Pakistan study notes for Matric, Intermediate, B.A, B.COM BSC, M.A, BCS. Free Pakistani Urdu educational school, colleges and University notes.

Sale and hire-purchase agreement distinguished

Sale and hire-purchase agreement distinguished

A hire-purchase agreement is a contract whereby the owner of goods lets them on hire to another person (called hirer or hire- purchaser) on payment of rent to be paid in instalments and upon an agreement that when a certain number of such instalments is paid, the property in the goods will pass to the hirer. A hire-purchaser may return the goods at any time without paying balance rent. A hire- purchase agreement is not a contract of sale but only a bailment.


The points of distinction between the two are:

1.         Contract

€ Sale is a contract of sale.

€ Hire-purchase agreement is a contract of bailment plus an agreement to sell.


2.         Ownership

In a sale, ownership of goods in transferred from the seller to the buyer as soon as the contract of sale is made.

In hire-purchase, ownership of goods, is transferred from the hire-seller tc the hire-purchaser only when agreed number of instalments are paid.


3.         Legal status

In a sale, the position of a buyer is that of an owner.

In hire-purchase, the position of hire-purchaser is that of bailee.


4.         Termination of contract

In a sale, the buyer cannot terminate contract and is bound to pay the price of goods.

In hire-purchase, the hire-purchaser has an option to terminate the contract at any stage, and is not bound to pay remaining installments.


5.         Reduction of price

in a sale, if price is payable in installments, payment of each installment reduces the amount payable as price of goods.

In hire-purchase, installments paid by hire-purchaser are regarded as hire charge and not towards payment of price, until all agreed installments are paid and option to purchase is exercised.

6.         Agreement to buy

In a sale., there is an agreement to buy. In hire-purchase, there Is no agreement to buy.


7.         Re-safe contract

In agreement to seii, the buyer can make a contract for re-sa!e.

in hire-purchase agreement, the hirer cannot make a contract of sale or pledge.

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