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