Meaning of Hire-Purchase Agreement
Hire-purchase agreement is an agreement by which goods is let on hire and the hirer has an option to purchase it in accordance with the terms of the agreement; under.
1.Possession of goods is delivered by the owner thereof to a person on condition that such person pays the agreed amount in periodical instalments;
2.The property in the goods is to pass to such person on the payment of the last of such instalments; and
3.Such person has a right to terminate the agreement at any time before the property so passes.
In other words, under the hire-purchase agreement, goods is delivered to a person who agrees to pay the owner by equal periodical instalments, such instalments are to be treated as hire of the goods until a certain fixed amount has been paid, when the goods becomes the property of the hirer.
A hire-purchase agreement, therefore, is an
irrevocable offer for sale, which shall become a contract of sale on the fulfilment of the condition by the intending buyer, i.e., payment of all hire instalments.
Characteristics of Hire-Purchase Agreement-
The main characteristics of hire-purchase agreement can be mentioned as follows:
(1)Credit Purchase. Purchase is credit purchase.
(2) Payment in Instalments. Purchase price is
paid in instalments.
3.Delivery. Goods is delivered to the buyer.
4.Right to Use -Buyer has a right to use the goods.
(5) Ownership. Seller remains the owner of goods
up to the time of payment of the last instalment.
(6) Transfer of Ownership. Hire-purchaser
becomes the owner of the goods on payment of the last instalment.
7.Duty of the Hirer. It is the duty of the hirer to
keep the-goods in good condition up to the date of payment of last instalment
(8) Repair Cost. It is the responsibility of the
owner to make normal repairs free of cost.
(9) Termination. Hirer has a right to terminate
agreement at any time.