1. what are the legal aspects of factoring?

Factoring in its traditional conception includes the management and collection of

loans granted by the client and accepted by the factor, which assumes according to
the contract the risk of insolvency of debtors. 

The following are the legal aspects of factoring:

 The sale is taking place on a credit basis and the factor takes the
responsibility for collecting payment from the buyer. For this purpose, the
agreement between the seller and the factor should clearly state the role of
each party involved in the sale.
 The seller should give due authority to the factor for collecting money from
the buyer.
 Legally, the claim on the buyer is assigned by the seller to the factor. For
this, a letter of authority is given by the seller to the factor.
 The buyer is also informed by the seller that he should make payment only
to the factor.
 All the rights of the seller on the buyer now get transferred to the factor in
his capacity as an assignee
 In case of default by the buyer, it is the factor who will take action against
the buyer in his capacity as an assignee.
 No other creditor can have any claim settled with the buyer towards the sale
of goods except the factor.
 The banker will be informed that he should not finance the seller for any
post sales requirements or accounts receivable discount, as it is the factor
who has been assigned with the bills.
 Disputes arising between the seller and buyer should be settled by the parties
concerned and they should not affect the factor.
 The factor must have the right to take legal action against the buyer in the
case of default.

2. what are the salient features of hire purchase system?

Hire purchase means a transaction where goods are purchased and sold on
the terms that:
(i) Payment will be made in installment,
(ii) The possession of the goods is given to the buyer immediately,

(iii) The property (ownership) in the goods remains with the vendor till the last
installment is paid,

The main features of a hire purchase agreement are as below:

 The payment is to be made by the hirer (buyer) to the hiree, usually the
vendor, in instalments over a specified period of time.
 The possession of the goods is transferred to the buyer immediately.
 The property in the goods remains with the vendor (hiree) till the last
installment is paid. The ownership passes to the buyer (hirer) when he pays
all installment.
 The Hiree or the vendor can repossess the goods in case of default and treat
the amount received by way of installment as hire charged for that period.
 The installment in hire purchase include interest as well as repayments of
principal.
 Usually, the hiree charges interest on flat rate.