Page 184 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Unit 12: Hire Purchasing

5. The hirer/purchase is free to return the goods without being required to pay any further Notes
installments falling due after the return.

Features of Hire Purchase Agreement

1. Under hire purchase system, the buyer takes possession of goods immediately and agrees
to pay the total hire purchase price in installments.
2. Each installment is treated as hire charges.
3. The ownership of the goods passes from the seller to the buyer on the payment of the last
installment.
4. In case the buyer makes any default in the payment of any installment the seller has right
to repossess the goods from the buyer and forfeit the amount already received treating it
as hire charges.
5. The hirer has the right to terminate the agreement any time before the property passes.
That is, he has the option to return the goods in which case he need not pay installments
falling due thereafter. However, he cannot recover the sums already paid as such sums
legally represent hire charges on the goods in question.

Task What are biggest advantages of hire-purchase agreements? List them in
order of importance.

12.2 Legal Framework

There is no exclusive legislation dealing with hire purchase transaction in India. The Hire
Purchase Act was passed in 1972. An Amendment bill was introduced in 1989 to amend some of
the provisions of the act. However, the act has been enforced so far. The provisions of the Act are
not inconsistent with the general law and can be followed as a guideline particularly where no
provisions exist in the general laws which, in the absence of any specific law, govern the hire
purchase transactions. The act contains provisions for regulating:
1. The format/contents of the hire-purchase agreement,
2. Warrants and the conditions underlying the hire-purchase agreement,
3. Ceiling on hire-purchase charges,

4. Rights and obligations of the hirer and the owner.
In absence of any specific law, the hire purchase transactions are governed by the provisions of
the Indian Contract Act and the Sale of Goods Act. Let us discuss the provisions of Sale of Goods
Act.
In a contract of hire purchase, the element of sale is inherent as the hirer always has the option
to purchase the movable asset by making regular payment of hire charges and the property in
the goods passes to him on payment of the last installment. So in this context we will discuss the
provisions of Sales of Goods Act, which apply to hire purchase contract.
Contract of Sale of Goods: A contract of sales of goods is a contract whereby the seller transfers
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.

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