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What Does Caveat Emptor Mean?

Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Caveat Emptor” Caveat emptor is Latin for "Let the buyer beware” Under the principle of caveat emptor, the buyer could not recover damages 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 express warranty ensuring the quality of goods. In England, common law requires that goods must be "fit for the particular purpose" and of "merchantable quality", per Section 15 of the Sale of Goods Act but this implied warranty can be difficult to enforce and may not apply to all products. Hence, buyers are still advised to be cautious. The modern trend in the US, however, is one of the implied warranties 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. By Barry Norman, Investors Trading Academy