HIRE PURCHASE

Presented by
Uday
Nawaz

HIRE PURCHASE Presented by:

uday
Nawaz
INTRODUCTION:
The term "hire purchase" originated and developed in
the United Kingdom in 19th century.
Hire purchase is a method of sale.in this system the
goods are let out on hire by a creditor to the hire
purchase customer.
The buyer is required to pay an agreed amount in
periodical instalments.
The ownership of the property remains with creditor
and passes on to hirer on the payments of the last
instalment.
CONT..

The Hire purchase act, 1972 is enacted for the purpose for
the hiring of goods for a stipulated time and money.
It states the duties, rights and obligation of the parties
involved in the hire purchase of goods.
The act extends to the whole of India except the state of
Jammu and Kashmir as the act number 26 of 1972.
There are six chapters with 31 sections in the act.
section 2 is the definition clause of the act defines the contract
of guarantee, hire purchase, the hire purchase price or sum,
hire purchase agreements, hirer and owner.
DEFINITION:
Hire purchase is a agreement whereby an owner of
goods allows a person, the hirer, to hire goods from him
for a period of time by paying instalments. The hirer has
an option to buy the goods at the end of the
agreement if all instalments are being paid.
HIRE PURCHASE AGREEMENT:

Hire purchase is based on an agrrement.it has

to be writing and signed by both the parties.
The agreement must contain:

1.Description of the goods

2.Hire purchase price of the goods
3.The date of commencement of the agreement.
4.The number of instalments, amount, and due
date.
CONTENTS OF THE HIRE PURCHASE AGREEMENT:

Every hire-purchase agreement shall state-

(a) The hire-purchase price of the goods to which the agreement
relates,
(b) The cash price of the goods, that is to say, the price at which the
goods may be purchased by the hirer for cash,
(c) The date on which the agreement shall be deemed to have
commenced.
(d) the number of instalments by which the hire-purchase price is to
be paid, the amount of each of those instalments, 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 and
(e) the goods to which the agreement relates
PARTIES IN THE AGREEMENT:

There are two parties in a hire purchase agreement:

The intending seller(Owner)
The intending purchaser(Hirer)
Tripartite agreement in Hire purchase:
Presently, there are three parties involved in India
consisting of seller, financier and the hirer / purchaser.
Thus, a seller arranges a hire purchase agreement
through a finance company with the customer. So, it is
a tripartite agreement.
FEATURES :
Payment to be made in instalments over as specified period
The possession is delivered to the hirer at the time of entering
into the contract
The property in the goods passes to the hirer on payment of the
last instalment
Each instalment is treated as hire charges so the if default is
made in payment of any instalment ,the seller becomes
entitled to take away the goods
The hirer or purchaser is free to return the goods without being
required to pay any further instalment falling due after the
return.
ADVANTAGES

No immediate cash
Easy possession

Thrift

Economic growth

Relief to buyer.
DIS ADVANTAGES

Loss to seller in the event of default by the

buyer.
It is expensive

May lead to bankruptcy

ELIGIBILITY TO ENTER INTO HIRE
PURCHASE AGREEMENT:
People with a regular and stable income and
capacity to pay instalments from the current
income.
The person must be competent to enter into a
contract.
Minor is not eligible.
Foreigners and people not having permanent
residence in the country are disqualified for
availing such forms of credit sales.
RIGHTS OF THE HIRER:

To buy the goods at any time by giving notice to the

owner and paying the balance of the HP price.
To return the goods to the ownerthis is subject to the
payment of a penalty to reflect the owner's loss of profit.
With the consent of the owner, to assign both the
benefit and the burden of the contract to a third person.
The owner cannot unreasonably refuse consent where
the nominated third party has good credit rating.
The hirer has a right to terminate the hire-purchase
agreement at anytime.
OBLIGATIONS FOR THE BUYER

To comply with the agreement

To take care of goods

Not to make unauthorised use.

To give information
RIGHTS OF OWNER

Rights to terminate the agreement.

To recover possessions.

To recover damage.
OBLIGATIONS OF THE BUYER

Relief against termination for non-payment of

hire purchase.
To supply a copy of the agreement.

To supply all necessary information.

PROBLEMS OF HIRE PURCHASING COMPANIES IN
INDIA

Legal restrictions.
Competitors.

Bankruptcy.

No separate legislation.

Poor government support.

CONCLUSION

In a hire purchase transaction the goods are let

out on hire by a finance company or seller to
the hirer. The buyer is required to pay on
agreed amount in periodical instalment's
during a given period. The ownership of the
property remains with creditor and passes on
to hirer on the payment of the last instalment.