law, the buyer had no express warranty ensuring the quality of goods. In England, common law requires that goods must be "fit for the particular purpose" and of "merchantable quality," per Section 15 of the Sale of Goods Act but this implied warranty can be difficult to enforce and may not apply to all products. Hence, buyers are still advised to be cautious.
The modern trend in the US, however, is one of the implied warranty of fitness that applies only to the sale of new residential housing by a builder-seller and the caveat emptor rule applies to all other sale situations (e.g. homeowner to buyer). Other jurisdictions have provisions similar to this.
In addition to the quality of the merchandise, this phrase also applies to the return policy. In most jurisdictions, there is no legal requirement for the vendor to provide a refund or exchange. In many cases, the vendor will not provide a refund but will provide a credit. In the cases of software, movies, and other copyrighted material, many vendors will only do a direct exchange for another copy of exactly the same title. Most stores require proof of purchase and impose time limits on exchanges or refunds. Some larger chain stores, such as F.Y.E., Staples, Target, or Walmart, will, however, do exchanges or refunds at any time, with or without proof of purchase, although they usually require a form of picture ID and place quantity or dollar limitations on such returns.
Laidlaw v. Organ, a decision written in 1817 by Chief Justice John Marshall, is believed by scholars to have been the first U.S. Supreme Court case which laid down the rule of caveat emptor in U.S. law.
In the UK, consumer law has moved away from the caveat emptor model, with laws passed that have enhanced consumer rights and allow greater leeway to return goods that do not meet legal standards of acceptance. Consumer purchases are regulated by the Sale of Goods Act 1979.
In the UK, consumers have the right to a full refund for faulty goods. However, by convention, most retail companies allow customers to return goods within a specified period (typically a month or two) for a full refund or an exchange, even if there is no fault with the product. Exceptions may apply for goods sold as damaged or to clear.
Goods bought through 'distance selling,' for example online or by phone, also have a statutory 'cooling off' period of seven working days. To cancel the contract is to treat the contract as if it had not been made, except that the Regulations refer to the terms.
Although no longer applied in consumer law, the principle of caveat emptor is generally held to apply to transactions between businesses unless it can be shown that the seller had a clear information advantage over the buyer that could not have been removed by carrying out reasonable due diligence.
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Caveat venditor is Latin for "let the seller beware." It is a counter to caveat emptor and suggests that sellers can also be deceived in a market transaction. This forces the seller to take responsibility for the product and discourages sellers from selling products of unreasonable quality.
In the landmark case of MacPherson v. Buick Motor Co. (1916), New York Court Appeals Judge Benjamin N. Cardozo established that privity of duty is no longer required in regard to a lawsuit for product liability against the seller. This case is widely regarded[by whom?] as the origin of caveat venditor as it pertains to modern tort law in US.
||This article includes a list of references, but its sources remain unclear because it has insufficient inline citations. (May 2013)|
- "Caveat emptor - Definition from the Merriam-Webster Online Dictionary". Merriam-Webster, Incorporated. Retrieved 2008-03-30.
- See Stambovsky v. Ackley, 572 N.Y.S.2d 672 (N.Y. App. 1991).
- 15 U.S. 178 (1817)
- Kaye, Joshua. "Disclosure, Information, the Law of Contracts, and the Mistaken Use of Laidlaw v. Organ." Unpublished. 2007. p. 2. http://works.bepress.com/cgi/viewcontent.cgi?article=1000&context=joshua_kaye
- "Trader's Guide to Civil Law". Trading Standards. Retrieved 2007-11-29.
- Hamilton, W.H. "The Ancient Maxim Caveat Emptor" (1931) 40 Yale Law Journal 1133, argues that caveat emptor never had any place in Roman law, civil law, or lex mercatoria and was probably a mistake when implemented into the common law. Rather, there was a duty of good faith.
- MacPherson v. Buick Motor Company (Opinion of the Court)
|Look up caveat emptor in Wiktionary, the free dictionary.|