Caveat Emptor

Business, Legal & Accounting Glossary

Definition: Caveat Emptor



What is the dictionary definition of Caveat Emptor?

Dictionary Definition


(kah-vee-ott emptor) Latin for “let the buyer beware.” The basic premise that the buyer buys at his/her own risk and therefore should examine and test a product himself/herself for obvious defects and imperfections. Caveat emptor still applies even if the purchase is “as is” or when a defect is obvious upon reasonable inspection before purchase. Since implied warranties (assumed quality of goods) and consumer protections have come upon the legal landscape, the seller is held to a higher standard of disclosure than “buyer beware” and has responsibility for defects which could not be noted by casual inspection (particularly since modern devices cannot be tested except by use and many products are pre-packaged).


Full Definition of Caveat Emptor


Caveat emptor is Latin for “Let the buyer beware”. Generally, caveat emptor is the property law doctrine that controls the sale of real property after the date of closing.

Explanation

Under the doctrine of caveat emptor, the buyer could not recover 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. 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 rule of Caveat Emptor applies to all other sale situations (i.e. homeowner to buyer). [See Stambovsky v. Ackley, 572 N.Y.S.2d 672 (N.Y. App. 1991)] Many other jurisdictions have provisions similar to this.

Before statutory law, the buyer had no warranty on the quality of goods. In many jurisdictions, the law now requires that goods must be of “merchantable quality”. However, this implied warranty can be difficult to enforce, and may not apply to all products. Hence, buyers are still advised to be cautious.

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 case of software, movies and other copyrighted material many vendors will only do a direct exchange for another copy of the exact same title. Most stores require proof of purchase and impose time limits on exchanges or refunds. However, some larger chain stores will 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. Many companies operating in the UK will allow customers to return goods within a specified period for a full refund, even if there is no problem with the product.

Caveat Venditor

Caveat venditor is Latin for “let the seller beware”. It is a counter to caveat emptor, and suggests that sellers too can 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 predominantly regarded as the origin of caveat venditor as it pertains to modern tort law in the US.


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Definition Sources


Definitions for Caveat Emptor are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 26th April, 2020 | 1 Views.