Let the purchaser beware – (Caveat emptor).

By Y.SRINIVASA RAO, Principal Senior Civil Judge, Tirupati, Andhra Pradesh.

Introduction:— As per Advanced Law Lexicon by P. Ramanatha Aiyar, 3rd Edn. 2005 at page 721: Caveat emptor means “Let the purchaser beware.” It is one of the settled maxims, applying to a purchaser who is bound by actual as well as constructive knowledge of any defect in the thing purchased, which is obvious, or which might have been known by proper diligence.

“Caveat emptor does not mean either in law or in Latin that the buyer must take chances. It means that the buyer must take care.” (See Wallis v. Russell (1902) 21 R 585, 615).

Caveat emptor is the ordinary rule in contract:—

 “Caveat emptor is the ordinary rule in contract. A vendor is under no duty to communicate the existence even of latent defects in his wares unless by act or implication he represents such defects not to exist.” (See William R. Anson, Principles of the Law of Contract 245 (Arthur L. Corbin Ed.3d. Am. ed.1919) Applying the maxim, it was held that it is the bounden duty of the purchaser to make all such necessary enquiries and to ascertain all the facts relating to the property to be purchased prior to committing in any manner.

Caveat emptor qui ignorare non debuit quod jus alienum emit:—

“Let a purchaser beware: who ought not to be ignorant that he is purchasing the rights of another”Commr. of Customs (Preventive) v. Aafloat Textiles (I) (P) Ltd., (2009) 4 SCC (Civ) 404: (2009) 235 ELT 587.

As the maxim applies, with certain specific restrictions, not only to the quality of, but also to the title to, land which is sold, the purchaser is generally bound to view the land and to enquire after and inspect the title- deeds; at his peril if he does not. See. Commnr. Of Customs(Preventive) vs M/S. Aafloat Textiles (I), (supra).

English Law: Caveat Emptor:—

Sales of Goods Act, 1893, Sections 14, 56 & 57 Vict. c. 71 (U.K.) — (Let the purchaser beware.) The rule of ‘caveat emptor’ as to purchase of goods and animals with its existing modifications was thrown into statutory shape by s. 14 of the Sale of Goods Act, 1893, 56 & 57 Vict. c. 71, by which ‘subject to the provision of this act and or any statute in that behalf’(as, e.g., the Fertilisers and Feeding Stuffs Act, 1906, 6 Edw. 7, c. 27, Ss. 1(3) and (4), ‘there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale,’ except (1) on a purchase in reliance on the seller’s skill; or (2) on a purchase by description from a seller who deals in goods of that description, in which case there is an implied warranty that the goods shall be of merchantable quality; or (3) by usage of trade. Let the buyer beware. See. Cy. Law Dict.

Ward v. Hobbs, 4 App Cas 13:—

Upon a sale of goods the general rule with regard to their nature or quality is caveat emptor, so that in the absence of fraud, the buyer has no remedy against the seller for any defect in the goods not covered by some condition or warranty, expressed or implied. It is beyond all doubt that, by the general rules of law there is no warranty of quality arising from the bare contract of sale of goods, and that where there has been no fraud, a buyer who has not obtained an express warranty, takes all risk of defect in the goods, unless there are circumstances beyond the mere fact of sale from which a warranty may be implied. (Bottomley v. Bannister, [1932] 1 KB 458 : Ward v. Hobbs, 4 App Cas 13}. (Latin for Lawyers)

No one ought in ignorance to buy that which is the right of another. The buyer according to the maxim has to be cautious, as the risk is his and not that of the seller.See. Commnr. Of Customs(Preventive) vs M/S. Aafloat Textiles (I).

Indian Law Perspective :— The purchaser can not get a higher right, title or interest in the   property   than   what   vested   with   the   seller.  Ultimately the purchaser takes the risk, if he purchases the property which does not   belong   to   the   judgment   debtor.   The   purchaser   at   an   auction sale takes the property subject to all the defects of title, and the doctrine of caveat emptor (let the purchaser beware) applies to such a purchaser. See. Govindammal v. Vaidiyanathan, (2019) 17 SCC 433. See also. Desh Bandhu Gupta v. N.L. Anand, (1994) 1 SCC 131.

The doctrine of “caveat emptor” comes to play the moment a purchaser proceeds to purchase a property. It is the duty of the buyer for making the necessary searches in the office of the land records to ascertain whether the seller had the right, title and interest to sell the same to the purchaser.  See. Usha Biswas and Another Vs. State of West Bengal and Others, 2018 SCC OnLine Cal 16669 : (2018) 4 Cal LT 304 : (2019) 2 CHN 72.

TCI Distribution Centres Ltd Vs. The Official Liquidator, High Court, Madras and Ors., 2009 SCC OnLine Mad 1481 : (2009) 4 LW 681 : (2009) 8 Mad LJ 1238 : (2010) 153 Comp Cas 437. In this case, it was held that the principle  caveatemptor (purchaser beware) cannot be extended to a case, where the vendor did not have title to the property. It was further held that the court is afraid to allow the Official Liquidator to get shelter under the clause that the propertywas sold ‘as is where is and whatever there is basis’ or under the doctrine of Caveat Emptor.

As is where is and whatever there is basis’:—

It was held that “When the Official Liquidator sells the property and assets of a companyin liquidation under the orders of the Court he cannot and does not hold out any guarantee or warranty in respect thereof. This is because he must proceed upon the basis of what the records of the company in liquidation show. It is for the intending purchaser to satisfy himself in all respects as to the title, encumbrances and so forth of the immovable property that he proposes to purchase. He cannot after having purchased the property on such terms then claim diminution in the price on the ground of defect in title or description of the property. The case of the Official Liquidator selling the property of a company in liquidation under the orders of the Court is altogether different from the case of an individual selling immovable property belonging to himself. There is, therefore, no merit in the application made on behalf of Triputi that there should be a diminution in price or that it should not be made liable to pay interest on the sum of Rs 1 crore 98 lakhs.” See. Union Bank Of India  v. Official Liquidator (1994) 1 SCC 575. 

In Law, it is the “Caveat Emptor” [Purchaser Beware]. If the sale is vitiated by fraud, the buyer can sue the seller to set aside the sale and to recover the price. As per Section 55(2) of the Transfer of Property Act if the title is restricted viz., subject to statutory charge – there cannot be a covenant of higher title. To put it differently, if the title is subject to certain restrictions, there cannot be a covenant for enjoyment of a higher title. See. N.Suresh vs. The Indian Bank, MICRO ARM Branch, Rep. By its Chief Manager, 2013 SCC OnLine Mad 1091 : (2013) 3 Mad LJ 885.

A question is raised whether Sect. 55, Sub-Sect. 2 of the Transfer of Property Act, applies and if it does, whether from the fact that the buyer knew that the property belonged to the family of which the vendor was only the managing member it can be deduced that there was a “contract to the contrary,” within the meaning of Sect. 55. Sect. 55 deals with rights and liabilities of buyer and seller. Sub-Sect. 2 enacts that in the absence of a contract to the contrary, the seller shall be deemed to contract with the buyer that the interest the seller professes to transfer to the buyer subsists and that he has power to transfer the same. It is argued that this applies only to cases where there has been a completed sale and that no such presumption will be made where the transaction is still in the executory stage. But I find nothing in the language of the section nor can I perceive any reason which would justify such a distinction. What the legislature intended apparently was that subject to any special stipulations to the contrary, certain stipulations would be presumed in every transaction of sale of immoveable property and a warranty of title on the part of the seller is one of those stipulations. It is not easy to understand how the legislature could import a stipulation of this nature in a transaction of sale without implying at the same time that it should be taken as having formed part of the contract which became perfected in the sale. See. Adikesavan Naidu and others Vs.M. V. Gurunatha Chetti and others, 1916 SCC OnLine Mad 234 : (1917) 5 LW 425 : AIR 1918 Mad 1315 (FB)

Civil LawLaw of ContractsT.P. Act

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