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CMA Intermediate · Business Laws and Ethics · Sale of Goods Act, 1930

Kiran agrees to sell his car to Lata at a price to be fixed by the valuation of Mr. Desai, a third party. Mr. Desai dies before making the valuation, and no goods were delivered. What is the effect on the agreement?

The agreement is avoided. When the price is to be fixed by a third party's valuation and the valuer cannot make it, the agreement ends. The reasonable price rule applies only if goods were delivered to and appropriated by the buyer.

  1. ALata must pay a reasonable price
  2. BThe agreement is avoidedCorrect
  3. CKiran may fix the price himself and enforce the contract
  4. DThe court must appoint another valuer and the agreement continues

Explanation

Under Section 10(1), if the third party cannot or does not make the valuation, the agreement is avoided. The proviso on a reasonable price applies only when goods have been delivered to and appropriated by the buyer, which did not happen here.

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