Caveat Emptor means “let the buyer beware”, for example the buyer must take care. As a general rule, the buyer purchases goods after satisfying himself as to quality and fitness and, therefore, the buyer purchases the goods at his own risk, relying upon his own skill and judgment. In a contract for sale of goods there is no implied warranty or conditions as to quality or fitness for any particular purpose of goods and therefore, the buyer purchases the goods at his risk relying on his own skill and judgment (Sec 16).
Exceptions: (Sec 16) In the following cases, doctrine of Caveat Emptor does not apply, for example, under the following circumstances the seller gives an implied warranty as to quality and fitness of the goods and if the goods are not fit for sale, the seller cannot take the defense under doctrine of Caveat Emptor and he shall be liable for breach of warranty of quality or fitness.
1) Custom or usage of Trade: an implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the custom or usage of trade. However, custom should not be unreasonable and should not be inconsistent with the express terms of the contract.
2) Fraud: Where the seller is guilty of fraud, for example, where the seller obtains the consent of the buyer by fraud or conceals a defect, the seller is liable. Where the buyer purchased pigs at an auction sale and paid a fair price for them as healthy pigs, and subsequently turned that the pigs were ill, it was held even though the vendor had committed fraud by connecting the health of pigs, caveat emptor will apply. However, the situation would be different if the pigs had been bought from dealer in work.
3) For specific purpose: (1) Where the goods are ordered for specific purpose, and (2) the seller is made aware of it, and (3) the buyer relies on the skill or judgment of the seller, there is an implied condition that the goods shall be reasonably fit for such purposes.
Where the Doctor after purchasing woolen underpants from the defendant manufacturer took ill and it was diagnosed that the Doctor contacted illness due to defects in manufacturing underpants, it was held that Doctor was entitled to succeed.
The purpose for which goods are required is implied of these particular goods are purchased from a dealer dealing in those particular goods and if the goods subsequently turn out to be unfit for the purpose required, they can be rejected. Particular purpose for which goods are required is to be disclosed where goods can be used for more than one purpose. However, where the sale of a specified article is under its patent or trade name, there is no implied condition as to its fitness for particular purpose, i.e. doctrine of Caveat Emptor will apply.
Merchantable quality: Where (1) the sale is by description and (2) purchased from the seller who deals in goods of that description, there is an implied condition that the goods shall be of merchantable quality. Where a person ordered motor horns from a manufacturer of horns were damaged, it was held the buyer was entitled to reject the horns.
It should be noted that goods are merchantable if they are fit for any one of several purposes for which the goods may ordinarily be used. The word ‘merchantable’ commonly means “commercially saleable”. If the description is a familiar one it may be that in practice only one quality of goods answers that description, then that quality and only that is merchantable quality.
However, if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed. In all the above cases, seller is bond by implied warranty. Except in the above cases, doctrine of Caveat Emptor shall apply and the seller shall not be liable to any penalty if the goods purchased are unfit. The buyer may, however, protect himself by express warranty or condition.