Distinguish between sales and hire-purchase agreement

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Q.4      Distinguish between sales and hire-purchase agreement.

Ans:    HIRE-PURCHASE AGREEMENT

Hire-purchase 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 the agreement under which.

(i)         The owner delivers possession of goods thereof to a person on condition that such person pays the agreed amount in periodical installments.

(ii)        The property in the goods is to pass to such a person on the payment of the last installment; and

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

 

DISTINCTION BETWEEN A SALE AND HIRE-PURCHASE AGREEMENT

A ‘Sale’ can be distinguished from a hire-purchase agreement as under.

Basis of distinction

Sale

Hire-purchase agreement

1. Regular law All contract of sale are government by Sale of Goods Act, 1930 The Hire-purchase agreements are governed by Hire Purchase Act 1972.
2. Nature of contract It is contract of sale It is an agreement of hiring and hence are the agreement to sale.
3. Possession of goods. Possession of goods need not necessarily to be transferred immediately       Possession of goods is necessarily transferred immediately. Transfer of owner ship of goods
4. Transfer of ownership of goods Ownership of goods is transferred immediately. Ownership of goods is transferred on the payment of the last installment when whose option to purchase is exercised.
5. Right to terminate The buyer has no right to terminate the contract of sale The hirer has right to terminate the agreement at any time before the ownership is transferred.
6. Right to repossess the goods. The seller has no right to repossess the goods. He can sue for price. The hirer has right to repossess the goods if the hirer defaults.
7. Transfer of good title to third party The buyer can transfer a goods title to third party because ownership of goods has been transferred The hirer cannot transfer a good title to third party because ownership of goods has not been transferred.
8. Compulsion as to be in writing A contract of sale need not necessary be in writing The hire-purchase agreement must be in writing.
9. Benefit of implied condition and warranties and warranties under the sale. The benefit of implied condition and warranties are applicable The benefit of implied condition and warranties are not applicable.
10. Saletax In case of sale of taxable goods sales tax is levied. In case of hire of even taxable goods, sales tax is not levied.
11. Treatment, of payment made by installment. The payment made by the buyer is treated as payment towards the price of goods. The payment made by the hire purchases is treated as hire charges for the use of goods till the option to purchase the goods is exercised

 

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