Caveat Emptor Law and Legal Definition
Caveat emptor is a Latin term meaning "let the buyer beware". It is a general rule of law that a purchaser assumes the risk of his/her purchase. The intent of the rule is to place a duty of care on the buyer in selecting an item and putting forth appropriate inquiry before completing the sale. In this way, a seller is also protected from liability for buyer's remorse.
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:
- There was a material defect which adversely affects health or safety;
- The seller or the seller's agents knew of the defect before the sale;
- The defect was such that it could not be discovered by due diligence; and
- The house was not bought "as is."
- 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.