Supreme Court of the United States - 15 U.S. 178, 2 Wheat. 178, 15 U.S. 178, 4 L. Ed. 214, SCDB 1817-032, 1817 U.S. LEXIS 396
In the 1817 Supreme Court case Laidlaw v. Organ, tobacco merchants Laidlaw sued Organ for not paying for tobacco they agreed to sell him, claiming a breach of contract. Organ had learned that the War of 1812 ended, but didn't tell Laidlaw, whose tobacco would now be worth more. Organ refused to pay and sent the tobacco back, saying Laidlaw was hiding information about the war.
Laidlaw sued for specific performance, but the trial court found in Organ's favor. Laidlaw appealed, and the Supreme Court reversed the decision, ordering a new trial. They said Organ couldn't cancel the contract due to fraud because Laidlaw didn't lie or hide required facts. Both parties had equal access to war news, and Organ didn't rely on Laidlaw's silence to make a decision.
This case highlights the legal concept of caveat emptor, which means "let the buyer beware." It places the responsibility of finding defects on the buyer, not the seller, and signifies that buyers must inspect goods or services before purchase. It contrasts with caveat venditor, or "let the seller beware," which puts the burden on the seller to be honest and fair with the buyer. These principles determine how much information parties must share during contract negotiations.
The court held that a buyer is not required to disclose external factors that could impact the price of a product to the seller, as long as there is no intention to deceive or mislead. However, the judge's absolute instruction was found to be incorrect, and the issue of whether the buyer engaged in any deceit towards the seller should have been left to the jury. The decision was overturned, and the case was sent back to the Louisiana district court for a new trial.
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