‡ Hire-purchase is a mode of financing the

price of the goods to be sold on a future

date. In a hire-purchase transaction, the
goods are let on hire, the purchase price is
to be paid in installments and the hirer is
allowed an option to purchase the goods
by paying all the installments.
‡ Under hire purchase system, the buyer takes
‡ possession of goods immediately & agrees to
pay the total hire purchase price in
installments
‡ Each installments is treated as hire charges
‡ The ownership of goods passes from buyer to seller on
the payments of the installments
‡ In case the buyer makes any default in payments of any
installments the seller has right to reposses the goods
‡ Normally a deposit is requested i.e. 10%
‡ Funding Period- periods are normally between 3-7
years.
‡ Goods are let out on finance by a
finance company to the hire purchaser
customer
‡ Buyer is required to pay an equal
amount of periodic installments during
a given period
‡ Ownership transfers at the payment of the
last installment
‡ To buy the goods at any time by giving notice to
the owner and paying the balance of the HP
price less a rebate.
‡ To return the goods to the owner.
‡ With the consent of the owner, to assign both
the benefit and the burden of the contract to a
third person
‡ Where the owner wrongfully repossesses the
goods, either to recover the goods plus
damages for loss of quiet possession or to
damages representing the value of the goods
lost
 The owner usually has the right to
terminate the agreement where the hirer
defaults in paying the installments. This
entitles the owner
‡ To forfeit the deposit
‡ To retain the installments already paid and
recover the balance due
‡ To repossess the goods
‡ To claim damages for any loss suffered.
 contract of sale is constituted of following
elements:
‡ Two parties
‡ Goods
‡ Money consideration
‡ Transfer of ownership
‡ Essentials of a valid contract-under the
Indian Contract ct.
The important clauses in a hire-purchase
agreement are:
‡ Nature of greement- Term, nature and
commencement of the agreement.
‡ Delivery of Equipment- The place and time
of delivery and delivery charges.
‡ Location- The place where the equipment
shall be kept during the period of time.
‡ Inspection- the hirer has examined the
equipment and is satisfied with it.
‡ Repairs- The hirer to obtain at his cost,
insurance on the equipment and to hand
over the insurance policies to the owner.
‡ Risk- Loss and damage to be borne by the
hirer.
‡ Registration and Fees
‡ Stamp Duty
‡ Schedule- equipments forming subject-
matter of agreement . and hire charges.
 promissory note signed by the hirer for
the full amount payable under the
agreement including the interest element
of finance charge.