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Modes of determining price of goods

The price of goods is an important element of a valid sale. It is the consideration for transfer or agreement to transfer the property in goods from the seller to the buyer. Thus, there can be no valid sale without a price. According to Sec. 2(10) of Sale of Goods Act, “Price means the money consideration for a sale of goods”. In other words, the money paid for the purchase of goods is called the price. The price may be fixed in various ways. The different modes of fixing the price are contained in Section 9 of the Sale of Goods Act, which may be discussed under the following heads:
  • Sec 9(1) It may be fixed by the contract itself: This is the most common way of fixing the price. When the parties make the contract of sale, they generally also make a mention of the price which has to be paid for the goods
  • Sec 9(1) It may be fixed in accordance with an agreed manner: For example, the parties agree that the market price prevailing on the date of supply of goods will be the price to be paid.
  • Sec 9(1) Fixation of price by course of dealings: Sometimes, the customs or usage of trade provides certain principles for the determination of the price. This method is applicable if parties regularly trade.

If the buyer has been previously paying to a particular seller, the price prevailing on the date of placing the order, the course of dealings suggest that in subsequent transactions also the price on the date of order will be paid

  • Sec 9(2) Fixation of a reasonable price: Sometimes, none of the above principles is applicable. In such cases, the buyer shall pay to the seller a reasonable price (market price)
  • Sec 10 Fixation of price by a third party: The parties may agree to sell and buy the goods on the terms that the price shall be fixed by the valuation of a third party. It may, however, be noted that if such third party fails to make the valuation, the contract becomes void. However, in such a case, if the buyer has already received the goods or part thereof and appropriated them, he is bound to pay reasonable price for the same.

A agreed to sell his 100 bags of rice to B at a price to be fixed buy C. if C fails to fix the price then the agreement is void. If A prevents C from making the valuation of goods and fix the price then B can claim damages from A.


Note: Sometimes, the buyer or seller prevents the third party to fix the price. In such a case, the aggrieved party can claim for damages.

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