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Section 107: Sections 76 to 123 [Repealed by the Indian Sale of Goods Act, 1930]

Indian Contract Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1872
Section 106 All 266 Sections of Indian Contract Act Section 108

Legal Commentary & Landmark Judgments: Section 107

Historical Section 107 of the Indian Contract Act, 1872 codified the unpaid seller's right to resell the goods where the buyer made default in payment, entitling the seller to recover from the defaulting buyer any deficiency arising from the resale and reasonable expenses incurred, while requiring the seller to retain any surplus if the contract had not reserved resale rights. Transposed into Section 54 of the Sale of Goods Act, 1930, this provision establishes the accounting mechanism for mitigation of commercial damages.

  • Statutory Right to Claim Deficiency: If upon resale the realized price is less than the contract price, the seller can recover the deficit as liquidated compensation from the defaulting buyer.
  • Surplus Retention and Resale Reservation: Unless the right of resale was expressly reserved in the contract, an unpaid seller who failed to give notice of resale could not recover the deficiency and was accountable for any surplus.
  • Duty to Mitigate and Reasonable Timing: The resale must be conducted within a reasonable time and at prevailing market rates; an unreasonably delayed distress sale does not bind the buyer for the inflated deficiency.
Key Landmark Precedents:
  • Murlidhar Chiranjilal v. Harishchandra Dwarkadas AIR 1962 SC 366: The Supreme Court held that on breach of contract of sale, the seller's measure of damages is the difference between contract price and market price at the date of breach, and the seller must take all reasonable steps to mitigate loss through timely resale.
  • Ramgopal v. Dhanji Jadhavji Bhatia (1928) 55 IA 299 (PC): The Privy Council affirmed that an unpaid seller exercising resale powers must act prudently and expeditiously; damages claimed for loss on resale will be disallowed if the seller delayed the sale in a falling market.
Courtroom Practice & Strategic Litigation Guidance:

In drafting breach of contract plaints claiming resale deficit, plead that the resale was conducted in a commercially reasonable manner after notice. Annex auction advertisements, quotations from multiple prospective buyers, and invoices to defeat allegations of collusive or undervalued resale.

Section 106 All 266 Sections of Indian Contract Act Section 108