Caveat emptor: the seller need not disclose defects in the goods, and the exceptions

The principle. The principle that a seller need not disclose defects in the goods he sells is the doctrine of caveat emptor, meaning let the buyer beware. It places the burden of a wise purchase on the buyer. Where goods are offered for sale, choosing them is the buyer's job; the seller is under no duty to point out the defects in what he sells, and is not answerable for the buyer's poor choice. The buyer must satisfy himself, before he buys, that the goods will serve his purpose. If they turn out defective or unsuited to that purpose, or if he bought on his own skill and judgment, he cannot hold the seller liable.

Statutory basis: section 16. The rule is contained in section 16 of the Sale of Goods Act, 1930. Subject to the Act's other provisions and to any other law in force, section 16 provides that a contract of sale carries no implied condition or warranty about the quality of the goods supplied or their fitness for any particular purpose. So, unless the case falls within one of the exceptions, the law reads no promise about quality or fitness into the contract, and the seller's silence about a defect is not a breach.

How the rule works.

1. In a decided case a seller sold pigs which were infected and passed typhoid to the buyer's healthy pigs; the seller was held not bound to disclose that the pigs were unhealthy.
2. A buyer who wanted a horse for riding, but did not say so, bought one fit only to draw a carriage; he could neither reject the horse nor claim compensation.
3. Our example: Nikhil inspects a second-hand scooter at a Lucknow showroom and sees that its front tyre is worn smooth and its side panel is cracked. He buys it at the price asked without raising either point. These are defects his own examination revealed, so no implied condition covers them (proviso to s. 16(2)) and the seller's silence about them gives Nikhil no claim.
4. A qualification: where goods are dangerous and the buyer does not know of the danger, the seller must warn him of the likely danger, and may be liable in damages for failing to do so.

Exceptions to caveat emptor. The doctrine does not protect the seller in the following cases:

1. Fitness for the buyer's particular purpose (s. 16(1)). Three conditions must all be met: the buyer makes known to the seller the particular purpose for which he needs the goods, in a way showing that he is depending on the seller's skill or judgment; he does in fact rely on it; and the goods are of a description which it is in the course of the seller's business to supply. The seller must then supply goods reasonably fit for that purpose. Where an article has only one use, the purpose need not be stated; where it has several, the buyer must state the one he has in mind. In Priest v. Last a chemist who sold a hot-water bottle that burst was held liable, since he knew what it was bought for. Example: a farmer tells a pump dealer in Nashik that he needs a pump to lift water from a 60-metre borewell and leaves the choice to him; a pump that cannot lift from that depth breaks the condition.
2. Goods bought under a patent or brand name. Where the buyer asks for goods by their patent or brand name, there is no implied condition that they are fit for any particular purpose (s. 16(1)), because he relies on the brand and not on the seller.
3. Sale by description (s. 15). The goods must correspond with the description; if they do not, the seller is responsible.
4. Merchantable quality (s. 16(2)). Where the buyer purchases by description from a seller who trades in goods of that kind, the goods must be of merchantable quality. Caveat emptor does not apply to latent defects; but if the buyer has examined the goods, the condition does not extend to defects which that examination should have shown.
5. Sale by sample (s. 17). Where goods are bought by sample, the rule does not apply if the bulk does not correspond with the sample.
6. Sale by sample as well as by description (s. 15). The goods must correspond with both; if they fail either test, the rule does not apply.
7. Usage of trade (s. 16(3)). An implied condition or warranty as to quality or fitness for a particular purpose may be annexed by the usage of trade, and a seller who departs from it cannot rely on the rule. Example: where custom in a trade expects tailored uniforms to fit the wearer, a supplier cannot plead caveat emptor over garments that do not fit.
8. Fraud or active concealment. Where the seller obtains the sale by misrepresentation or fraud and the buyer relies on it, or where he actively hides a defect so that a reasonable examination by the buyer could not discover it, the rule does not apply; the buyer may avoid the contract and claim damages.

Conclusion. The starting point under section 16 is that the seller may stay silent about defects and the buyer bears the risk of his own choice. The exceptions cut this back sharply: once the buyer relies on the seller's skill for a stated purpose, or the goods fail to match their description or sample, or goods bought by description from a dealer are not of merchantable quality, or trade usage implies a term, or the seller is fraudulent or hides a defect, the seller answers for the goods. Fitness for a particular purpose is implied only where the three conditions of section 16(1) are met.