Beware of Caveat Emptor

Q. Recently you wrote that sellers need to shun misleading practices. Can't we rely on the consumer to defend his own interests?

A. In traditional common law, the basic rule in commerce was "caveat emptor," a Latin term meaning "Let the buyer beware". Since it was the responsibility of the buyer to wary of any problems with the purchase, he had a claim against the seller only if there was actual fraud. Merely finding an unusual defect was not grounds for cancellation.

There were some valid justifications for the caveat emptor rule. One was that only the customer can know what his needs are, and if the product meets them. Another is the desire to have clear and unambiguous laws of transfer to keep the courts from being clogged with endless litigation.

However, this rule created more problems than it solved, and today it has been abandoned in the developed world in favor of an implied warranty of merchantability.

It is true that only the consumer can be totally sure why he wants a product, but it is equally true that when people buy standard products the vast majority have exactly the same expectations, so it is reasonable to demand that the seller fulfill them. And even though only the consumer knows what he wants, typically only the seller is well-versed in the finer aspects of the product, especially if it is one sold seldom. An appliance dealer sells more refrigerators in one day than a typical person buys in a lifetime, so it is in everybody's interest to have the seller share his knowledge with the buyer, especially relating to any defects in the product.

It is noteworthy that Jewish law deals with misleading practices on two distinct levels. On one level, we have the ability to nullify a sale when the merchandise has substantive defects, to the extent that there is no true meeting of the minds. This corresponds to what in secular law is known as the implied warrantee of merchantability.

But there is another level of prohibition which is not actionable, but is still forbidden. This is called geneivat da'at, or "stealing judgment." In these cases the substantive information about the product and price are known, but significant context is missing. One case would be where the item is advertised as being "50% off" whereas in fact the discount is from a temporary markup. The customer is properly informed of the item and the price, but he is misled into thinking it is a bargain. This would also apply to meaningful but non-critical aspects of the product. An example would be selling a product as "natural" to a person who doesn't insist on natural products but views it as a sign of quality.

This highlights the fact that Jewish law is not merely a system of litigation or conflict resolution but also a system of ethical and religious norms. The customer doesn't have recourse but the misleading practice is still forbidden. The name of this prohibition is also instructive. The premise of your question is that we can rely on the judgment of the customer, but in fact sellers have many clever techniques of "stealing" that judgment, of inducing the customer to suspend his critical faculties. Jewish law has always affirmed, and current practice confirms, that we need to beware of "buyer beware."