Source: http://www.mondaq.co.uk/x/40206/Arbitration+Dispute+Resolution/From+Caveat+Emptor+to+Caveat+Venditor+a+Brief+History+of+English+Sale+of+Goods+Law
Timestamp: 2019-04-24 15:56:53+00:00

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The caveat emptor principle, that literally means let the buyer beware, has been followed for many years by the Courts of England. These simple words were an easy focus for judicial thought, a principle to be invoked when the going is difficult, a guide to be followed amid the baffling uncertainties of litigation1. Emptor in Latin is the buyer and the verb cavere is a verb of caution: caveat emptor was the perfect principle for transactions involving not massive quantity of goods.
A lot of cases in medieval times were decided by the rules of the lex mercatoria in special courts, but for other than the basic rights such as the right of the seller to payment and the right of the buyer to the goods, private law was not very interested. As a matter of fact the criminal law and statutes that prohibited the use of false measures and the adulteration of food, beer and wine, regulated the major part of claims about the sale of goods and there were local policies regulating the trade fairs that changed from place to place2.
The principle of caveat emptor was the guideline for the courts and the point was that the buyer had the chance to use his knowledge to be careful or accept the cost of his inattention. No warranties were implied to assure the quality of the goods he was going to buy and only a seller making a false statement could be sued in tort for deceit3. In such a case he was not simply assuming a fact but giving a clear warranty to the buyer he could be sued even though he did not know about the falseness of his affirmation.
In the case of false affirmation of the seller there was no need of a written warranty; it was sufficient that the buyer was convinced to buy by the false statements of the seller to imply this particular warranty and, even though a contract was necessary, there was no need that the guarantee was a part of the contract. However it is very important to point out that all this concerned fraud and that was the only way for the buyer to sue the seller for breach of the contract: no implied terms arose if the seller did not make any false statement. As we have said this situation was perfect if you try to imagine the scenario of the sales in medieval times: there were small fairs and small quantities of limited types of goods to be sold. The buyer often had the knowledge to recognize defective goods and to discuss the price with the seller who, instead of offering a written warranty, could accept an eventual reduction in price.
The case that clearly illustrates the situation up to seventeenth century is Chandelor v. Lopus4 in which the plaintiff brought an action against the defendant for the selling of a Bezoar Stone. This particular stone, found in the stomach of some animals, was supposed to have medicinal properties. The majority of the court held that the evidence was insufficient to find the defendant liable because of the absence of any written warranty.
As already noted, the action for the breach of contractual rights did need, at the time, a written warranty and, in absence of the latter, the only possibility was an action for fraud.
This particular situation continued up to seventeenth century, however, by 1528 we have the proof that some courts started to consider the breach of the contract as an assumpsit instead of a tort for deceit5. This was an important first step for the implying of non-written warranties but the situation was unclear up to the end of the nineteenth century due to the influence of land law, which at that time dominated the English law of sale, where the principle of caveat emptor was still the only one considered.
This was the reason why the change was not rapid and why the courts continued to differentiate between the sale of specific goods, capable of being examined by the buyer and the sale of unascertained goods where the buyer was obliged to rely on the seller's description.
On the other hand, such an approach might be justifiable in an age where goods were generally simple and were normally traded at markets, where the buyers had the opportunity to examine goods before buying6.
As a matter of fact, the industrial revolution and the scale production of massive quantities of goods changed in some way the approach of the courts. Sellers and buyers were no longer contracting at fairs but they were often actually in different places; moreover sellers started to realise that the quality of the products they were selling was very important in order to be competitive in a big market where the same product was sold by different producers7.
As noted above, change was not rapid and still in 1802, in Parkinson v. Lee8, the King's Bench Court denied the existence of an implied warranty. In this case the buyer decided to buy from the seller five pockets of hops that were supposed to be warranted by a sample that the buyer had had the possibility to examine. The further goods later delivered conformed with the sample but had been treated with water to increase their weight. The jury stated that it was impossible for the buyer to discover that the goods had become worthless. Even though the verdict was for the buyer, Le Blanc J., who directed the jury, expressly asserted that the ratio decidendi did not involve the implicatiom any non-written warranty. Grose J. expressed his opinion about the warranty, assuming fault on the part of buyer because he did not ask for a written warranty in the contract.
These decisions were influenced by the rules that applied to the sales of horses where the possibility of any kind of implied warranty was considered unacceptable. However the judges refused the idea of implied warranties in horse-trading by considering that the background of the horse traders and the differences of these particular goods had created a coherent and effective scheme for quality obligations9. In fact the price of a horse was considerably different with or without the written warranty: the acceptance of the risk gave the buyer the possibility to buy at a cheaper price. This method worked very well for a kind of sale in which the danger to the seller of offering a long-term warranty was seen as too high.
In any case, the analogy with horses was not considered enough to deny the existence of an implied warranty for other types of goods and, as a result of the great changes of the industrial revolution, and the consequent increase of international trade a new sale of goods law was gradually born10.
Caveat Emptor was still alive as a general rule but many courts were going in a slightly different direction.
Even though the industrial revolution was already started and great changes in the methods of production were made, the case law of the first part of the nineteenth century was not about the sale of complex machineries or goods derived from large-scale production as we mean it these days11. The case law was basically concentrated on raw materials to be used in the process of manufacture such as bags of waste silk, quantities of worsted coatings, pockets of hops, Manilla hemp12, etc.
However, as Karl Llewellyn has pointed out, in spite of the law reports, since the first part of the nineteenth century something had changed: sellers begin to build good will, in wide markets, to feel their standing behind goods to be no hardship, to lessen the threat to their solvency from a thousand lurking claims, and to view it as the mark of business respectability and the road to future profit. The law of seller's obligation had to change, to suit these developments13.
John v. Bright15: &ls;16 >> The courts finally accepted a non-written warranty about the quality of the goods and the key concept of the merchantability of the goods was introduced. However it is very important to underline the fact that this rule was only about the contracts of sale for specific goods: no implied warranty was at the time introduced in common law for the protection of the buyer of unascertained goods.
Barr v. Gibson17 <>. This rule was indeed particular and constituted an exception to the rule stated in John v. Bright; in any event as will be seen later, it did not survive to the changes operated by the introduction of the Sale of Goods Act 1893.
Randall v. Newson19: <>. It means that if the contract of sale was by description there was an implied warranty that the goods was supposed to be not only in conformity with the description but also merchantable.
This was, in brief, the situation of the case law up to the latter part of the nineteenth century and this was the law that Sir Mackenzie Chalmers wanted to reproduce when he first accepted, in 1889, the task of writing the draft of the Sale of Goods Act.
Unfortunately, as will be seen later, Sir Mackenzie Chalmers failed20 in his purpose because the Statute did not reproduce the situation of the common law and introduced many innovative concepts21. Because of the many changes operated by the Select Committee the failure cannot be considered his completely his responsibility.
In spite of the fact that the Act did not reproduce the situation, as it existed, many common law countries have adopted the Sale of Goods Act 1893 and even in recent times has been the inspiration for the codification of the law of sale for the international transactions22.
The implied terms regulated in the Act and the final consideration for the merchantability of the goods represented a first step towards the death of the principle of Caveat Emptor23.
In fact, with the Sale of Goods Act 1893 the protection of the implied terms relating to the contract was extended to contracts for the sale of specific goods as well as unascertained goods24. In spite of this revolution the goods were merely required to be merchantable until 197325 when the Supply of Goods (Implied terms) Act introduced the new concept of merchantable quality of the goods.
This is the historical view of the situation from the seventeenth century until the latter part of the twentieth century because no significant changes were introduced to the implied terms of the original Sale of Goods Act 1893 up until 1973. Now one can take panoramic view of the recent situation and how it is evolving.
Before 1973 the courts changed the concept of sale by description in order to try to give the buyer further protection and indeed anticipated the introduction of the concept of merchantable quality. In Ashington Piggeries v. Christopher Hill Ltd.26 the plaintiff (feed-stuff compounders) contracted with the defendant (mink breeders) for the compound and the delivery of a particular animal foodstuff specifically for mink nutrition. The central point of the matter was whether it was a sale by description; further, as though the seller was not a professional trader in mink food, was the latter liable for the breach of section 14 of the Sale of Goods Act 1893?
Lord Wilberforce stated: "I would have no difficulty in holding that a seller deals in goods of that description if he accepts orders to supply them in the way of business; and this whether or not he has previously or not accepted orders for goods of that description"27. This meant that the seller could be considered an expert for the sole reason that he was selling those goods and this is the reason why this was considered a sale by description!28. It is difficult to agree with the Learned Lord's opinion but it illustrates how the law was manipulated to guarantee a greater protection to the buyer.
In the same case Lord Diplock, for the first time, assumed that the swing of the pendulum was going too far in favour of the new principle of caveat venditor and was alarmed about a confused situation arising29.
The Sale of Goods Act 197930 did not provide any modification to implied terms, however in 1987 the Law Commission published a report in which suggested some changes in implied terms and in the provisions for their breach. The Sale and Supply of Goods Act 199431 substituted the concept of merchantable quality with the concept of satisfactory quality moving the pendulum further in favour of the buyer.
Moreover, a European Directive on Consumer Guarantees was passed in 199932 and is now likely to be implemented.
Three implied terms have been set out that basically require that the goods must be fit in accordance with the buyer's legitimate expectations34 and sometimes, on the same facts, the buyer is able to sue the seller for more than one or all of the implied terms35.
Section 14 applies only for contracts of sale in the course of the business. But what does "in the course of the business" mean?
Prior to 1973 the provisions relating to the merchantable quality of the goods applied only if the type of goods of the contract were the goods generally supplied by the seller in the course of his regular business. As previously noted the Supply of Goods (Implied Terms) Act 1973 changed the rule to guarantee a major protection for consumers36 but the idea of sale in the course of the business has been interpreted in a restrictive way up to 1999.
Until recently the definition of a sale in the course of the business was not very clear notwithstanding the major parts of the interpretation of the courts seemed to be in favour of the seller. A contract of sale was considered in the course of the business if the seller was selling goods conforming to his regular business37: Caveat Emptor still survived.
In Slater v. Finning Ltd38, which was about the selling and replacing of a camshaft39, Lord Steyn took a firm position in defence of the ancient principle of Caveat Emptor. He assumed that the new principle of Caveat Venditor was going too far and that the imposition of a strict liability on the seller when the seller did not have a real clue about the facts was against the facilitation of commerce. He pointed out that the seller would be put in a very vulnerable position and that the expenses of examining and checking the every instance would be unaffordable40.
In commenting on this judgement Tom Burns has assumed, and I have to agree, that implied in the judgement of Lord Steyn there was the concern that such an extension of Caveat Venditor would encourage litigation by making buyers feel more confident about suing the seller41.
In spite of this view, the problems relating to the interpretation of whether a contract of sale can be considered in the course of the business of the seller have been examined and changed in favour of the principle of Caveat Venditor in Stevenson v. Rogers42. Mr Stevenson (a fisherman) sold a second hand fishing boat to Mr. Rogers for the price of 600.000 pounds. Mr Roger was not satisfied with the quality of this boat and brought a claim for the breach of Section 14 (2) of the Sale of Goods Act. As noted Mr.Stevenson was a fisherman and the sale of the boat was just an occasional way to do business and, before this case, he would not have been considered as being in breach of an implied term.
It is now apparent that any contract of sale made by a business will be caught by the provisions of section 14 (2) and (3) of the Sale of Goods Act and that a lot of companies involved, even infrequently, in the sale of goods will have to take it into consideration47. Every businessman concerned in the sale of goods will be subject to the provisions even if the sale of goods is not his normal business.
Prior to the Unfair Contract Terms Act 1977 the seller was able to eliminate the consequences of the implied conditions of the Sale of Goods Act with an exclusion clause. After 1977 the seller can no longer avail himself of this possibility if the buyer is dealing as a consumer49; however the goods purchased must be of a type ordinarily supplied for private use and consumption50.
Further, as previously noted, this situation is going to be modified by the European Directive on Consumer Guarantees51. At the moment the only remedies for the breach of an implied condition under the Sale of Goods Act 1979 are rejection and damages52 Under the EC Directive on Consumer Guarantees, which the UK is obliged to implement as soon as possible, the chief remedy will be the right of the consumer to have the goods replaced or repaired (Article 3 (3)). A reduction of the price or the rejection of the contract will become the second choice (Article 3(5)).
Following the aim of the Directive, consumers often prefer the choice of replacement and repair and for the seller this can be considered a cheaper remedy53.
Nevertheless, even before the Directive was born, the Law Commission54 was considering the idea of adopting some kind of statutory remedies for slight breaches in consumer transactions. In the end the Law Commission asserted that these remedies would be too complex in practice and too adverse to consumers55.
As we have seen consumer protection is, in some ways, better guaranteed by national law and it will very difficult to implement the Directive in a way which maintains the more stringent rights currently available to consumers (e.g. a right to reject for minor defects)56 and at the moment it is unclear what minimal changes will be required, or what additional changes the government intends to make57.
On the light of the historical point of view and analysing the current law, even though the Sale of Goods Act 1979 still assumes that the main principle of the law of sales is Caveat Emptor58 I have to agree with the belief of the major part of the doctrine affirming that such a statement is to be considered unrealistic59.
Unfortunately I have to consider that modern legislation is probably going too far in the protection of the buyer even when the buyer is not a consumer and could bear the risk deriving from the normal way of doing business. Sometimes there is no fault and someone has to suffer the consequences of the bad luck. At the moment the seller suffers all the consequences of the bad luck, and this is indeed against the aim of the law to facilitate commercial transactions. The principle of Caveat Venditor can be justified when there is a disproportion of power between seller and buyer (e.g. the big companies contracting with a consumer) but it is totally against the principle of laissez faire when this disproportion is not present because the buyer is also contracting in the course of the business.
However, sometimes even when this disproportion exists there are practical reasons not to increase or decrease the contractual power of the buyer. I agree in fact with the point of view of the European Community legislator: the consumer often prefers the easier remedies of the replacement and reparation to the inconvenient of a claim for rejection or damages.
Commercial law, we must remember, has been created with the aim of facilitating!
1 Walton H. Hamilton, The ancient maxim Caveat Emptor (1931) 40 Yale LJ 1133 at 1156.
2 Royston Miles Goode, Commercial Law (London, Penguin Books, 1995), p. 188.
4 Chandelor v. Lopus (1603) Cro Jac 4.
5 See Jordan's Case (1528) YB 27 Hen VIII, f.24, pl.3.
6 See Robert Bradgate, Commercial Law (London, Edinburgh, Dublin: Butterworths, 2000) p. 273.
7 See Karl L. Llewellin, Cases and Materials on the Law of Sales (London, Callaghan & Co, 1930), p. 204.
8See Parkinson v. Lee (1802) 2 East 314.
9 See Paul Mitchell, The development of quality obligations in sale of goods (2001) 117 LQR p. 650.
11 See Michael G. Bridge, The evolution of modern sales law  LMCLQ p. 53.
13 Llewellin, Cases and Materials, p. 204.
14 See Mitchell, Development of quality obligations, pp. 650-656.
15 Jones v. Bright (1829) 5 Bing. 533.
16 See the assertion of Best C.J. in ibid. 546. See also Laing v. Fidgeon (1815) 4 Camp. 169.
17 Barr Gibson (1838) 3 M. & W. 390. See also Sutton v. Temple (1843) 12 M. & W. 52 and Hart v. Windsor (1844) 12 M. & W. 68.
18 Jones v. Just (1868) 3 Q.B. 197.
19 Randall v. Newson (1877) 2 Q.B.D. 102.
20 For a different point of view see Bridge Evolution of modern sales law, p. 52.
21 For example Sir Chalmer in his first draft proposed the reference to an opportunity to inspect the goods that had been deleted. The rule of Barr v. Gibson about the exclusion for the sale of an existing chattel was removed and a new general principle about the reliance of the buyer on the seller's opinion and judgement was introduced.
22 See eg article 35 of the United Nations Convention on Contracts for the International Sale of Goods (1980) [CISG].
23 In England, the implied terms as to quality and fitness in ss. 13-15 of the 1893 Act represented an important step in the abandonment of the original common law rule of caveat emptor in Patrick S. Atiyah, John N. Adams and Hector L. MacQueen The Sale of Goods (Harlow, Longman, 2001) p. 137.
24 Bradgate, Commercial Law, p. 273.
25 See Supply of Goods (Implied Terms) Act 1973, c. 13.
26 Ashington Piggeries Ltd. and Another Appelants v. Cristopher Hill  A.C. 441.
28 See section 14 of the Sale of Goods Act 1893.
29 Ashington Piggeries Ltd. and Another Appelants v. Cristopher Hill  A.C. pp. 508-509.
30 See Sale of Goods Act 1979, c. 54.
31 See Sale and Supply of Goods Act 1994, c. 35.
32 Directive 1999/44/EC on certain aspects of the sale of consumer goods and associated guarantees (1999) OJ L 171/12, 7 July 1999.
33 Section 13 and 14 of the Sale of Goods Act 1979 c. 54 as amended.
34 Bradgate, Commercial Law, p. 275.
36 See R&B Customs Brokers v UDT Finance Ltd. (1988) 1 All ER 847. The Unfair and Contract terms Act 1977, c. 50 gave a widely definition of acting in the course of the business that has been interpreted in a restrictive way even for the application of Section 14 the SoGA. The interpretation of this case practically reintroduced the requisite of the regularity of the transactions of the seller reducing the consumer protection under the SoGA.
37 See Davies v. Summer  1 W.L.R. 1301 and R&B Customs Brokers Co. Ltd v. United Dominions Trust Ltd  1 W.L.R. 321.
38 See also, for a point of view developed before the changes of 1973 and 1977 the judgements of Lord Wilberforce and Lord Diplock in Ashington Piggeries Ltd. and Another Appelants v. Cristopher Hill  A.C. pp. 488 and ss.
39 Slater v. Finning Ltd  A.C. 473.
40 In particular there was a lack of information because the buyer failed to clearly explain to the seller the particular purpose of the goods.
41 Slater v. Finning Ltd  A.C. pp. 484 ss.
42 Tom Burns, Slater v. Finning Ltd: Defining the limits of Caveat Venditor in Section 14(3) of the Sale of Goods Act 1979 (1997) 2 Jur. Rev. p. 118.
43 Stevenson v. Rogers  Q.B. 1028. It is indeed very hard to reconcile this case with R&B Custom brokers and a lot of discrepancy there are between the interpretation of the words in a course of a business on both consumer and SoGA provisions.
44 Stevenson v. Rogers  Q.B. p. 1039.
45 See the Sale of Goods Act 1893.
46 See section 3 of the Sale of Goods Act 1979, c. 54.
47 Stevenson v. Rogers  Q.B. p. 1039.
48 See John De Lacy, Business sellers' liability for the implied terms under the Sale of Goods Act 1979 (2000) 1 Insolvency L. p. 27.
50 See Unfair Contract Terms Act 1977, c. 50.
51 For example, in Stevenson, Mr. Rogers was not acting as a consumer because a boat cannot be considered as goods ordinarily supplied for a private use and consumption. See section 12(1) c of the Unfair Contract terms Act 1977, c. 50. Notwithstanding if the consumer will not able to rely upon the provisions of the 1977 Act, the Unfair Terms in Consumer Contracts regulation 1999/2083 will help him.
52 Directive 1999/44/EC on certain aspects of the sale of consumer goods and associated guarantees (1999) OJ L 171/12, 7 July 1999.
53 See section 11(3), 30, 52, 54, of the Sale of Goods Act 1979, c. 54.
54 Colin Scott and Julia Black, Cranston's Consumers and the Law (London, Butterworths, 2000 3rd Ed.), p. 170.
55 See Law Commission Report 160, Sale and Supply of Goods (1987) Chapter 3. See also J. Adams and R. Brownsword, Law Reform, Law-Jobs, and Law Commission No. 160 (1988) 51 MLR p. 481.
56 Working Paper N. 85 (1983) para 4.43-4.47.
57 Scott and Black, Cranston's Consumers, p. 171.
58 See Atiyah, Adams and MacQueen, The Sale of Goods, p. 214.
Section 14 (1) of the Sale of Goods Act 1979, c. 54. It sounds in effect strange that this section states: there is no implied term about the quality or fitness for any particular purpose of goods supplied under a contract of sale.
See Atiyah, Adams and MacQueen, The Sale of Goods, p. 138.
Sale and Supply of Goods Act 1994, c. 35.
Sale of Goods Act 1893.
Sale of Goods Act 1979, c. 54.
Supply of Goods (Implied Terms) Act 1973, c. 13.
Unfair Contract Terms Act 1977, c. 50.
Working Paper N. 85 (1983) para 4.43-4.47.
Directive 1999/44/EC on certain aspects of the sale of consumer goods and associated guarantees (1999) OJ L 171/12, 7 July 1999.
United Nations Convention on Contracts for the International Sale of Goods (1980) [CISG].
Law Commission Report 160, Sale and Supply of Goods (1987) Chapter 3.
Ashington Piggeries Ltd. and Another Appelants v. Cristopher Hill  A.C. 441.
Barr Gibson (1838) 3 M. & W. 390.
Chandelor v. Lopus (1603) Cro Jac 4.
Davies v. Summer  1 W.L.R. 1301.
Hart v. Windsor (1844) 12 M. & W. 68.
Jones v. Bright (1829) 5 Bing. 533.
Jones v. Just (1868) 3 Q.B. 197.
Jordan's Case (1528) YB 27 Hen VIII, f.24, pl.3.
Laing v. Fidgeon (1815) 4 Camp. 169.
Parkinson v. Lee (1802) 2 East 314.
Randall v. Newson (1877) 2 Q.B.D. 102.
R&B Customs Brokers v UDT Finance Ltd. (1988) 1 All ER 847.
R&B Customs Brokers Co. Ltd v. United Dominions Trust Ltd  1 W.L.R. 321.
Slater v. Finning Ltd  A.C. 473.
Stevenson v. Rogers  Q.B. 1028.
ATIYAH Patrick S. et al., The Sale of Goods (Harlow: Longman, 2001).
BRADGATE Robert, Commercial Law (London, Edinburgh, Dublin: Butterworths, 2000).
LLEWELLIN Karl L., Cases and Materials on the Law of Sales (London: Callaghan & Co, 1930).
GOODE Royston Miles, Commercial Law (London: Penguin Books, 1995).
SCOTT Colin and BLACK Julia, Cranston's Consumers and the Law (London: Butterworths, 2000).
BURNS Tom, Slater v. Finning Ltd: Defining the limits of Caveat Venditor in Section 14(3) of the Sale of Goods Act 1979 (1997) 2 Jur. Rev. 118.
BRIDGE Michael G., The evolution of modern sales law  LMCLQ 53.
DE LACY John, Business sellers' liability for the implied terms under the Sale of Goods Act 1979 (2000) 1 Insolvency L. 27.
HAMILTON Walton H., The ancient maxim Caveat Emptor (1931) 40 Yale LJ 1133.
MITCHELL Paul, The development of quality obligations in sale of goods (2001) 117 LQR 650.

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