HIRE PURCHASE
Hire Purchase system is a system in which the goods are delivered to the purchaser at the time of agreement
before the payment of instalments. However, the title of the goods is transferred after the payment of all
instalments as per the hire purchase agreement. It is a special system of purchase and sale of goods. Under this
system the purchaser pays the price of goods in instalments.
CONDITIONS OF HIRE PURCHASE AGREEMENT
Hire purchase is a transaction where the goods are sold by vendor to the purchaser under the following
conditions:
The goods will be delivered to the purchaser at the time of the agreement
The purchaser has a right to use the goods delivered
The price of the goods will be paid in the instalments.
Every instalment will be treated to be the hire charges of the goods which is being used by the purchaser.
If all the instalments are paid as per the terms of agreement, the title of the goods is transferred by the vendor to
the purchaser.
If there is default in the payment of any of the instalments, the vendor will take away the goods from the
possession of the purchaser without refunding him any amount received earlier in the form of instalments.
FEATURES OF HIRE PURCHASE AGREEMENT
1. TRANSFER OF POSSESSION ONLY: The hire vendor transfers only the possession of goods to the hire
purchaser immediately after the agreement of hire purchase is made.
2. GOVERNING ACT: Hire purchase system is governed under the Hire Purchase Act, 1972. This act came
into force on 1 September, 1973.
3. CREDIT PURCHASE: Hire purchase is a system of credit purchase. It implies that the goods are sold for
payment that is to be done in future period of time.
4. TERMINOLOGY: The terms used in the agreement of hire purchase are:
Hire Purchaser: The buyer in the hire purchase agreement who purchases the goods on hire basis
Hire Vendor: The seller in the hire purchase agreement who sell the goods on the hire basis.
Cash Payment: The amount to be paid on outright purchase in cash.
Down Payment: Initial payment made at the time of signing the hire purchase agreement.
Hire Purchase Price: The amount to be paid if the goods are purchased under the hire purchase system. It
includes cash price and interest on future instalments.
5. RIGHT TO TERMINATE: The hire purchase has a right to terminate the agreement at any time in the
capacity of a hirer.
6. Goods should be delivered in the possession of the purchaser at the time of commencement of agreement.
7. Hire Vendor continues to be the owner of the goods as the last payment of instalment is over.
8. If there is default in the payment of any instalment, the hire vendor will take away the goods from the
possession of the purchaser without refunding him any amount.
9. Each instalment consists of partly interest and part of capital payment.
Hire Purchase system is a system in which the goods are delivered to the purchaser at the time of agreement
before the payment of instalments. However, the title of the goods is transferred after the payment of all
instalments as per the hire purchase agreement. It is a special system of purchase and sale of goods. Under this
system the purchaser pays the price of goods in instalments.
CONDITIONS OF HIRE PURCHASE AGREEMENT
Hire purchase is a transaction where the goods are sold by vendor to the purchaser under the following
conditions:
The goods will be delivered to the purchaser at the time of the agreement
The purchaser has a right to use the goods delivered
The price of the goods will be paid in the instalments.
Every instalment will be treated to be the hire charges of the goods which is being used by the purchaser.
If all the instalments are paid as per the terms of agreement, the title of the goods is transferred by the vendor to
the purchaser.
If there is default in the payment of any of the instalments, the vendor will take away the goods from the
possession of the purchaser without refunding him any amount received earlier in the form of instalments.
FEATURES OF HIRE PURCHASE AGREEMENT
1. TRANSFER OF POSSESSION ONLY: The hire vendor transfers only the possession of goods to the hire
purchaser immediately after the agreement of hire purchase is made.
2. GOVERNING ACT: Hire purchase system is governed under the Hire Purchase Act, 1972. This act came
into force on 1 September, 1973.
3. CREDIT PURCHASE: Hire purchase is a system of credit purchase. It implies that the goods are sold for
payment that is to be done in future period of time.
4. TERMINOLOGY: The terms used in the agreement of hire purchase are:
Hire Purchaser: The buyer in the hire purchase agreement who purchases the goods on hire basis
Hire Vendor: The seller in the hire purchase agreement who sell the goods on the hire basis.
Cash Payment: The amount to be paid on outright purchase in cash.
Down Payment: Initial payment made at the time of signing the hire purchase agreement.
Hire Purchase Price: The amount to be paid if the goods are purchased under the hire purchase system. It
includes cash price and interest on future instalments.
5. RIGHT TO TERMINATE: The hire purchase has a right to terminate the agreement at any time in the
capacity of a hirer.
6. Goods should be delivered in the possession of the purchaser at the time of commencement of agreement.
7. Hire Vendor continues to be the owner of the goods as the last payment of instalment is over.
8. If there is default in the payment of any instalment, the hire vendor will take away the goods from the
possession of the purchaser without refunding him any amount.
9. Each instalment consists of partly interest and part of capital payment.
