Caveat emptor
Caveat emptor, a Latin phrase meaning "let the buyer beware," is a principle in commercial law emphasizing that buyers are responsible for assessing the quality and suitability of goods before making a purchase. This concept has historical roots in contract law and underscores the asymmetry of information between buyers and sellers. While buyers are expected to be diligent, sellers also have obligations, notably in ensuring that goods are safe and function as intended. Legal precedents, such as the landmark case of MacPherson v. Buick Motor Co., highlight manufacturers’ responsibilities for product safety, even if sold through third parties. The principle acknowledges that while buyers should investigate potential purchases, there are protections such as warranties and consumer laws that can provide recourse in cases of fraud or product defects. However, buyers should remain vigilant about the conditions of sale, as additional fees and "as is" disclaimers may affect their rights. Ultimately, caveat emptor emphasizes the need for informed decision-making in transactions, reinforcing the balance of responsibility between buyers and sellers.
On this Page
Subject Terms
Caveat emptor
Transactions involving the exchange of currency for goods or services are supposed to be equitable to both parties. Most people, however, have at least once found that what they thought they were purchasing was not what they had in fact acquired. Yet unless the seller deliberately misrepresented the item for sale, the principle of caveat emptor holds that “a person who buys something is responsible for making sure that is in good condition, works properly, etc.,” according to the definition from the Merriam-Webster Dictionary. The phrase caveat emptor is the Latin for “Let the buyer beware,” caveat being the subjunctive of cavere, to beware, and emptor, buyer. According to the Merriam-Webster, the earliest known use of the phrase was in 1523.
Background
The principle of caveat emptor has its roots in contract law, a division of common law, or law that derives its legitimacy from the courts. In the United States, the principle is enshrined in the 1817 Supreme Court case of Laidlaw v. Organ. Mr. Organ purchased a large quantity of tobacco from the Peter Laidlaw company on February 18, 1815, the same day he learned of the United States and Great Britain signing the treaty to end the War of 1812. The conflict involved a naval embargo, which severely depressed the price of tobacco; thus, Mr. Organ stood to profit handsomely from his investment. Mr. Organ had knowledge of this “inside information,” and chose not to disclose it to Laidlaw. Two days later, the company forcibly repossessed the tobacco. Mr. Organ filed suit for breach of contract. Although the Court raised the question as to whether Mr. Organ, by withholding critical information, intentionally deceived the other party, it found that he was not obliged to disclose it. It is worth noting that in this case, it was the buyer’s honesty that was questioned, making it more a matter of caveat venditor, or “seller beware.” However, the duty of disclosure and the responsibility of the other party to be well-informed would become the foundations of caveat emptor.
Nevertheless, manufacturers have a duty to produce goods that will perform safely and without failure and can be held liable if these products do not. This precedent was established in the 1916 case of MacPherson v. Buick Motor Co., in which Donald MacPherson sued the manufacturer of his automobile when a wheel failed, causing a serious accident. Even though Mr. MacPherson purchased the automobile from an independent dealer and the wheel was made by a subcontractor of Buick, the automobile manufacturer was still found responsible for lack of inspection, as it had the knowledge that its product could be dangerous if negligently made. An earlier case, 1854’s Hadley v. Baxendale, held that a company is not responsible for damages of which it had neither knowledge nor foresight.
Overview
When one party has information about a good or service that may be hidden from the other, the condition is known as information asymmetry. The less informed party must therefore beware. The single exception is when a seller expressly conceals a latent defect, one that is developing but not yet obvious or visible, thereby committing gross misrepresentation or fraud.
The principle of warranty may, in some cases, offer protection. Warranty means that a product or service will perform as promised. An express warranty is a specific promise by the manufacturer or seller and is usually in writing. With the exception of lifetime guarantees, an express warranty sets a limited time frame in which the buyer may make a claim, or ascribes a minimum amount of time that the product should be expected to perform as advertised. With a satisfaction guarantee, the manufacturer makes an unconditional promise—the buyer is entitled to a refund for any reason, enforced in the United States under the Magnuson-Moss Warranty Act of 1975.
An implied warranty, by contrast, is the expectation that a product or service must conform to reasonable expectations of quality, even in the absence of an express warranty. This is sometimes referred to as a warranty of merchantability. Purchasers of motor vehicles and other heavy machinery in the United States have a degree of consumer protection in statutory law that stipulates that the product will be free of defects that render it inoperable or require unreasonable repair. These are known as lemon laws, but they can vary considerably from state to state, and the buyer needs to know the qualifications and limitations in his or her home state. More often, though, the Uniform Commercial Code standardizes laws of sales and other commercial transactions among states.
Another implied warranty—one of fitness for a particular purpose—applies when a buyer states the product is for a specific purpose and relies on the seller to select or provide a product that meets that stated need. An implied warranty might, however, carry an exception or a disclaimer, such as the phrase that the item is being sold “as is.”
Even with consumer protection laws, the buyer ought to beware. In the United States, some vendors charge “fees” under various names for services that the buyer might expect to be included in the price of the product—delivery charges and restocking fees are two examples. Buyers can, in some instances, purchase an extended warranty on an item, which is essentially an insurance policy the seller or a third party might offer with provisions to repair or replace a product should it fail beyond the standard warranty. These so-called warranties often have exclusions for which the consumer can incur unexpected expenses, and repairs may not be of the highest quality. Ultimately, it remains up to the buyer to investigate the product or service and the seller in an effort to secure a fair deal.
Bibliography
Bevans, Neal R. Consumer Law & Protection: A Practical Approach for Paralegals and the Public. Durham: Carolina Academic, 2011. Print.
Chandler, Adrian, and Ian Brown. Questions & Answers—Law of Contract 2013 and 2014. 9th ed. Oxford: Oxford UP, 2013. Print.
Cunningham, Lawrence A. Contracts in the Real World: Stories of Popular Contracts and Why They Matter. Cambridge: Cambridge UP, 2012. Print.
Marsh, Gene A. Consumer Protection in a Nutshell. St. Paul: West Group, 1999, Print.
Pettit, Michael. The Science of Deception: Psychology and Commerce in America. Chicago: U of Chicago P, 2013. Print.
Pink, Daniel H. To Sell Is Human: The Surprising Truth About Moving Others. New York: Riverhead, 2012. Print.
Shepherd, Joanna M. “Products Liability and Economic Activity: An Empirical Analysis of Tort Reform’s Impact on Business, Employment, and Production.” Vanderbilt Law Review 66.1 (2013): 255–321. Print.
Stone, Richard. Q & A Contract Law 2013-2014. 10th ed. New York: Routledge, 2013. Print.