If A endeavors to buy goods from B, and tells B that he is worth $5,000.00, when in fact he is worth nothing, and B relying upon A's statement, sells the goods to A, B is entitled to rescind the contract by reason of the fraud. He may sue and recover the price of the goods, or he may retake the goods from the buyer. (See Rescission under chapter on Contracts.) If the goods have been sold to a third party who purchases for value and without notice of the fraud, the original seller cannot take the goods from him. A sale procured through fraud is voidable, and not void. The seller may avoid the sale if he chooses. That is, title vests in the purchaser subject to being retaken by the seller, if he chooses, when he discovers the fraud. If a third person innocently purchases the goods before the original seller rescinds the contract, the last purchaser's title cannot be disturbed. The seller may permit the purchaser to keep the goods, and bring an action for damages based upon deceit.
One kind of a sale frequently induced by fraud is void, absolutely, and not voidable. If a person fraudulently induces another to believe that the purchaser is someone else, and purchases goods under this representation, no title passes from the seller, and he may recover the goods from an innocent purchaser.
213. Rule of Caveat Emptor, or Let the Purchaser Beware. One who purchases chattel property from anyone except the grower or manufacturer of the article in question, which is inspected by the purchaser, or may be inspected by the purchaser, purchases at his own risk. If the article turns out to be of poor quality or worthless, in the absence of fraud or warranty, the purchaser has no redress. This rule is called the rule of Caveat Emptor, (let the purchaser beware). Its purpose is to decrease litigation, and make men rely upon their own judgment. If a purchaser is unwilling to rely upon his own judgment, he must exact a warranty from the seller. In the absence of warranty or fraud, the purchaser must abide by the result of his purchase. If the article purchased has defects apparent to anyone upon inspection, the purchaser cannot complain. He should have seen the defects. If the defects are not apparent upon inspection, he must bear the loss. He should have required the seller to warrant the goods against latent defects, if he was unwilling to purchase on his own judgment. In all sales by an owner, however, title to the goods is impliedly warranted, and in case of sale of goods grown or manufactured by the seller, there is an implied warranty against latent defects. In all other sales, the purchaser buys at his own risk, and has no redress against the seller unless the latter warrants the goods. Warranties are discussed in the following section.
214. Express Warranty. Contracts of sale often contain collateral agreements called warranties. Warranties are either express or implied. An express warranty is an agreement in addition to the ordinary agreement to transfer a certain chattel for a consideration in money or money's worth, by which the seller agrees that the thing sold is of a certain quality, or is in a certain condition. An express warranty is not an essential part of a contract of sale. That is, a sale containing no collateral promise to the effect that certain conditions or terms of the contract are warranted, may be made. If the contract of sale does not expressly state that the seller warrants certain terms or conditions, or does not contain words of similar meaning, the contract of sale is without express warranty. An express warranty, by express agreement, adds something to the contract of sale. This additional agreement, called an express warranty, enables the purchaser to recover damages from the seller for failure of the warranty, when he might not be able to have any redress if the sale were made without warranty. Express warranties may be made orally, or in writing.
If the seller, in making the sale expressly states that he warrants certain terms of the contract, or uses language which means that he intends to warrant certain terms of the contract, there is an express warranty. A sells a wagon to B and warrants that it will carry 6,000 lbs. of stone. If it fails to carry this amount, B can recover from A on this warranty. If A had sold the wagon to B without this stipulation, and it had failed to carry 6,000 lbs. of stone, B would have no redress.
A seller is permitted to express his opinion relative to the quality of the article which is the subject of the sale without making a warranty. This is called "trade talk," or "puffing." A seller is permitted to express his own opinion relative to the quality of goods he is endeavoring to sell, without having his words amount to a warranty, but if he makes positive assertions, his words will be construed as a warranty. Such expressions as, This is first class, and This is equal to any on the market, are usually regarded as "trade talk" and not as warranties.
215. Implied Warranties. Some contracts of sale carry with them implied warranties. These warranties are common to all sales of the particular class in question. Implied warranties cannot be said to be in addition to the contract of sale, but are impliedly a part of the contract. The most common implied warranties are warranties of title, warranties of wholesomeness in sale of food, warranties in sales by sample, warranties of merchantability, and warranties of fitness of goods to be used for a particular purpose.
216. Implied Warranty of Title. In every sale, in the absence of an express stipulation to the contrary, there is an implied warranty of title. This means that the ownership is in the seller, and that he has the right to sell the property, and that it is free from incumbrances. This, of course, does not prevent the seller from disposing of just what interest he has in the property if he expressly so contracts. For example, if A negotiates the sale of a horse to B, and tells B that he has purchased the horse a few days previously from C, and does not know whether there are any incumbrances on the horse, but will sell what interest he has, and if B purchases on these representations, he cannot sue A on an implied warranty of title if it subsequently develops that D has a mortgage on the horse. If, however, A offers to sell B a horse, saying nothing about the matter of title, and B purchases the horse, and later is obliged to yield possession to C, who holds a mortgage, B may recover the purchase price of the horse from A upon an implied warranty.
Formerly, a distinction was drawn between sales of property in the possession of the seller, and of property in the possession of some third person, making the seller not liable upon an implied warranty in the latter case. At present, however, the tendency of the courts is to make the seller liable upon an implied warranty, regardless of whether the property is in his possession, or in the possession of a third person at the time the sale is made. When a person sells chattel property, not as owner, but in an official capacity, or as an agent, there is no implied warranty of title. Common examples of this principle are sales by a pledgee, mortgagee, sheriff, guardian, administrator, assignee, or trustee in bankruptcy.
217. Implied Warranty of Wholesomeness in Sales of Food. In the sale of articles to be used for food, there is an implied warranty that the article sold is wholesome and fit for the purpose which it is sold. This rule is based upon the principle of public policy, that it is the duty of the state to protect life and health. A, a grocer, sold canned tomatoes to B, for use in B's family. The tomatoes contained poisonous adulteration. A was held liable in damages to B, for breach of implied warranty of wholesomeness of the article sold for food. Some jurisdictions hold that this rule does not apply in sales of food, where the article is not sold to a consumer. That is, if the article is sold by a wholesaler to a jobber, or to a retailer, the warranty does not apply, but where it is sold by anyone to a consumer, it does apply.