Ascertainment of Price is critical while formulating a contract. The Ascertainment of Price is a very crucial step in the and can sometimes even determine the nature of the contract. But what does the law say about the price? How is the price defined in The Sale of Goods Act, 1930?

Meaning[Section 2(10)]
Price means the money consideration for a sale of goods.
Modes of determining Price [Section 9(1)]
There are three modes of determining the price as under:
 It may be fixed by the contract or
 It may be left to be fixed in an agreed manner
 It may be determined by the course of dealing between the parties.
 Thus,the price need not necessarily be fixed at the time of sale.

Price of a Contract

Also, from the Section 9 (1), we can see that the price in the contract of sale may be determined or stated by:

1. the contract, i.e. the price is explicitly mentioned or decided within the contract of sale itself or
2. the contract has some clause(s) that has the or defines the authority  that will eventually ascertain the price. For example, the contract asks for a valuer to be commissioned for the purpose of the ascertainment of price.
3. the price may also be determined by the course of dealings. For example, if the two parties have a long history of dealing with each other, then the price if not specified clearly can be ascertained from the previous history of dealings and prices. Clearly, this portion of the section is only applicable if the parties have a tradition or history of similar deals.

Similarly, Sec 9 (2) says that if the price is not determined through either of the methods discussed in sec 9 (1) then the buyer will have to pay the seller a reasonable price. This price will be decided in accordance with the market value.

For example, if the Government of your State has been purchasing its electricity from a neighboring state at a given price. If they enter into a new contract, then the price will either be:

1. explicitly mentioned in the contract.
2. fixed by the two parties after due consideration with each other.
3. or the price will be the same as was traditionally accepted by the two parties.

Consequences of not determining the Price in any of the Mode [Section 9(2)]
Where the price is not determined in accordance with Section 9(1),the buyer must pay seller a reasonable price.What is a reasonable price is a question of fact dependent on the circumstances of each particular case.It may be noted that a
reasonable price need not be market price.

Agreement to sell at Valuation (Section 10)

Since now the sec 9 of the Act discussed what we can call the direct modes of ascertaining the price. However, there are other modes of price determination that we will define in the sec (10).

• 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, therefore.
• 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.”

The method of determination or mode of ascertaining the price here is by a third party. This comes into effect when both the parties have decided to the clause that the price will be decided by the third party. However in case the third party is not capable or refuses to make a proper valuation of the goods to be purchased, then the agreement will be void.

In some cases, the third party may be obstructed by the default of one of the parties. In such case, the party at fault will be responsible to pay proper compensation in terms of damages to the other party, provided that the other party is not at fault. Once the goods have been appropriated and received, the buyer is liable to pay the price thereof.

Consequence of not Fixing Price by third party[Section 10(1)]
The agreement to sell goods becomes void if the following two conditions are fulfilled.
 If such agreement provided that the price is to be fixed by the valuation of a third party,
 If such third party cannot or does not make such valuation.

Duty of buyer
A buyer who has received and appropriated the goods,must pay a reasonable price therefor.
Right of party not at fault to sue Where such a third party is prevented from making the valuation by fault of the
seller or buyer,the party not at fault may maintain a suit for damages against the party in fault.