Prove the breach before measuring the price difference
Section 57 of the Sale of Goods Act, 1930 allows a buyer to sue for damages where the seller wrongfully neglects or refuses to deliver. Verify the delivery terms, agreed specifications, available contractual extensions and the actual breach. Section 73 of the Indian Contract Act, 1872 addresses loss arising naturally or contemplated at contract formation, excludes remote and indirect loss, and requires taking into account available means of reducing the inconvenience from non-performance.
Read the applicable text: Sale of Goods Act, 1930, section 57 Indian Contract Act, 1872, section 73.
Compare the same goods on the same commercial basis
For a reasonably sourced replacement, reconcile quantity, grade, delivery location, due date, freight and recoverable tax. A price difference can support the loss analysis; it is not a fixed statutory measure for every case. Compare usable substitute quantities with undelivered units and exclude optional upgrades or unrelated freight. Where an available market provides the ordinary measure, retain evidence of the market price at the contractual place and time for delivery or the relevant breach date, as the facts require. A reasonable replacement purchase can support the loss calculation, but making one is not invariably necessary. The Supreme Court’s decision in Murlidhar Chiranjilal illustrates the importance of proving the relevant market price and taking reasonable steps to mitigate loss.
Record mitigation and incremental costs
Document procurement attempts, quotations, lead times and why the selected option was reasonable. Where a cheaper quotation could not meet the specification or date, retain that evidence. Identify separate incremental expedited freight or handling only to the extent evidenced and not already in the replacement price. Capture savings, refunds and recoveries when relevant to the claimed loss.
Keep restitution, damages and remedies separate
An advance that remains with the original supplier is a separate component to analyse on its own legal basis; section 61(1) preserves recovery of money paid where the consideration has failed, where applicable. Do not add it to a gross substitute invoice as though the original contract price were irrelevant. Where cancellation, a remedy clause or an agreed settlement applies, read the actual terms and review interaction with any other remedy. Do not assume every amount in a claim letter is an accounting receivable.
Build a file a reviewer can reproduce
Link the original contract and due-date chronology to vendor quotes, replacement invoices, goods receipts and payment proof. Use separate rows for price differential, causally related costs, credits and any independently supported advance claim. Close each quantity and value difference, and record disputed items without presenting them as established damages.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Like-for-like replacement
Of 500 units, 200 are not delivered. Original price is ₹800 per unit and a comparable replacement is ₹950. The supported starting price difference on 200 units is ₹30,000.
Illustrative example 2: Two sourcing options
For 100 comparable units, timely replacement at ₹520 instead of the original ₹480 gives ₹4,000 incremental price. A quote at ₹500 with unsuitable lead time would imply ₹2,000; keep the lead-time evidence explaining the difference.
Illustrative example 3: Avoid double counting freight
The delivered replacement price is ₹78,000 versus ₹70,000 originally delivered. It already includes ₹3,000 freight. The comparison gives ₹8,000, not ₹11,000 after adding the same freight again.
Illustrative example 4: Different grade and optional upgrade
Replacement for 50 units costs ₹1,200 each versus ₹1,000 originally. Assume ₹70 per unit relates solely to a voluntary upgrade. The adjusted difference is ₹130 per unit, or ₹6,500.
Illustrative example 5: Advance and net cover
Original comparable price is ₹2 lakh and cover costs ₹2.35 lakh. The price difference is ₹35,000. A ₹50,000 advance of which ₹20,000 was returned leaves a separate ₹30,000 balance to assess.
Illustrative example 6: Savings against the differential
Assume ₹22,000 price difference and ₹6,000 additional reasonable cost, with ₹4,000 documented saved handling relevant to the claim. The working is ₹24,000 before legal review.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Read the supply contract | Due date, specifications and remedy terms |
| 2 | Confirm the breach chronology | Correspondence and actual delivery log |
| 3 | Measure undelivered goods | Order and goods-receipt records |
| 4 | Obtain comparable quotes | Product, date, location and terms |
| 5 | Document mitigation decision | Availability and lead-time comparison |
| 6 | Normalise price components | Freight, duties, creditable tax and discounts |
| 7 | Remove upgrades and overlaps | Quantity-level comparison |
| 8 | Track original advance separately | Payment, refund and ledger evidence |
| 9 | Check deductions and recoveries | Savings and settlement records |
| 10 | Approve the claim file | Legal and commercial reconciliation |
Sixteen practitioner FAQs
1. Is a supplier delay always a wrongful refusal?
Check agreed extensions, notices and the facts.
2. Does section 57 give a fixed formula?
It supplies the remedy; actual damages require applicable legal and factual analysis.
3. Should the whole order enter the price comparison?
Measure the affected undelivered quantities.
4. Can a substitute with better specification be used?
Normalise any voluntary upgrade and show the comparable basis.
5. Is the cheapest quotation always required?
Assess actual availability, performance and terms as part of reasonable mitigation.
6. Should replacement GST be added?
Test recoverability and compare like with like.
7. Can urgent freight be included?
Support causation, reasonableness and absence of duplication.
8. What if cover was never bought?
A purchase is not invariably required. Preserve price and availability evidence for the relevant place and time and establish the proper measure of loss on the facts.
9. Can lost profits be assumed?
No. Assess proof, causation, remoteness and overlap.
10. Does a demand letter establish a receivable?
No. Apply the separate accounting recognition analysis.
11. Should an advance refund reduce the price differential?
Record it against the relevant advance claim unless facts support another allocation.
12. Can the buyer claim the entire replacement invoice as loss?
The original cost and any other relevant components must be considered.
13. What if a later shipment is accepted?
Review affected quantities and how acceptance changes the claim.
14. Can another remedy be pursued?
Check contract terms and applicable law, including overlap and election where relevant.
15. Does a settlement credit affect the outstanding balance?
Trace the actual allocation and avoid counting a recovery twice.
16. What is the most useful audit evidence?
A reconciled chronology and quantity comparison backed by independent commercial documents.
Official sources
Sale of Goods Act, 1930, section 57 Indian Contract Act, 1872, section 73
Supreme Court: Murlidhar Chiranjilal v. Harishchandra Dwarkadas, [1962] 1 SCR 653