The price for goods may be expressly fixed by the contract. If not fixed by the contract, the price may be an open term, whereby the parties merely indicate how the price should be determined at a later time or make no provision whatever as to the price. When persons experienced in a particular industry make a contract for goods without specifying the price to be paid, the price will be determined by the manner that is customary in the industry. Ordinarily, if nothing is said as to price, the buyer is required to pay the reasonable value of the goods, which is generally the market price.

In recent years, there has been an increase in the use of the cost plus formula for determining price. Under this formula, the buyer pays the seller a sum equal to the cost to the seller of obtaining the goods plus a specified percentage of that cost. The percentage represents the seller’s profit.

The contract may expressly provide that one of the parties may determine the price. In such a case, that party must act in good faith. The contract may specify that the price shall be determined by some standard or by a third person. For example, Lee agreed to sell Glen 1,000 yards of cotton fabric at a price to be fixed by White, a cotton fabric expert. If White fixes the price at $7 a yard, that price is as binding on the buyer and the seller as though it had been fixed by agreement between them. If White refuses to fix a price through no fault of the parties, the price will be a reasonable price, probably the current market price.