A hire-purchase agreement is one under which a person takes delivery of goods promising to pay the price by a certain number of installments and, until full payment is made, to pay hire charges for using the goods.
From this definition it can be said that a hire-purchase agreement is a bailment plus an agreement to sell.
The main provisions of the Hire-Purchase Act are summarized as under:
- Hire-Purchase Agreement means an agreement under which goods are let on hire and under which the hirer has an option to purchase them in accordance with the terms of the agreement and includes a agreement under which,
(i) Possession of goods is delivered by the owner thereof to a person on condition that such a person pays the agreed amount in periodical installments, and
(ii) The property in the goods is to pass to such person on the payment of the last of such installment, and
(iii) Such a person has a right to terminate the agreement at any time before the property so passes. — Sec. 2 (e).
- Hire-Purchase agreement must be in writing and signed by parties. A surety, if any, must sign the hire-purchase agreements. The agreement shall be void if the above requirements have not been complied with.—Sec. 3.
- Contents of hire-purchase agreement must include the following.—Sec. 4:
(i) The hire-purchase price of the goods to which the agreement relates;
(ii) The cash price of the goods, i.e., the price at which the goods may be purchased by the hirer for cash;
(iii) The date on which the agreement shall be deemed to have commenced;
(iv) The number of installments by which the hire-purchase price is to be paid, the amount of each of those installments and the date, or the mode of determining the date, upon which it is payable, and the person to whom and the place where it is payable;
(v) The goods to which the agreement relates, in a manner sufficient to identify them;
(vi) Where any part of the hire-purchase price is, or is to be, paid otherwise than in cash or by cheque, the hire-purchase agreement shall contain, a description of that part of the hire-purchase price; and
(vii) Where any of the above requirements has not been complied with, the hirer may institute a suit for getting the hire-purchase agreement rescinded; and the court may, if it is satisfied that the failure to comply with any such requirement has prejudiced the hirer, rescind the agreement on such terms as it thinks just, or pass such other as it thinks fit in the circumstances of the case.
- The purchaser has the option of paying the full price before it was due. In that case the purchaser is entitled to get a rebate.—Sees. 9, 10.
- In every installment of the full price, it includes the hire of the goods and the purchasing price. — Sec. 7.
- The seller can recover the possession of the goods, if the purchaser fails to pay any of the installment price.—Sec. 17.
- The Act provides that there will be certain warranties and conditions to be implied in the hire- purchase agreement. The words and expressions are defined in Contract Act and the Sale of Goods Act.—Sec. 6.
- The Act shall not apply in relation to any hire-purchase agreement made before the commencement of this Act—Sec. 31.