Ascertainment of Price is critical while formulating a contract. The Ascertainment of Price is a very crucial step in the and can sometimes even determine the nature of the contract. But what does the law say about the price? How is the price defined in The Sale of Goods Act, 1930? Let us find out below!
Ascertainment of Price
The Sale of Goods Act, 1930 has two sections, that discuss the ascertainment of a price. Ascertainment of price means to specify without ambiguity the price of a commodity. The Act has two sections that discuss this – sec 9 and sec 10. Let us see each of these separately and try to understand what provisions exist herein.
The sec 9 of the Act states the following:
The price in a contract of sale may be fixed by the contract, or it may be left to be fixed in manner thereby agreed or it can be determined by the course of dealing between the parties to the contract.
- Where the price is not determined in accordance with the said provisions, the buyer shall pay the seller a reasonable price. Reasonable price will depend on the individual case or circumstance.
If you look at the first part, the term price has to be defined. Section 2 (10) of the Act defines price as the monetary consideration or value decided for the sale of goods. Thus we see that for a price to come into existence, a sale has to come into existence.
Price of a Contract
Also, from the Section 9 (1), we can see that the price in the contract of sale may be determined or stated by:
- the contract, i.e. the price is explicitly mentioned or decided within the contract of sale itself or
- the contract has some clause(s) that has the or defines the authority that will eventually ascertain the price. For example, the contract asks for a valuer to be commissioned for the purpose of the ascertainment of price.
- the price may also be determined by the course of dealings. For example, if the two parties have a long history of dealing with each other, then the price if not specified clearly can be ascertained from the previous history of dealings and prices. Clearly, this portion of the section is only applicable if the parties have a tradition or history of similar deals.
Similarly, Sec 9 (2) says that if the price is not determined through either of the methods discussed in sec 9 (1) then the buyer will have to pay the seller a reasonable price. This price will be decided in accordance with the market value.
For example, if the Government of your State has been purchasing its electricity from a neighboring state at a given price. If they enter into a new contract, then the price will either be:
- explicitly mentioned in the contract.
- fixed by the two parties after due consideration with each other.
- or the price will be the same as was traditionally accepted by the two parties.
Agreement to sell at Valuation (Section 10)
Since now the sec 9 of the Act discussed what we can call the direct modes of ascertaining the price. However, there are other modes of price determination that we will define in the sec (10). Let us state the Section and then we will move on to explanation and analysis.
- Where there is an agreement to sell goods on the terms that the price is to be fixed by the valuation of a third party and such third party cannot or does not make such valuation, the agreement is thereby avoided; PROVIDED that, if the goods or any part thereof have been delivered to and appropriated by, the buyer, he shall pay a reasonable price, therefore.
- Where such third party is prevented from making the valuation by the fault of the seller or buyer, the party not in fault may maintain a suit for damages against the party in fault.”
The method of determination or mode of ascertaining the price here is by a third party. This comes into effect when both the parties have decided to the clause that the price will be decided by the third party. However in case the third party is not capable or refuses to make a proper valuation of the goods to be purchased, then the agreement will be void.
In some cases, the third party may be obstructed by the default of one of the parties. In such case, the party at fault will be responsible to pay proper compensation in terms of damages to the other party, provided that the other party is not at fault. Once the goods have been appropriated and received, the buyer is liable to pay the price thereof.
Solved Example For You
Q: Sec 9 (2) says that the price can be determined by an arbitrator. Is this statement right or not? Explain.
Ans: The statement is not correct. The mode of ascertaining the price through the help of a third party is discussed in the Sec (10) of the Act. In sec 9 (2), it is given that in case the price is not determined by (sec 9 (1)):
- the contract
- some agreed provision or procedure mentioned explicitly in the contract of sale or
- by the course of dealings.
In such a case, sec 9 (2) states that the buyer will have to pay the seller a reasonable price. The price is accepted in the market. Thus the statement is not correct.