The price of the goods

Being an essential part of the contract by virtue of s 2  the price of the goods is usually expressly agreed; for example, when buying goods in a shop, the buyer agrees to pay the marked price. Section 8 of the SoGA 1979 confirms that the price may be fixed by the contract and also indicates that the price can be determined by a course of dealing between the parties or in a manner agreed by the contract. Thus, when  re-ordering goods without reference to the price, the parties could be taken to agree that the price paid in a previous transaction was applicable to this contract. Equally, the parties might validly agree that an independent third party should determine the price payable. Of course, the question arises of what happens if that third party does not make, or is prevented from making, that determination of the price payable. Section 9 of the SoGA 1979 solves these issues:

(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 he cannot or does not make the valuation, the agreement is avoided; but if the goods or any part of them have been delivered to and appropriated by the buyer, he must pay a reasonable price for them.

(2) Where the third party is prevented from making the valuation by the fault of the seller or buyer, the party not at fault may maintain an action for damages against the party at fault.

Some problems arising from determination of the price, however, are not specifically addressed by the SoGA 1979. Though the Act indicates in s 8 that ‘a reasonable price’ is payable where the price has not been determined under s 8 it has beensuggested that failure to agree a price or a manner of fixing it means that there is no contract concluded and s 8 cannot operate to make such an arrangement a contract.

In May and Butcher v The King an agreement for the purchase of government tentage provided that the price was to be agreed from time to time; effectively, they agreed to make later agreements as to the price. Had there been no mention of the price at all, then failure to actually agree a price would not mean that there was no contract: a ‘reasonable price’ would have been payable, under the SoGA 1893. However, as the parties had expressly stated that the price was to be agreed later, it was held that they were simply agreeing to agree and had not intended to make a binding contract.

In Foley v Classique Coaches Ltd the defendants agreed to purchase supplies of petrol from the plaintiffs, at a price ‘to be agreed by the parties from time to time’. Failing agreement, the price was to be settled by arbitration. The agreement was held to be a binding contract by the Court of Appeal.

The distinction between the two cases would appear to be based on the fact that, by providing a method by which the price could be fixed, the parties had shown an intention to make a legally binding agreement. Accordingly, it would seem that intention to be bound can be regarded as the key issue, and agreement as to price is merely a factor in determination of such intention.