<P> A common way that information asymmetry between seller and buyer has been addressed is through a legally binding warranty, such as a guarantee of satisfaction . But without such a safeguard in place the ancient rule applies, and the buyer should beware . </P> <P> 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 . </P> <P> Before statutory law, the buyer had no express warranty ensuring the quality of goods . In the UK, 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 . </P> <P> The modern trend in the U.S. is that the implied warranty of fitness for a particular purpose applies in the real - estate context to only the sale of new residential housing by a builder - seller and that the caveat emptor rule applies to all other real - estate sale situations (e.g. homeowner to buyer). Other jurisdictions have provisions similar to this . </P>

What is meant by the rule of caveat emptor