Start with wrongful non-delivery and actual loss
Section 57 of the Sale of Goods Act, 1930 allows a buyer to sue for damages when a seller wrongfully neglects or refuses to deliver. Establish the contract, delivery obligation, non-delivery and absence of an applicable excuse. Section 73 of the Indian Contract Act supplies the general loss framework: loss arising naturally or contemplated at contracting may qualify, remote loss is excluded, and available means of mitigating the loss must be considered.
Read the applicable text: Sale of Goods Act, 1930, sections 57, 58 and 61; Indian Contract Act, 1872, section 73 and illustrations; Specific Relief Act, 1963, section 21.
Build the comparable replacement schedule
Section 73 illustration (a) shows the ordinary market measure: the difference between the agreed price and the price of comparable goods when delivery should have occurred. Illustration (k) separately shows a reasonable replacement cost and why an undisclosed third-party commitment may not support additional recovery. Record quantity, grade, delivery point, transport terms, delivery timing and tax basis. Use actual reasonable replacement evidence where available, or supported contemporaneous market quotations. Explain any differences and test the delivery-date and quantity assumptions; a higher later quote may reflect a different market or an avoidable delay.
Separate additional losses from price spread
A replacement purchase can contain extra freight or emergency handling. Include a supported incremental cost only once and only to the extent legally recoverable. Preserve what the supplier knew at contracting about downstream commitments. A lost resale profit is not automatic. Keep alternatives available at the time and mitigation decisions on file, even when no replacement was bought.
Keep refunds and contract remedies separate
Track advances paid, amounts refunded and any asserted refund right separately from damages. Section 61 preserves recovery of money paid where the consideration for that payment has failed, and preserves interest or special damages where otherwise legally recoverable. Check contractual remedies, limits and dispute terms. Do not add the full replacement invoice to the full original price as loss. For specific or ascertained goods, section 58 addresses specific performance. Read it with the applicable Specific Relief Act provisions; section 21 addresses compensation in a suit for specific performance. Avoid double recovery for the same loss.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Comparable market measure
A seller fails to supply 500 identical units priced at ₹800. A comparable delivery-date market price is ₹920. The spread is ₹120 per unit and the price-difference working is ₹60,000.
Illustrative example 2: Partial delivery
Of 400 contracted units, 250 are delivered. For the remaining 150 the comparable replacement price is ₹1,160 against ₹1,000 contract price. The working is ₹24,000 for the missing units.
Illustrative example 3: Freight counted once
An all-in cover purchase costs ₹3,18,000, including ₹18,000 freight. The original delivered price was ₹2,80,000. The spread is ₹38,000; adding freight again would overstate it to ₹56,000.
Illustrative example 4: Avoidable delay
Equivalent supply was reasonably available for ₹2,50,000 when due against a ₹2,20,000 contract. An avoidable delay leads to a ₹2,75,000 purchase. The contemporaneous spread is ₹30,000. On the stated facts the extra ₹25,000 was avoidable and is excluded from that loss working.
Illustrative example 5: Refund and damages working
A ₹70,000 advance is partly refunded by ₹50,000. The separate advance shortfall is ₹20,000. Against a ₹4,00,000 original price, reasonable cover costs ₹4,60,000, so the price spread is ₹60,000. Track the two claims separately and check overlap and recoverability.
Illustrative example 6: Direct costs versus speculative resale
A supported price difference is ₹42,000 and separately recoverable handling on the stipulated facts is ₹8,000. An additional ₹35,000 resale profit claim lacks the necessary evidence. The supported working is ₹50,000, not ₹85,000.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Confirm the contract and due date | Accepted terms and delivery schedule. |
| 2 | Verify the missing quantity | Goods receipts and shortages log. |
| 3 | Establish wrongful non-delivery | Breach evidence and asserted excuses. |
| 4 | Find comparable substitutes | Quotes or purchase evidence at relevant dates. |
| 5 | Normalise commercial terms | Specification, freight, taxes and location. |
| 6 | Review mitigation | Available offers and decision record. |
| 7 | Calculate the price difference | Contract and cover schedule by missing units. |
| 8 | Verify distinct additional loss | Causation, knowledge and receipts. |
| 9 | Reconcile advances and refunds | Separate cash and claim schedules. |
| 10 | Approve the supported claim | Net working and legal review. |
Sixteen practitioner FAQs
1. Does section 57 apply to a buyer who simply changes plans?
No. It addresses the seller’s wrongful neglect or refusal to deliver.
2. What if the seller delivered only part?
Identify the missing units and analyse those units.
3. Can a quote substitute for an actual cover purchase?
A reliable contemporaneous comparable quote can support the analysis; verify its relevance.
4. Which price date matters?
Use the facts and applicable measure, ordinarily testing the price when performance was due.
5. Can a higher-quality substitute set the benchmark?
Normalise to comparable goods and explain any upgrade.
6. Should freight be added to every cover calculation?
Only to the extent incremental, supported and not already included.
7. Does a later price rise automatically increase damages?
No. Assess timing and available mitigation.
8. Can ordinary market spread and special loss both be claimed?
Check proof, foreseeability and overlap before combining them.
9. Is every resale profit recoverable?
No. Section 73 excludes remote loss and requires the relevant proof.
10. What if a customer penalty was not disclosed to the supplier?
Assess whether the claimed loss was reasonably within the parties’ contemplation.
11. Does an advance refund itself measure non-delivery damages?
It is a separate cash item; calculate loss independently.
12. Can I claim the full substitute invoice?
Normally compare it with the contract performance cost and account for refunds and benefits separately.
13. What if no loss can be substantiated?
Do not book the gross invoice as damages; assess the remedies available on the facts.
14. Does section 57 require a completed replacement purchase?
No express requirement, but prove loss and mitigation.
15. What if specific goods are still available?
Consider the appropriate remedy separately from this damages working.
16. What file best supports a claim?
A dated, comparable procurement record tied to the missing quantity and net loss.
Official sources
Sale of Goods Act, 1930, sections 57, 58 and 61; Indian Contract Act, 1872, section 73 and illustrations; Specific Relief Act, 1963, section 21