What Is Caveat Emptor?
Caveat Emptor is the right of sellers not to pay damages to buyers for defects they were not aware of. It is most commonly used in the sale of cars and real estate. Under caveat emptor, the burden is on the buyer to do due diligence and ask questions of the seller. However, the seller is liable if they misrepresented or concealed issues in a fraudulent manner.
Caveat emptor does not apply to newly built homes; the builders must issue a warranty in these circumstances. But it would apply to the home once it was sold after that.
For example, if someone wants to buy a car from another person, caveat emptor says that the buyer is responsible for doing their due diligence. They can do this by asking questions and asking to see documentation like the service record and registration. The seller is not responsible for highlighting issues or important information the buyer should be aware of; the duty is on the buyer. If the car breaks down or needs expensive repairs in the future, then as long as the seller did not commit fraud, they are not liable for damages due to caveat emptor.
Are There Exceptions to Caveat Emptor?
Yes, there are multiple exceptions to caveat emptor that are there to protect consumers. Some of the common caveat emptor exceptions are:
- Fraud
- Warranties or guarantees issued by the seller (these are treated as contracts)
- Regulated industries like financial services
- Deception or misrepresentations of quality (the safe harbor statement)
These exceptions of caveat emptor mean to make sure that the buyer has the information they require to make an informed purchasing decision. However, there is still some responsibility on the buyer’s behalf to seek out this information or know where to look for it.