HIRE PURCHASE:

A hire purchase can be defined as a contractual arrangement under which the owner lets his goods on hire to the hirer and offers an option to the hirer for purchasing the goods in accordance with the terms of the contract. In India the market hire purchase has been predominant with financing of commercial vehicles. This helped the road transport operators to acquire commercial vehicles in a big way. But in the last few years, hire purchase, as a means of financial equipments has also come into popular use. SALIENT PROVISIONS OF A HIRE-PURCHASE AGREEMENT: To be valid, HP agreements must be in writing and signed by both parties. They must clearly set out the following information in a print that all can read without effort: 1. A clear description of the goods 2. The cash price for the goods 3. The HP price, i.e., the total sum that must be paid to hire and then purchase the goods 4. The monthly installments (most states require that the applicable interest rate is disclosed and regulate the rates and charges that can be applied in HP transactions 5. A reasonably comprehensive statement of the parties rights (sometimes including the right to cancel the agreement during a cooling-off period). 6. The right of the hirer to terminate the contract when he feels like doing so. SALIENT FEATURES OF HIRE PURCHASE AGREEMENT: In a hire-purchase agreement, the owner hires goods to the hirer with an option to purchase the goods when he has made the payment of a certain sum. By this system, the purchaser who is unable to pay the full price of the asset at one lump sum, gets facilities to acquire an asset and after making the payment of an initial amount called premium, the purchaser pays the balance consideration money in installments. After the payment of all the installments, the property in the goods passes to the hirer. The hirer has an option to return the goods during the period of hire. In a hire purchase agreement, the hirer has the right to terminate the agreement for hire at his pleasure and is not bound to pay the value of the goods. A hire-purchase agreement is a form of bailment; the hirer is given the right to purchase the goods on certain conditions. That, however is an option not an obligation to purchase. The hirer may elect to purchase the goods and when he does so, after he fulfills all the conditions prescribed in the agreement, the title to the goods will pass to him. But he may elect not to do so, and in that event he is entitled to return the goods and terminate the agreement in the manner provided therein.

FORMS OF HIRE PURCHASE AGREEMENTS: Hire-purchase agreements are of two forms. 1. In the first form the goods are purchased by the financier from the dealer and O The financier obtains a hire-purchase agreement from the customer O Under which the customer becomes the owner of the goods O On payment of all the installments of the stipulated hire and exercising his option to purchase the goods on payment of a nominal price. O The owner gets his money from the financier, who recovers the cost from the customer. 2. In other form The customer purchases the goods and he executes a hire-purchase agreement with a financier, Under which he remains in possession of goods, subject to payment of amount paid by the financier on his behalf to the owner. The financier gets a right to seize the goods in the event of non-fulfillment of conditions of hire-purchase agreement by the customer.