Seeking Justice for Consumers

Submitted To: Submitted By:

Mr. Harpal Singh Debashree Manna

Dheeraj Nayal

Gagan Chopra

Gaur Govind

Kamaldeep

Jay Kumar .C

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 CAVEAT EMPTOR
Caveat means formal notice or warning, usually as an entry into a court register, given
by a concerned party to a court or judge to prevent some action (such as granting of a
probate) being taken without prior notice to that party. Latin for, let him beware.
Caveat emptor, pronounced kævi. ɑit ɛmptɔr is Latin word 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.
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.
Before statutory law, the buyer had no warranty of the quality of goods. In many
jurisdictions now, 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. 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.

This rule 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 him or herself.

MODERN TREND

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 vendetta (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 jewelry from a jeweler, is justified in his or her
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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.

Caveat Emptor in the law of commercial transactions, principle that the buyer
purchases at his own risk in the absence of an express warranty in the contract.

As a maxim of the early common law, the rule was well suited to buying and selling
carried on in the open marketplace or among close neighbors. The increasing
complexity of modern commerce has placed the buyer at a disadvantage. He is forced
to rely more and more upon the skill, judgment, and honesty of the seller and
manufacturer.

The modern law of commercial transactions recognizes this and protects the buyer by
implying various exceptions to the principle of caveat emptor. Thus, in the case of a sale
by sample, the law implies a condition in the contract that the bulk of the merchandise
will correspond with the sample in quality and that the buyer will have a reasonable
opportunity to examine the bulk of the merchandise. Likewise, when the buyer has
made known to the seller the particular purpose for which the goods are required, the
law implies a condition in the ensuing contract that the merchandise is of merchantable
(average) quality and reasonably fit for the intended purpose.

In the US

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 caveat
emptor rule applies to all other sale situations (i.e. homeowner to buyer). Many other
jurisdictions have provisions similar to this.

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 cases 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.

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In the UK

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.

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, in addition to any other return
policies. In private sales (where the seller is not acting as a business), the goods must
be as described, but the sale is not covered by the rules on satisfactory quality and
fitness for purpose.

CAVEAT VENDETTA

Caveat vendetta is Latin for "let the seller beware". It is a counter to caveat emptor and
suggests that sellers can also 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.

RULES OF SALES

1. Know your buyer.

Before you make your first sale, obtain the correct legal composition of your customer.
The best source is a copy of a check.

2. Advance Sales Protection.

Have the buyer sign a credit application with adequate terms of sales and have the
principal of the debtor sign a personal guaranty.

You need two separate signatures: one for the corporation and one for the guarantor.
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3. Preserve your rights.

When a payment is received by check with a notation on the front or the reverse side
that the check is given in full payment, you can deposit the check, if--and only if--you
preserve your right to pursue payment for the balance due. On the reverse side of the
check below the customer's notation, you MUST stamp, write or type

4. Monitor sales activity.

Photocopy all checks received from your buyer. This will reflect a change in the buyer's
legal status. For example, if the words “D.I.P.” appears on a check, your debtor are in
Chapter 11 and credit sales should be avoided.

5. Prepare for suit.

When a customer has failed to pay invoices timely, suit should be anticipated. Suit
delayed is collection denied, when you seek recovery from a business customer.

RULE OF CAVEAT EMPTOR

Today, the rule applies in "as is" sales, sheriff's sales, and forced sales. However,
modern concepts such as an implied warranty of merchantability (that the item is fit for
its intended purpose), implied warranty of habitability in landlord-tenant law, and
financial disclosure rules in stock transactions, have softened the harsh application of
the rule. The concept also applies to returns, so that a buyer is responsible for following
the seller's policies which may limit the time for returning an item, require a receipt, or
impose other requirements.

Certain states have abolished the rule in regard to certain purchases. For example, in at
least one state, the rule of caveat emptor no longer applies to new home sales.
However, it does still apply to sales of used homes. In order to hold the seller liable in
such cases of new home sales, the buyer must show:

1. There was a material defect which adversely affects health or safety;

2. The seller or the seller's agents knew of the defect before the sale;

3. The defect was such that it could not be discovered by due diligence;

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 4. The house was not bought "as is."

5. The law prohibits seller or the seller's agents to engage in fraud, or deceit, or to
make misrepresentations about the condition of the property.

Caveat Emptor is still the norm in India

Aug 14, 2006
Caveat Emptor means ‘let the buyer beware’ —has become redundant in the western
world over the last four decades as consumer protection rules have evolved to provide
vast statutory protection to buyers.

Consumer attitudes and protection standards vary in intent and scope from one country
to another and influence the quality of products and design. “Today, arguably no other
economic actor in the advanced industrial countries — not the investor, not the worker,
not the welfare recipient — enjoys a more thorough set of legal and institutional
protections than the modern consumer when he or she enters the corner store,”.

In fact, one would even argue that the pendulum may have swung to the other extreme
in America where MacDonald’s was sued by a customer who spilt scalding-hot coffee
on her own laps and by the parents of obese kids who gorged on junk food and held the
food chain responsible for their condition. In India, the concept of ‘caveat emptor’ is
alive and kicking and we have a long way to go before consumer laws evolve
adequately.

That will happen only when all stakeholders — manufacturers, the media (including
advertising agencies), policy makers and the judiciary — realize that they are all
consumers too. Some things are indeed improving, but slowly. For instance, only
recently, television advertising moved into the realm of co-regulation with a government
notification making the Advertising Standards Council of India’s (ASCI) code
compulsorily applicable to all TV advertisements.

This has happened under pressure from consumer groups who have been lobbying
hard for an independent regulator and a stricter advertising code. This development is
expected to put an end to surrogate advertising by liquor companies and it is only a
matter of time before the Ministry of Consumer Affairs extends the rule across all media
and forces advertisers and advertising agencies to become more responsible.

In India, very few consumer groups have the facilities to do comparative testing. And
even when they publish reports with fairly startling findings, there is very little consumer
interest in using them as a basis for purchase decisions (Insight magazine by the
Consumer Education and Research Center publishes comparative product testing
reports).

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Credible growth in retailing or changed shopping experience and shows that
government stepped in with regulation to make up for the loss of personal attention and
recommendations lavished on customers by the local corner store or grocer. In India,
the retail revolution has just begun and companies have yet to wake up to its
implications.

In all probability, we will be able to skip one step in the evolution of better consumer
protection, since large retailers will have the necessary marketing clout with
manufacturers to demand minimum quality requirements or force them to replace sub-
standard products without burdening consumers with the task. Indian consumers still
pay very little attention to the price-quality trade off. When a dozen different brands of
the same products are lined up in a supermarket, customers have to be educated not to
focus merely on the price and free gift but make an informed decision on quality as well.

Ideally, it is for companies to highlight their product quality where it is applicable.

Curiously enough, consumer protection is one area where the policy makers, especially
at the Ministry of Consumer Affairs, have been fairly receptive over the decades and we
have seen a slow but steady improvement in consumer protection rules. However, the
judiciary is rather less sensitive. Consumer cases drag on for a decade from the district
courts to the national commission. And even when consumers have pursued cases with
enormous doggedness and won their case, the courts have invariably been niggardly in
their compensation.

In fact, a series of cases recently settled by the National Consumer Disputes Redresser
Commission (NCDRC) have made it a point to mention the notional loss of income
suffered by the consumer, but have awarded a compensation that is a fraction of that
figure. Strangely, the courts seem to perceive it as a sign of their ‘even-handedness’ in
allowing only a part of the notional loss suffered by the consumer. There is rarely any
cognizance taken of the harassment, anxiety and mental torture suffered by the
consumer and even costs, when awarded are a mere pittance.

For instance, in a recent judgments by the NCDRC the court calculated the minimum
financial loss suffered by the consumer at Rs 9.24 lakh (and a maximum of Rs 20 lakh),
but still awarded a compensation of just Rs 2 lakh. In a case against Maruti, the
Supreme Court overturned two lower court judgments and decided (after a 10-year
battle) a consumer who was sold a car with a defective clutch (that never got fixed for
various reasons) was only entitled to a replacement of the clutch assembly and not the
car.

In another bizarre case, the NCDRC ordered a compensation of just Rs 25,000 to a

senior citizen who was harassed and humiliated by a corrupt and malicious railway

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employee who falsely alleged that her concessional fare was not in order. Such
judgments make manufacturers, service providers and government agencies
unconcerned about consumer issues. Unless courts begin to hand out punitive
damages at least in case of deliberate harassment, Indian consumers have a long way
to go before the concept of ‘Caveat Emptor’ becomes redundant in India.

EXCEPTIONS OF CAVEAT EMPTOR

CAVEAT EMPTOR, or buyer beware, can carry a seller just so far. It may work when a
private owner sells an old Junker "AS IS". However, in other instances a know-how
consumer can use several legal principles to counter the doctrine of caveat emptor:

• Fraudulent or negligent misrepresentation: A seller would be liable if he is

committing a fraud.
• Unfair business practices: The seller would be held liable under custom of
trade or trade usage.
• If the product or services do not meet reasonable levels of merchantability or
practice standards.
• The seller will always be liable if there is breach of any of the implied conditions.
• Special state consumer laws that protect consumers such as lemon laws or
demand letter.
• Where the goods can be put to only one type of use, the goods must be always
suitable for that usual purpose, otherwise seller would be held liable.

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 BIBLIOGRAPHY

http://www.indianexpress.com/news/caveat-emptor-is-still-the-norm-in-india/10528

http://en.wikipedia.org/wiki/Caveat_emptor

http://legal-dictionary.thefreedictionary.com/caveat+emptor

http://www.britannica.com/EBchecked/topic/100648/caveat-emptor

http://definitions.uslegal.com/c/caveat-emptor/