Reports of the presence of lead in noodles and potassium bromate in bread and the recent clarification by the ministry of consumer affairs that service charge in restaurants is voluntary are pieces of the same puzzle. Apart from the obvious food connection, these issues mark a growing shift towards consumer protection, sounding the death knell for the principle of caveat emptor.

Around mid-2015, the Food Safety and Standards Authority of India (FSSAI) issued a show-cause notice seeking explanation from a leading noodle-making brand. One of the reasons was the presence of lead beyond permissible limits in the noodles. This led to a massive product recall exercise and ended up in the burning of tonnes of noodle packets. The case finally made its way to the supreme court, raising issues affecting consumer welfare and health.

Next, in June 2016, the FSSAI banned potassium bromate as an additive in food products. The reason was a study by the Centre for Science and Environment on bread and bakery samples sourced from Delhi. The results showed presence of potassium bromate/iodate in 84 percent of the samples. Showing the significance of the shocking results, the study noted that in 1999, the International Agency for Research on Cancer (IARC), associated with World Health Organisation (WHO), classified potassium bromate as Class 2B, or possibly carcinogenic, for humans. Thus, unaware consumers were taking in toxins by eating something as harmless as bread.

Both these instances are a wake-up call for consumers who had lowered their guard by reposing blind faith in leading brands. In these circumstances, the principle of caveat emptor would hardly be of any help to the leading brands. The reason is simple. The entire edifice of consumer protection laws challenge this phrase. The following line on the website of the national consumer disputes redressal commission makes this amply clear: “By spelling out the rights and remedies of the consumers in a market so far dominated by organised manufacturers and traders of goods and providers of various types of services, the Act makes the dictum, caveat emptor (‘Buyer Beware’), a thing of the past.” The Act referred here is the Consumer Protection Act, 1986 (CPA).

Since December 14, 2016, the expression ‘caveat emptor’ seems to be back in use. This time, it is being used in the context of service charge. On this day, the ministry of consumer affairs wrote to all state and union territory governments regarding the practice of hotels and restaurants charging “service charge” in lieu of tips. The letter, relying on definitions of “complaint” and “unfair trade practice” under CPA, requested governments to sensitise hotels and restaurants. It added that Hotel Association of India concurred that service charge is discretionary/voluntary. A customer, dissatisfied with the service, could have it waived off. For effective dissemination of this information, hotels/restaurants should prominently display this option of not paying. So far so good. However, National Restaurant Association of India (NRAI) has a different take. It feels that service charge should not be voluntary. Nor does it see any violation of CPA.

In the contract governing the relationship between a customer and a hotel/restaurant, quality of information available is an important factor. But, information asymmetry is there. Envisage a situation where all hotels/restaurants provided transparent information on service charges. In the same picture, imagine hotel associations pushing for a minimum self-evolved template of such information. Had this been the case, the freedom to contract argument would have been more plausible. Lack of transparency is not restricted to the issue of service charge alone, it also extends to the way service tax/abatement is computed, and VAT rates are used. But this article isn’t about such issues. It is about Caveat Emptor. Perhaps one should add “Caveat Venditor”, “let the seller beware” and “Caveat Lector”, “let the reader beware”.

Origin of the term

It is rare to find a person who doesn’t know the meaning of Caveat Emptor – “let the buyer beware”. It is Latin and this has led to the belief of the dictum having hoary Roman origins. Well, that’s not true.  This is one of those Latin expressions that the Romans didn’t coin. They did not possess any legal principle for regulating the buyer-seller relationship.

The closest reference to this principle is traced to the Italian philosopher Saint Thomas Acquinas (1225-1274). Part II of his celebrated work, Summa Theologica, is dedicated to ethics. His writing is in the form of questions and answers. He comes to question LXXVII. Since the entire work is in Latin, the English translation is very helpful. So Question LXXVII translates to “Of Fraudulent Dealing in Buying and Selling”. This is further divided into a set of four questions. Article III or the third question – “Is the seller bound to mention any flaw there is in the thing sold?” is pertinent for our purposes. More specifically, the answer is important: “…But if the flaw is manifest, as when a horse has only got one eye, or when the use of the thing, though not available to the vendor, is still available for others; and when the vendor in his price makes due abatement for the flaw; then he is not bound to declare the flaw, because on account of it perhaps the buyer would wish more to be taken off from the price than ought to be taken off: hence the seller can lawfully provide for his own indemnity by reticence as to the flaw in the article… A judgment cannot be made except of a manifest case: for every man judges according as he knows. Hence if the flaws in a thing exposed for sale are secret, judgment is not sufficiently left to the purchaser unless they are declared to him. The case would be otherwise if the flaws were manifest of themselves.”  

These lines show a faint recognition of the principle of Caveat Emptor. But the two words put together as “Caveat Emptor” did not find a mention anywhere. So the question remains – who was the first person to coin the expression?  We seem to owe the expression to Sir Anthony Fitzherbert (1470-1538). A judge by profession, Anthony Fitzherbert has written extensively on law. In 1534, he came out with La Novela Natura Brevium, a compendium on law and legal principles. Originally, that book was written and published in Latin. As with most Latin works, an English version followed. The preface states, “…there are divers Maxims and Fundamentals in the Knowledge of the Common Laws of the Land, which a Man ought for to believe very necessary for those who will understand the same Law, especially at the beginning of their Studies; for upon those Fundamentals the whole Law doth depend.”

The expression ‘Caveat Emptor’ is nowhere to be found in the English version or the Latin one. But Anthony Fitzherbert mentions the horse. “If a Man do sell unto another Man a Horse, and warrant him to be found and good, and if the Horse be lame or diseased, that he cannot work, he shall have an Action upon the Case against him… But note, it behoveth that he warrant it to be good, and the Horse to be found, otherwise the Action will not lie.  For if he sell the Wine or Horse without such warranty, it is at the other’s Peril, and his Eyes and his Taste ought to be his Judges in that Case.”

This means that if the seller sells his wares without a warranty, it is the buyer’s problem. This gives us the doctrine, but there is no mention of the expression Caveat Emptor. So the quest to find the expression takes us to another Fitzherbert, known simply as Master Fitzherbert. In 1523, he published a book titled The Book of Husbandry. The book, written in English, used many Latin expressions. Section 118 is on wartes (warts) in horses. “…but if he be tame, and haue ben rydden vpon, then Caueat emptor, beware the byer, for the byer hath bothe his eyen to se, and his hands to handell.” This is the first recorded written use of the expression, surprisingly in a book on animal husbandry, not on law. Another interesting observation is the deep connection between the principle of Caveat Emptor and the trade of horses.

Thought the 1534 edition of The Book of Husbandry is commonly cited, the year was 1523, not 1534. Some doubt whether Master Fitzherbert and Anthony Fitzherbert were different persons. Since the book is full of examples of the horse and Latin phrases which were part of legal vocabulary, the author seems to be Anthony Fitzherbert, but that is by no means certain. Presumably, the expression became common.  In 1592, it was found in a rather unusual book, Pierce Penilesse His Supplication To The Devil, written by a “Gent” named Thomas Nashe. The book has a “private epistle” from the author to the printer. It states: “There is nothing that, if a man list, he may not wrest or pervert; I cannot forbid any to think villainously, Sed caueat emptor, Let the interpreter beware, for none ever heard me make allegories of an idle text.”

In the seventeenth century, this expression was frequently used. Sir Edward Coke, a judge, in “The Second Part of the Institutes of the Laws of England”, refers to caveat emptor as an “old rule” in a discussion related to a statute of Elizabeth on Sellers of Horses in Fairs and Markets. In Co Litt [(1633) 102a; L.2.C.7 S.145.], a case related to land, he went on to say: “note that by the civil law every man is bound to warrant the thing he selleth or conveyeth, albeit  there be no express warranty, either in deed or in law; but the common law bindeth him not, for caveat emptor”.

In the evolution of this principle, the case of Moore v. Hussey [Hobart 93, 80 Eng. Rep. 243 (1601)] can be described as a twist in the tale. As many point out, this case misquoted an ancient law, the Second Statute of Westminster, to read as “caveat emptor, qui ignorari non debuit quod alienum jus emit”. They say that the word ‘emptor’ was not preceded by ‘Caveat’ but by ‘Expectet’. But Chandelor v. Lopus [Cro. Jac. 4, 79 Eng. Rep. 3 (1603)] saved the day by applying the principle to relevant facts involving a bezoar stone.

Caveat emptor is now referred to as a complete Latin maxim. In English this reads, “Let a purchaser beware, for he ought not to be ignorant of the nature of the property which he is buying from another party.” But in this sense, it was never used in Latin. The English version was rendered into Latin to confer legal respectability. 

Era of caveat venditor

Originating at a time when buying and selling horses was an important trade; the expression ‘Caveat emptor’ has travelled across different subject matters. It has hopped from one legal jurisdiction to another, including in India. But after 1986, the old principle of seems to be fading away in questions relating to consumer welfare in India. Instead, “seller beware” and “producer beware” have become the rules of the game. In this age of greater transparency, consumers have the right to demand a fair disclosure from the sellers and producers. Trust reposed in brand names will be intact as long as quality, safety and high standards of service are assured. If satisfied, the consumers will be more than willing to stay loyal to their brands and even pay service charge in restaurants. It is all about playing fair.

Debroy is a member, and Gupta a young professional member, at the NITI Aayog.

(The column appears in the February 1-15, 2017 issue)