In hire purchase, the goods are let on hire. The purchase price to pay in installment.
A hire purchase agreement is defined as a particular kind of transaction in which the goods are let on hire with an option to the hirer to purchase them.
Following stipulation in hire purchase system.
1)In a specific time period payment made in installment.
2)Possession delivered to the hirer at the time of entering the contract.
3)The property in the goods passes to the hirer on payment of the last installment.
4)Each installment treated as hire charges so that if default made in the payment of any installment the seller becomes entitled to take away the goods and services.
5)The hire/purchase is free to return the goods without required to pay any further installment due after the return.
Hire purchase v/s installment payment
In an installment sale, the contract of sale entered into, the goods delivered and the ownership transferred to the price of the goods paid in specified installments over a definite period.
The distinction between hire purchase and installment purchase
1)The first difference based on the call option(to purchase the goods and services time during the term of the agreement and the right of the hirer terminate the agreement at any time before the payment of the last installment(right of termination)
2)In installment sale, the ownership in the goods passes on to the purchaser simultaneously with the payment of the first installment, whereas in hire purchase the ownership transferred to the hirer only when he exercises the option to purchase on payment of the last installment.
Legal framework of hire purchase
This act passed in 1972.An amendment bill introduced in 1989 to amend some of the provisions.
Act contains a provision for regulating
1)The format contents of the hire purchase agreement.
2)Warrants and the condition underlying thee hire purchase agreement.
3)Selling on hire purchase charges.
4)Rights and obligations of the hirer and the owner.
In absence of any specific law, the hire purchase transaction governed by the provision of the Indian contract Act and sales of Good Act.
1)An aspect of bailment of goods covered by the contract Act
2)An element of sale when the option to purchase exercised by the hirer is trending purchase which covered by the sale of a good act.
Sales of goods act
In the absence of any specific law, this transaction governed by the provision of the Indian contract act and the sales of goods act. This transaction agreement has two aspects.
i)An aspect of the bailment of goods covered by the contract act.
ii) An element of sale when the option to purchase exercised by the hirer intending purchase which covered by the sales of Goods Act.
A contract for sales of goods
A contract of sales of goods is a contract where the seller transfer or agrees to transfer the property in goods to the buyer for a price. It includes both an actual sale and an agreement to sell which vastly differ from the seller to the buyer the contract called a sale.
Where the transfer of property in the goods is to take place at a future time or subject to some conditions to be fulfilled later, called an agreement to sell.
Essential ingredients of sale
A contract of sale is constituted of the following elements.
a)Two parties->namely, the buyer and the seller, both competent to contract to effectuate the sale.
b)Goods->The subject -matter to be transferred from the seller to the buyer.
c)Money consideration->For the goods, known as ‘price’.
d)Transfer of ownership->The general property in the goods from the seller to the buyer.
e)Essential of valid contract-Under the Indian Contract Act.