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. It is a principle in commerce where without a warranty the buyer takes the risk. It acts as a warning that notifies a buyer that the goods he or she is buying are "as is," or subject to all defects. When a sale is subject to this warning the purchaser assumes the risk that the product might be either defective or unsuitable to his or her needs. In other words, consumers need to know their rights and be vigilant in avoiding scams. For example in the private purchase of a used car, caveat emptor places an onus on the buyer to make sure the car is worth the purchase price. This is because once the transaction is complete the buyer will not receive a warranty or return option from the seller. 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 or otherwise made material misrepresentations amounting to fraud.
The modern trend in laws protecting consumers, however, has minimized the importance of this rule. Although the buyer is still required to make a reasonable inspection of goods upon purchase, increased responsibilities have been placed upon the seller, and the doctrine of caveat venditor (Latin for "let the seller beware") has become more prevalent. Generally, there is a legal presumption that a seller makes certain warranties unless the buyer and the seller agree otherwise. One such warranty is the Implied Warranty of merchantability. If a person buys soap, for example, there is an implied warranty that it will clean; if a person buys skis, there is an implied warranty that they will be safe to use on the slopes. A seller who is in the business of regularly selling a particular type of goods has still greater responsibilities in dealing with an average customer. A person purchasing antiques from an antique dealer, or jewellery from a jeweller, is justified in his or her reliance on the expertise of the seller. If both the buyer and the seller are negotiating from equal bargaining positions, however, the doctrine of caveat emptor would apply.
Before statutory law, the buyer had no warranty ensuring the quality of goods. In many jurisdictions the law 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 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. Consumer purchases are regulated by the Sale of Goods Act 1979. In the UK, consumers have the right to a full refund for faulty goods, however by convention, most retail companies will allow customers to return goods within a specified period (typically a month or two) for a full refund or an exchange, even if there is no fault with the product. Exceptions may apply for goods sold as damaged or to clear. Goods bought via 'distance selling', for example online or via phone, also have a statutory 'cooling off' period of seven working days. To cancel the contract is to treat the contract as if it had not been made, except that the Regulations refer to the terms. Although no longer applied in consumer law, the principle of caveat emptor is generally held to apply to transactions between businesses unless it can be shown that the seller had a clear information advantage over the buyer that could not have been removed by carrying out reasonable due diligence.
In the case of Karuppanan Chellappan v Chong, the plaintiff in this action, now says that he had no knowledge of the condition laid down by the Lembaga Bandaran Cameron Highlands (LBCH) on the removal of the window protrusions at Hotel Sentosa, a four storey building which stood on Lot 26, Brinchang, Cameron Highlands. He alleged that the defendant had misled him by fraudulent misrepresentation in not divulging on this condition and had expressed that fraudulent misrepresentation in the sale and purchase agreement (SPA) by stating that it was free of any encumbrance. He further said that had he known of that condition he would certainly had not purchased the said building from the defendant. It was not in dispute that the condition on the removal of the window protrusions was not a restriction or condition that appeared on the title of Lot 26. The plaintiff further stated that he only became aware of this condition during the trial of the earlier suit - sometime in 1992. The plaintiff now seeks for reliefs mentioned in the case. In her defence, the defendant said that the plaintiff had seen the said building and was satisfied with its construction prior to the purchase. She said that the plaintiff never asked her about the window protrusions. She also said that she had already forgotten about the condition imposed by the LBCH on the need to remove the window protrusions whenever the owner of Lot 25 wished to build thereon. She denied that she had deliberately withheld the information on the condition from the plaintiff. Abdul Hamid Embong J referred to cases of Ang Hiok Seng v Yim Yut Kiu [1997] 1 AMR 917; Derry v Peek [1880] AC 14; Holmes v Jones [1907] 4 CLR and others and has held that it was clear that the plaintiff was time barred. He would therefore hold that the defence of limitation must, on the facts, succeed. For the above reasons, the plaintiffs claim is dismissed with costs.
This rule is claimed that it is not designed to shield sellers who engage in fraud or bad faith dealing by making false or misleading representations about the quality or condition of a particular product. It merely summarizes the concept that a purchaser must examine, judge, and test a product considered for purchase himself or herself. However, the common law legal maxim caveat emptor reflects the value-less acquisitive philosophy. Consumers are supposed to be careful (as in the common law principle of caveat emptor). As long as sellers do not flaunt the law, they can get away with gross exploitation, as there is no need to disclose all the information about a product. Although the consumer movement has resulted in many consumer protection laws, the philosophy still prevails. For example, the small print in insurance contracts, and the conditions hidden in footnotes (if at all disclosed) in advertised offers all point to caveat emptor in operation. These contracts require the disclosure of the original price because it might influence the buyer’s decision to enter into a contract with the seller. This means the buyer has put some degree of trust in the seller regarding the information he/she provides about the goods. To make this trust meaningful, the law imposes upon the seller a duty to disclose the true facts, for such a disclosure is regarded as indicating his sincerity.
Finally, Prophet Muhammad (pbuh) warned that selfish and dishonest traders would face punishment in the hereafter for undermining the fundamental basis of contracts. Wathilah bin Asqa’ related that once the Messenger of Allah came to them and said: “O you traders, beware of telling lies in (your business) transactions.” Prophet Muhammad (pbuh) always encouraged the Muslims to do business, as it is considered an aspect of Ibadah. This can be seen from a verse of the Qur’an: “And when the prayer ends, disperse in the land and seek of Allah’s bounty, and remember Allah much, that you may be successful.” [Q: 62:10] Of course, no action is left without regulation under Islamic law. Thus, a Muslim is obliged to be honest and fair in his business. He must shun fraud, deceit and perfidy so that his wealth is gained from healthy sources. For example, the Qur’an orders businessmen: “Give full measure and be not of those who cause loss to others” [Q: 26:181]; “And weigh with an equal balance” [Q: 18:35]. Prophet Muhammad (pbuh) approved of and confirmed transactions which do not conflict with the principles of the Shari’ah and disapproved of and prohibited those business practices which contradict the Shari’ah’s objectives and aims. The prohibitions include transactions that involve the element of fraud or deceit, exorbitant profit or injustice to one of the contracting parties, all of which are contrary to the overriding principle of good faith and fair-dealing mentioned in the Qur’an: “Do not defraud people of their things, and do not commit corruption in the earth” [Q: 26: 183]. The elements of good faith and fair-dealing are not new in Islamic terminology because they are an integral part of the contract. The attributes of truthfulness, honesty, justice and righteousness are among the fundamental principles which Islam imposes on every Muslim in every aspect of life. Without these elements, a business contract is regarded as lacking perfection in accordance with Islamic good manners, decency and ethical standards.
The Qur’an announces a general rule that mutual consent is a condition for the validity of every kind of contract. There is no basis for excluding the hire-purchase contract from that general rule. “O you who believe, do not consume your property among yourselves unjustly; rather, [it should be] trade by mutual consent amongst you. And do not kill yourselves (nor kill one another). Surely, Allah is Most Merciful to you” [Q: 4:29]. The element of mutual consent was emphasized in the Hadith: “It is unlawful to possess the property of a Muslim without his express consent.” As evident from the Qur’an and Hadith, Islam has laid down an ethical discipline in commercial transactions for the believers to follow. Dishonest traders who contravene those rules are blameworthy and liable to punishment on the Day of Judgment. The Prophet (pbuh) strongly promoted generosity to purify one’s account of malpractices and unsuitable acts while conducting business. He emphasized that the seller and buyer should explain the good and bad points of the transaction to gain the blessing of the Almighty in the transaction. In short, Islamic law emphasizes good conduct, decency and ethical standards of law and morality as a part of the contract. These must be molded together to ensure that justice is served to both parties, the purchaser and the seller. Only then can the objective of the Shari’ah be achieved.
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