5.

Hire Purchase

I. Introduction

A hire purchase agreement is a type of installment payment arrangement where the hirer (buyer)
acquires goods for use by paying installments, with the title of goods remaining with the owner
(seller) until the final installment is paid. Upon payment of the last installment, the title of the
goods transfers to the hirer.

II. Key Characteristics of Hire Purchase Agreements

i. Possession of Goods: The hirer gets the possession and use of goods immediately but
doesn't own them until the final payment.

ii. Payment in Installments: The price under a hire purchase agreement is paid in
installments over a period of time.

iii. Option to Purchase: The hirer has the option to return the goods without any further
obligation or to become the owner of the goods by paying all installments.

III. Rights and Obligations of the Hirer and Owner

i. Hirer's Rights and Obligations: The hirer has the right to use the goods, but they must
make regular installment payments. They also have an obligation to take reasonable care
of the goods. The hirer has a right to terminate the agreement at any time before the title
passes.

ii. Owner's Rights and Obligations: The owner has a right to receive regular installment
payments and can repossess the goods if the hirer defaults. The owner has an obligation
to pass the title of the goods to the hirer once all installments are paid.

IV. Remedies in Case of Breach of Agreement

i. If Hirer Breaches: If the hirer fails to make regular payments, the owner can repossess
the goods. However, if a certain proportion of the price has been paid, the owner may
need a court order to repossess.
 ii. If Owner Breaches: If the owner fails to transfer ownership after all payments are made,
the hirer can claim damages or can sue for specific performance.

V. Difference Between Hire Purchase and Outright Sale

In a hire purchase, the hirer gets the possession of goods but ownership transfers only after all
installments are paid. In contrast, in an outright sale, the buyer gets both possession and
ownership upon payment of the price.

Understanding hire purchase agreements is crucial as they provide an alternative to outright sale,
especially for high-priced goods. It allows the hirer to have the use of the goods while paying for
them gradually. However, the consequences of defaulting are also significant and should be
clearly understood.