Caveat emptor!, buyer beware, is a term rich in legal, social, economic, and political overtones. At its broadest, social and economic aspects, the concept speaks to risk. Any action or inaction carries with it consequences. Risk is the term used to value some element of the spectrum of consequences that are either unanticipated or neglected. Risk, of course, can point in the other direction—of value enhancement, but fear of loss tends to drive the term in many contexts. More specifically the term speaks to the allocation of the burden of risk. In this case the burden of inaction or neglect falls on the party that failed to act or whose acts failed to be effective. At the same time it points to the complementary duty of those with obligation to beware. In that aspect it also carries with it the obligation of the party without that burden to honestly and completely make the transaction transparent—that party has no obligation to act but may not deceive or hide. It speaks, in other words both to a core principle of information symmetry among parties to a transaction (of whatever sort) as a basic social and cultural expectation of social interaction. It also speaks to the allocation of the burden of achieving information parity among actors to transactions. Lastly, it suggests penalties for those who impede the attainment of information parity and those and consequences for those who fail to undertake actions that move parties closer to a state of information parity
It is at this point that managerialism enters—and the mechanisms of politics and law are inserted. The result is at least a partial transformation of the societal consequences of caveat emptor into frameworks of legal risk. In its broadest sense, political ideology and the expectations of society deemed important enough to be codified and expressed as law, can substantially reconstruct the meaning of caveat emptor itself. In its narrower sense, politics expressed through law can shift the burden of informational parity from one party to another. It can set penalties for impeding access to information or for deception. And law constitutes the institutional system for asserting or avoiding consequences for action or inaction—for example by limiting the liability of those who had no obligation to disclose or by limiting recovery for those who failed to seek information. Likewise parties can themselves shift burdens and risks through legally constructed devices—warranties for example, whether they arise in contract, statute or judicial doctrine.
Caveat emptor, however, does not manifest itself in a vacuum. The equity or fairness of caveat emptor is possible only in the shadow of its complementary principle–due diligence. Like caveat emptor, due diligence is another term rich in legal, social, economic, and political overtones. At its narrowest it described the appropriate level of investigation—of actions meant to produce information parity above a minimum baseline—when deciding to engage or not engage in an action. At its broadest, it suggests the social and cultural expectation of care and attention to oneself and oneself within the web of collective interactions. It references the set of societally derives expectations borne by an individual as an expression of social solidarity in action. One bears the burden of attentiveness to ensure the integrity of a social system (including its cultural, economic, and political aspects) that ensures its stability by a distribution of the burdens of carefulness that aligns with cultural values and the performance of societal interactions.
Like caveat emptor, due diligence is molded not merely by socio-cultural expectations (realized in markets for interaction)– it is also managed and shepherded by politics and expressed in law. Under what circumstances the burden of due diligence arises, the definition of what is “due” defined. Beyond social expectations, political organs have increasingly turned to those mechanisms that impose on one or another party an obligation to be attentive at least to a certain minimum level. These then have attached to them the same consequences as caveat emptor but in a complementary way. Law can prescribe the consequences for failing to undertake a defined degree of attentiveness; law can define the context in which such attentiveness is required as well as the characteristics of the systems developed to ensure the proper execution of care and attentiveness obligations. And it can frame the obligations both to be attentive, and to provide the information necessary for those seeking it as a matter of the regulation of relations between private actors, or as a matter of obligation to the state administered through its administrative apparatus. In the latter sense, due diligence and due diligence systems have been tightly woven into the laws of securities regulation, and increasingly in virtually all aspects of corporate governance and in the economic relations among actors
This was the quite rich but limited universe in which caveat emptor and due diligence were interlinked and were expressed in practices and the legal frameworks designed to support them. The development was particularly potent first in the heartlands of the Anglo-European world and then elsewhere with distinct national and cultural characteristics.
Since the commencement of the construction of the institutions (and behavior rule-expectations) that have come to be understood as economic globalization, and especially after the 1990s, two important transformations began to appear. The first was something of an inversion in the relative privileging of caveat emptor and due diligence, on one which due diligence acquired a deeper societal and institutional character. The second was the critical broadening of the applicability of due diligence and its conceptual (and instrumental) manifestations within other spheres of societal normative practice. This change is now most acutely felt in the aligning of human rights and sustainability norm-expectations with the mechanics and sensibilities of due diligence. And by definition, the transformation of the expectations of the role of caveat emptor in the intermeshing of societal, economic and market activities with the human rights and sustainability expectations of society—now increasingly written into law as well as embedded in societal expectations markets effects.
It follows—and follows with increasing intensity—that no consideration of human (societal) economic activity can be comprehensively undertaken, or societal relations understood in this context, in the absence of a thorough encounter with the insinuation of the techniques, sensibilities, and normative ideologies of due diligence (and its shadow relationship to caveat emptor). As important, the intermeshing of societal, legal, cultural and political drivers crafting public and private legalities around due diligence expectations, especially in the context of business and their human rights and sustainability expectations, now merits serious study.