HIRE PURCHASE

2. Definitions. - In this Act, unless the context otherwise requires. -

(a) "contract of guarantee" in relation to any hire-purchase agreement, means a contract whereby a
person ( in this Act referred to as the surety) guarantees the performance of all or any of the hirer’s
obligations under the hire-purchase agreement.

(b) "hire" means the sum payable periodically by the hirer under a hire-purchase agreement.

(c) "hire-purhase 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 an agreement under which-

(i) possession of goods is delivered by the owner thereof to a person on condition that such persons
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
installments, and

(iii) such person has a right to terminate the agreement at any time before the property so passes.

(d) "hire-purchase price" means the total sum payable by the hirer under a hire-purchase agreement
in order to complete the purchase of, or the acquisition of property in, the goods to which the
agreement relates and includes any sum so payable by the hirer under hire-purchase agreement by
way of a deposit other initial payment, or credited or to be credited to him under such agreement on
account of any such deposit or payment, whether that sum is to be a or has been paid to the owner
or to any other person or is to be or has been discharged by payment or money or by transfer or
delivery of goods or by any other means but does not include any sum payable as a penalty or as
compensation or damages for a breach of the agreement.

(e) "hirer" means the person who obtains or has obtained possession of goods from an owner under
a hire-purchase agreement, and includes a person to whom the hirer’s rights or liabilities under the
agreement have passed by assignment or by operation of law.

(f) "owner" means the person who lets or has let, delivers or has delivered possession of goods, to a
hirer under a hire-purchase agreement and includes a person to whom the owners property in the
goods or any of the owners rights or liabilities under the agreement has passed by assignment or by
operation of law.

(g) each of the words and expressions used and not defined in this Act but defined in the Indian
Contract Act, 1872 ( 9 of 1872) or the Sale of Goods Act, 1930 (3 of 1930) shall have the meaning
assigned to it in that Act.

Contents of hire purchase agreement.- (1) 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 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 and

(e) the goods to which the agreement relates, in a manner sufficient to identity them.

(2) 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 the part of the hire-purchase price.

(3) Where any of the requirements specified in sub-section (1) or sub-section 92) 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 term as it thinks just, or pas such other order as it thinks fit in the circumstances of
the case.

Overview of Hire Purchase Agreement

Features of Hire Purchase Agreements

The entire interest that is accumulated by the hiree is distributed. This distribution is done on the basis of
method sum of the years digits.
The counterpart of the lessor or the hiree buys a particular property. He then provides the hirer or the
counterpart of the lessor the property on a rental basis.

• The hiree usually takes a flat rate of interest. This means that a specified portion of the interest rate is
calculated on the basis of the investment made at the beginning by the hirer. The figure is normally
around 14 percent. The interest rate is not taken on the basis of diminishing balance.
• The hirer is supposed to pay the hiree a certain number of installments at time periods that are fixed.
These installments are supposed to account for the payment of the principal as well as the interest. At
the time when the final installment is paid by the hirer the ownership of the asset is transferred to him.