caveat emptor

noun caveat emp·tor \ -ˈem(p)-tər , -ˌtȯr \
Updated on: 13 Oct 2017

Definition of caveat emptor

: a principle in commerce: without a warranty the buyer takes the risk
  • Caveat emptor is a reasonable approach for many consumer products.

Did You Know?

"Without a warranty, the buyer must take the risk" is the basic meaning of the phrase caveat emptor. In the days when buying and selling was carried on in the local marketplace, the rule was a practical one. Buyer and seller knew each other and were on equal footing. The nature of modern commerce and technology placed the buyer at a disadvantage, however, so a stack of regulations have been written by federal, state, and local agencies to protect the consumer against dangerous or defective products, fraudulent practices, and the like. But the principle that a buyer needs a warranty if he is to avoid risk remains an important legal concept. Note that a caveat is a small warning or explanation intended to avoid misinterpretation.

Origin and Etymology of caveat emptor

New Latin, let the buyer beware


Financial Definition of CAVEAT EMPTOR

caveat emptor

What It Is

Caveat emptor is Latin for let the buyer beware, meaning the buyer assumes the risk in a transaction.

How It Works

Garage sales are great examples of caveat emptor. Buyers purchase goods as is and have little or no recourse if those goods turn out to be defective. Thus, buyers are responsible for testing and examining those products before purchase.

However, in many cases outside of the garage-sale circuit (for instance, the purchase of a new car), several laws, regulations, and industry standards hold sellers to a higher standard by requiring them to offer adequate disclosure and take responsibility for defects that buyers may not note in a casual inspection.

Why It Matters

Caveat emptor, or the notion that the buyer takes the risk, is a fundamental principle of commerce. The resulting philosophy is that the buyer is responsible for knowing his rights and protecting himself.

After the 1929 market crash, Congress began to favor more disclosure (via the passage of the Securities Exchange Acts) over the notion of caveat emptor in the securities industry. However, buyers, particularly in the securities industry, are still responsible for their own decisions, and in many other areas of commerce, caveat emptor does not trump all -- sellers share responsibility for providing working products, sound advice, and transparent information to buyers.


CAVEAT EMPTOR Defined for English Language Learners

caveat emptor

noun

Definition of caveat emptor for English Language Learners

  • law : the principle that a person who buys something is responsible for making sure that it is in good condition, works properly, etc.


Law Dictionary

caveat emptor

noun caveat emp·tor \ -ˈemp-tər, -ˌtȯr \

legal Definition of caveat emptor

: a principle in commercial transactions: without a warranty the buyer takes the risk as to the condition of the property or goods — compare products liability at liability 2b, warranty

Origin and Etymology of caveat emptor

New Latin, may the buyer beware



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