Hire Purchase Agreement

Saptaparni Raha
Sep 10, 2022
2 min read

Written by Saptaparni Raha, Lawyer

Akash wants to purchase a BMW bike for himself. He went to the showroom and found that he didn't have enough money to purchase the bike. Rohit, the showroom owner, allows Akash to hire goods by paying monthly instalments. Akash is happy to hear that as he can afford the bike by paying for it in instalments.

Now they went before a lawyer to know out the possible solution so that both of them could have some legal protections.

Here is the lawyer, Saptaparni, who suggested that they can enter into a hire purchase agreement and informed them about the agreement.

Introduction:

When a person agrees to hire goods by paying monthly instalments to the owner of the goods, it is known as a hire purchase agreement.

Benefits of the Hire Purchase Agreement:

The hirer becomes the owner of the goods once he pays the instalment.
The seller of the goods also benefits from this kind of transaction because it helps to increase the sale of the goods.
If there is any default in payment by the hire purchaser, the seller can get his goods back from the purchaser.

Disadvantages of the Agreement:

Mostly, the duration of the agreement is long.
In this agreement, the seller repossesses the goods because this hiring never comes with actual ownership in case of the default of the payment.

Important Clauses For this Agreement:

The first clause is related to the hire purchase price of goods.
In the second clause, the amount of price in cash needs to be mentioned by the hire purchaser.
Next, it has to mention the date of the commencement of the contract.
Then it is very important to mention the number of instalments, amounts, and mode of instalments.
In the next clause, it has to mention the details of goods that are related to this agreement and which method should apply to identify the goods.
It is mandatory to mention the methods of payment, whether in cash or cheque.
The following clause is the dispute resolution clause which shall mandate that if any dispute arises, then what will be the procedure to resolve the conflict and the jurisdiction of the proceedings?

Conclusion:

The Hire Purchase Agreement is also known as the Agreement of Bailment, where the purchaser can use the goods but cannot own them until the agreement continues.

References:

Sorbhi Sharma. (2021). All you need to know about the hire-purchase agreement. retrieved from All you need to know about hire-purchase agreement - iPleaders
Latest Laws.com. Hire Purchase Agreement, retrieved from Hire Purchase Agreements (latestlaws.com)