Caveat Emptor

Caveat emptor is a Latin phrase that when literally translated means “let the buyer beware.” The phrase comes from two separate new Latin words: emptor, or “buyer,” and cavere, the verb for “caution.” The caveat emptor warning is most pronounced when the purchaser assumes the risk that the product is defective or unsuitable for his or her needs. Caveat emptor is not a transfer of responsibility to protect a seller who chooses to engage in fraud by making false statements or by issuing misleading representations about the quality or condition of a product. The caveat emptor warning simply reiterates and summarizes the concept that purchasers must inspect and examine for themselves any product considered for purchase, the failure of which may be considered negligence on the part of the buyers.

The concept of caveat emptor is believed to have been used as far back as ancient Rome as a rule for buying within the marketplace. The earliest recorded uses, however, were in medieval England as common law protection established by the English Parliament against unfair dealings within consumer transactions. Some scholars believe that the 1817 Supreme Court case of Peter Laidlaw and Company v. Hector M. Organ was the first to codify as rule of law in the United States the issues of duty to disclose concerning what information sellers were required to disclose or keep to themselves. The concept of caveat emptor, however, did not become widely used until the dawn of the Industrial Revolution, when the buying and selling of manufactured products and real estate became a fast-paced, mainstream market.

Since the time of the Industrial Revolution, the premise behind caveat emptor has been a valuable doctrine used for buyer protection. The idea of “let the buyer beware” was especially valuable to emerging, large corporations because it put the duty of inspection on the buyer, rather than the seller. The seller of goods could effectively make false representations about quality, without fear of repercussion.

The tide began to turn toward greater consumer protection in 1914, when the Federal Trade Commission (FTC) mandated that companies had a “duty to disclose” all known defects and accurately portray the value of the goods that they produced. Prior to the 1960s, however, the duty to disclose was not a strictly enforced practice, despite the 1914 FTC Act. Instead, large corporations still denounced the implied warranty of merchantability and fitness for use under the theory of caveat emptor, placing the burden on the buyer to have the product examined prior to purchase, despite all statements by the seller regarding the value, maintenance, or condition of the product. During the 1970s, however, consumer protection laws were further codified under the Uniform Commercial Code, essentially eliminating the outdated theory of caveat emptor altogether.

Since the 1970s, these consumer protection laws have helped regulate the relationship between buyers and sellers, protecting buyers from sellers who actively engage in illegal acts such as false advertising and failing to disclose known defects. Today, consumer protection laws create a duty to disclose upon sellers that serves as an exception to any legal defense of caveat emptor. Over time, real estate and consumer transactions, as well as manufacturing and advertising, became more complex, necessitating more regulation than what could be addressed by common law concepts of caveat emptor, now considered a highly inequitable imposition upon a buyer. Such regulations effectively obliterated the seller's claims of caveat emptor as a safety net for sellers who wished to use it as an excuse for poor advertising practices. Interestingly, although the express codification of consumer protection appears to make the claim of caveat emptor obsolete, the resulting legal loopholes have also given rise to the claims of caveat venditor (let the seller beware) and caveat emptor light.

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