Determine how the parties agreed to price the sale
Under section 9(1) of the Sale of Goods Act, 1930, the price may be fixed in the contract, determined by an agreed mechanism or established by the parties’ course of dealing. A purchase order without a numerical price is not necessarily a sale for an arbitrary price. Identify the contractual mechanism and its actual inputs. Where none determines the price, section 9(2) requires a reasonable price on the facts. This assumes an otherwise established sale; the section does not make every incomplete negotiation enforceable. Checked on 5 November 2026.
Read the applicable text: India Code: Sale of Goods Act, 1930, sections 9 and 10.
Reconstruct the pricing evidence in order
Keep the accepted order, amendments and rate sheet before turning to prior transactions. For an agreed formula, record the specified benchmark, observation date, unit, grade and adjustment. For a course-of-dealing claim, compare genuinely similar transactions and actual acceptance, not an isolated invoice challenged by the buyer. When section 9(2) applies, collect comparable evidence for the relevant time and conditions, including freight and specifications. The statute supplies no universal average, markup or pricing date for all cases.
Read third-party valuation as a separate branch
Section 10(1) addresses an agreement to sell on terms that the price is to be fixed by a third party’s valuation. If that party cannot or does not value, the agreement is avoided under the stated rule. Review any operative replacement-valuer or fallback clause before concluding that the mechanism failed. Do not bypass a genuinely essential valuation condition by automatically inserting a section 9 price for the entire order. Establish whether a valuation was the agreed price-setting condition rather than a merely advisory estimate.
Measure only the delivered and appropriated goods under the proviso
Section 10(1)’s proviso requires reasonable price for goods, or the part, delivered to and appropriated by the buyer. Document both facts, especially when part is used in production and part remains segregated awaiting return. Delivery records alone do not establish the second fact. Reconcile serials and quantities with stores, consumption and communications. The examples stipulate the legal characterisation of the relevant goods; a warehouse receipt or ERP goods-received flag is not a universal appropriation test.
Separate a price obligation from a fault-based damages claim
If seller or buyer fault prevents the valuation, section 10(2) lets the party not at fault maintain a damages suit. Support actual prevention, responsibility and loss; a valuer’s unavailability does not prove either party’s fault. Keep the claimed damages, mitigation and any amount due for appropriated goods in separate schedules and avoid double counting. The examples use stipulated evidence and amounts before taxes, interest or legal costs. Contract pricing under sections 9 and 10 does not itself establish GST valuation or revenue recognition.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Fixed purchase-order price
The accepted order fixes ₹800 per unit for 150 units. Price is ₹1,20,000 before separate taxes. A later comparable quote of ₹850 does not itself replace that agreed rate; the alternative would add ₹7,500 without an assumed amendment.
Illustrative example 2: Agreed benchmark and processing amount
For 180 units, assume the contract fixes a specified-date benchmark plus ₹70 processing per unit. The valid benchmark is ₹540. Price is ₹610 per unit, or ₹1,09,800. Verify the benchmark date and avoid adding a second processing charge.
Illustrative example 3: Established course of dealing
Assume the parties’ accepted recurring transactions establish ₹750 per unit for the same grade and terms. Eighty units give ₹60,000. A later disputed invoice at ₹790 would show ₹63,200, a ₹3,200 variance requiring support rather than automatic acceptance.
Illustrative example 4: Reasonable-price evidence
Assume no price under section 9(1). Supported comparable ₹530 per unit is adjusted by ₹20 for comparable delivery and minus ₹10 for grade. The evidenced estimate is ₹540 per unit and ₹64,800 for 120 units. These adjustments are stipulated; the Act does not prescribe this formula.
Illustrative example 5: Valuer fails after partial appropriation
There is no operative fallback. Of 100 units delivered, assume only 60 are appropriated and the other 40 are segregated without appropriation. On supported reasonable price of ₹700 each, the section 10(1) proviso gives ₹42,000 for the 60 units. Do not bill all 100 for ₹70,000 on that basis.
Illustrative example 6: Quantify a claim without assuming an award
Assume the buyer wrongfully prevented the valuation and the seller can evidence ₹25,000 replacement freight and ₹18,000 distinct wasted testing cost, less ₹8,000 of mitigation proceeds. The model claim is ₹35,000. Section 10(2) permits a suit in the stated circumstances; the arithmetic does not decide causation or recoverability.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify the agreement | Retain accepted orders and amendments. |
| 2 | Classify the price mechanism | Distinguish fixed amount, formula, course of dealing and third-party valuation. |
| 3 | Check benchmark details | Record date, unit, grade and agreed adjustments. |
| 4 | Evidence prior dealings | Match comparable accepted transactions. |
| 5 | Build reasonable-price evidence | Document comparable terms and reasoned adjustments. |
| 6 | Read fallback wording | Confirm whether another valuer or formula remains operative. |
| 7 | Verify valuation failure | Retain appointment and correspondence records. |
| 8 | Reconcile appropriated quantity | Prove delivery and appropriation for the claimed portion. |
| 9 | Separate fault and damages | Document prevention, causal losses and mitigation. |
| 10 | Close the transaction file | Reconcile price, claims, taxes and accounting separately. |
Sixteen practitioner FAQs
1. Must the contract state a rupee figure?
No. Section 9(1) recognises agreed mechanisms and course of dealing.
2. Can an index formula set the price?
Yes, if it is the agreed mechanism and its inputs can be established.
3. Is one historic invoice a course of dealing?
Not necessarily. Review comparable transactions and acceptance.
4. When is reasonable price relevant under section 9?
When price is not determined under subsection (1).
5. Is reasonable price a fixed statutory formula?
No. It depends on the particular facts.
6. Does an unaccepted quote prove an agreed price?
No. Establish its contractual status.
7. What triggers section 10(1)?
A price dependent on third-party valuation that cannot or does not occur under the stipulated agreement.
8. Does a valuer’s report always bind the parties?
Its effect depends on the actual agreed pricing terms.
9. What if a replacement valuer is provided for?
Examine whether that mechanism remains operative.
10. Can section 9 automatically save the whole failed valuation deal?
No. Analyse section 10 and the actual contract separately.
11. Which goods fall within the section 10 proviso?
The goods delivered to and appropriated by the buyer.
12. Does delivery alone prove appropriation?
No. Examine what the buyer did with the goods and the relevant terms.
13. Can the proviso apply to only part of the order?
Yes. Reconcile that specific quantity.
14. Does valuer unavailability prove party fault?
No. Section 10(2) requires prevention by a party’s fault.
15. Is a damages worksheet an entitlement determination?
No. It supports a claim subject to evidence and legal assessment.
16. Does the reasonable-price figure automatically set GST value?
No. GST valuation follows the applicable tax provisions.