Prove the buyer’s wrongful non-acceptance first
Section 56 of the Sale of Goods Act, 1930 permits a seller to sue for damages where the buyer wrongfully neglects or refuses to accept and pay for the goods. Establish the contract, what was due, readiness and ability to tender and why the refusal was wrongful. A buyer with a valid right to reject presents a different case. Section 55 is a separate route for the price if its conditions are met. The entire invoice is not the default measure of section 56 damages.
Read the applicable text: India Code: Sale of Goods Act, 1930, sections 44, 54–56 and 60 India Code: Indian Contract Act, 1872, section 73 and illustrations.
Build a comparable market file at the relevant date
Apply the loss principles in section 73 of the Indian Contract Act, 1872. Its illustrations (c) and (d) support comparing the contract price with what the seller could obtain at the relevant breach point on those facts. Seek contemporaneous offers and completed trades for equivalent goods, location, quantity and delivery terms. Bridge adjustments for differences in packaging, freight, quality or lot size. Where there is no reliable market, develop a supported loss model rather than plugging in an unsupported comparison. If the buyer repudiates before delivery, section 60 lets the seller keep the contract alive until the delivery date or treat it as rescinded and sue for damages. Identify the relevant valuation date in light of that election and the facts.
Account for mitigation, avoided costs and proceeds
Document efforts to find another buyer and why a bid was accepted or rejected. A later resale can support the evidence, but a later fire-sale price does not automatically establish the recoverable spread. Deduct avoided costs in the appropriate comparison and include additional costs only where caused by the breach, recoverable under section 73 and not already captured in the spread. Exclude remote loss. Section 44 addresses loss caused by neglect or refusal to take delivery after the seller is ready and willing and requests delivery, plus a reasonable custody charge. If relying on an unpaid seller’s statutory resale under section 54, check the applicable route, including perishability, notice where required, or an expressly reserved right of resale. Reconcile these items with the section 56 working. The same loss should be claimed once.
Present damages, recoveries and price routes separately
Prepare a schedule by affected lot: original terms, mitigation comparator, proposed incremental costs, savings and credits. Identify any deposit and analyse the terms and applicable law before setting it against the claim. Separate price, damages and interest issues instead of assuming they are cumulative. Section 61 preserves claims for interest or special damages where otherwise recoverable, and separately addresses the court’s discretion to award interest in specified suits. Record which items need legal review and preserve contemporaneous evidence so the position can be defended even if the market later moves.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Comparable price spread
A seller contracted for 400 units at ₹1,050 each. Equivalent goods could be sold on like terms at ₹980 per unit at the relevant breach point. The starting loss is ₹70 × 400 = ₹28,000, subject to the supported facts and mitigation.
Illustrative example 2: Match freight terms
A contract price of ₹1,200 per unit includes delivery costing ₹70 per unit. An otherwise comparable alternative buyer offers ₹1,090 per unit ex works, avoiding that delivery cost. Compare net proceeds of ₹1,130 and ₹1,090; on 300 units the initial difference is ₹12,000.
Illustrative example 3: Do not import a later price slump
A 200-unit contract was priced at ₹1,000 per unit. Evidence supports ₹940 at breach, but the market fell to ₹850 by an avoidably delayed resale. The breach-date difference is ₹12,000; the late resale difference of ₹30,000 is not automatically recoverable.
Illustrative example 4: No ready market for a bespoke lot
Expected proceeds were ₹4,00,000. At breach the seller could avoid ₹90,000 of remaining costs and obtain ₹2,10,000 net by a reasonable alternative disposal. Comparing ₹3,10,000 expected net inflow with ₹2,10,000 mitigated net inflow gives a ₹1,00,000 working, subject to proof and review.
Illustrative example 5: Strip out overlapping custody costs
A supported price-spread working is ₹48,000 and the seller proposes ₹7,000 additional costs. Of these, ₹3,000 are already captured in the net resale comparator. The proposed total before further legal review is ₹52,000, with only ₹4,000 added separately.
Illustrative example 6: Credit an applied deposit
Assume ₹60,000 damages are established and ₹25,000 already held is validly applied against that same claim. The residual is ₹35,000; maintain the gross claim, deposit and application evidence separately.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Verify the concluded bargain | Purchase order, accepted terms and goods specifications. |
| 2 | Prove performance readiness | Production, conformity and tender evidence. |
| 3 | Classify the refusal | Buyer notice and legal review of rejection rights. |
| 4 | Identify the breach and remedy route | Event chronology, price rights and any repudiation election. |
| 5 | Collect relevant market evidence | Matched quotations and completed transactions. |
| 6 | Normalise transaction terms | Quality, lot size, freight and location adjustments. |
| 7 | Document mitigation | Bid comparisons, communications and alternative disposal. |
| 8 | Check proposed additional costs | Breach causation, proof and exclusion of remote losses. |
| 9 | Remove overlap and reconcile credits | Custody, disposal, deposits and net claim bridge. |
| 10 | Archive the final claim file | Approved computation and evidence by lot and date. |
Sixteen practitioner FAQs
1. Is buyer non-payment always a section 56 case?
No. Section 56 concerns wrongful neglect or refusal to accept and pay. Check section 55 separately where a price claim may lie.
2. Can I use the whole invoice as damages?
Establish the actual compensable loss and the means available to reduce it.
3. What if the goods failed a valid acceptance test?
Review the buyer’s rejection rights before treating the refusal as wrongful.
4. How do I handle a refusal before delivery?
Assess the section 60 choice and document the response and resulting timeline.
5. Which comparison date should I use?
Identify the legally relevant breach point; section 73 illustrations demonstrate contemporaneous comparisons on their stated facts.
6. Is a quote for a lower-grade product adequate?
Only if differences are reliably adjusted or shown not to affect the comparison.
7. Can I wait for a higher market price?
The available means of mitigating the loss matter. Document reasons for waiting and the alternatives.
8. Does an actual resale decide damages automatically?
No. Consider timing, comparability and whether the seller reasonably mitigated.
9. What if the goods were made to order and cannot be resold as delivered?
Support any feasible conversion, salvage or alternative market and quantify avoided completion costs.
10. Should I include delivery cost in the price spread?
Use comparable terms or net proceeds. Do not deduct the same freight cost twice.
11. Can the seller claim remote reputational losses?
Section 73 excludes remote and indirect loss. Apply causation and foreseeability to any claimed additional item.
12. Do I need to examine the unpaid-seller resale rules?
Yes if using that statutory route. Section 54 may govern its notice and recovery consequences.
13. How do I handle storage charges already in a net resale figure?
Remove them from any additional-cost line.
14. Is a forfeiture clause automatically enforceable for its full amount?
No. Review the contract and the character of the payment. Where section 74 applies to a named sum or penalty, reasonable compensation is capped by the stated sum or penalty; do not treat the clause alone as proof of an entitlement to retain the full deposit.
15. What if the original price was payable on a fixed day regardless of delivery?
Check the conditions in section 55(2) before choosing the price or damages route.
16. What evidence should survive settlement?
Retain the market and mitigation file and a bridge from claimed damages and credits to the amount settled.
Official sources
India Code: Sale of Goods Act, 1930, sections 44, 54–56 and 60 India Code: Indian Contract Act, 1872, section 73 and illustrations