The priceCentral

Section 10 of The Sale of Goods Act, 1930

(1)Where there is an agreement to sell goods on the terms that the price is to be fixed by the valuation of a third party and such third party cannot or does not make such valuation, the agreement is thereby avoided: Provided that, if the goods or any part thereof have been delivered to, and appropriated by, the buyer, he shall pay a reasonable price therefor.
(2)Where such third party is prevented from making the valuation by the fault of the seller or buyer, the party not in fault may maintain a suit for damages against the party in fault

Summary

This section applies when a buyer and seller agree to let a third person decide the price of the goods.
If that third person is unable to or refuses to set a price, the agreement is generally cancelled.
However, if the buyer has already received and started using any of the goods, they must pay a reasonable price for those specific goods.
If the seller or buyer does something to stop the third person from making the valuation, the person at fault can be sued.
The party who is not at fault has the right to seek damages (compensation) if the valuation process is blocked.

Practical examples

1Farmer John agrees to sell his tractor to Sarah for a price to be determined by an independent mechanic, Mr. Miller, on October 5th. Mr. Miller unexpectedly goes out of business and refuses to do the valuation. Since no goods were delivered yet, the agreement is avoided under Section 10.

2In a deal on November 1st, a library agrees to buy 50 rare books from a collector at a price set by an expert appraiser. The library takes 10 books immediately. Before the expert can price them, the collector hides the remaining books to prevent the appraisal. The library must pay a reasonable price for the 10 books and can sue the collector for damages under Section 10.

FAQ

1. What happens under Section 10 of The Sale of Goods Act, 1930 if the third-party appraiser refuses to value the goods?

Under Section 10 of The Sale of Goods Act, 1930, if the third party cannot or does not make the valuation, the agreement is avoided, provided no goods have been delivered and used.

2. If I already used the goods but the appraiser failed to set a price, do I get them for free under Section 10 of the 1930 Act?

No, under Section 10 of the Sale of Goods Act, 1930, if the goods have been delivered to and used by the buyer, the buyer must pay a reasonable price for them even if the valuation fails.

3. Can I sue the seller if they block the appraiser from seeing the goods under Section 10 of the 1930 Act?

Yes, Section 10 of the Sale of Goods Act, 1930 allows the party not at fault to sue for damages if the other party prevents the third party from making the valuation.

Test yourself

Q1.Under Section 10 of The Sale of Goods Act, 1930, what is the default result if a chosen third party does not value the goods?

Q2.According to Section 10 of The Sale of Goods Act, 1930, if the buyer has already received and appropriated some goods before the valuation fails, what must they pay?

Q3.Under Section 10 of the 1930 Act, what can a buyer do if the seller prevents the third party from valuing the goods?

Q4.How does Section 10 of the Sale of Goods Act, 1930 interact with Section 9 regarding reasonable price?

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