Unit – 4

Hire

Question Bank

Q1) What are content of Hire-Purchase Agreement?

A1) CONTENTS OF HIRE-PURCHASE AGREEMENT-

Every Hire-Purchase Agreement shall state -(a) the hire-purchase price of the goods to which the agreement relates; (6) 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 instalments by which the hire-purchase price is to be paid, the amount of each of those instalments, 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 identify them.

Where any part of the hire-purchase price is, or is to be, paid otherwise than in cash or by cash, the Hire-Purchase Agreement shall contain a description of that part of the hire-purchase price. There is an implied warranty in the Hire-Purchase Agreement that the hirer shall have and enjoy quiet possession of the goods and that the goods shall be free from any charge or encumbrance in favour of any third party at the time when the property is to pass.

Hire-Purchase Price: 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 the Hire-Purchase Agreement by way of a deposit or other initial payment or credited or to be credited to him under such agreement on account of any such deposit or payment, but does not include any sum payable as penalty or as compensation or damages for a breach of the Agreement.

Hirer: Hirer means the person who obtains or has obtained possession of goods from the owner under a Hire-Purchase Agreement and includes a person to whom the hirer's rights of liabilities under the Agreement have passed by assignment or by operation of Law.

Owner: 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 owner's property in the goods or any of the owner's rights or liabilities under the Agreement has passed by assignment or by operation of law. Contract of Guarantee in relation to any Hire-Purchase Agreement means contract where by a person (surety) guarantees the performance of all or any of the hirer's obligations under the Hire-Purchase Agreement.

Hire means the sum payable periodically by the hirer under the terms of Hire-Purchase Agreement.

Q2)  What is Characteristics of Hire-purchase System?

A2)  i) Purchase is credit purchase.

ii) Purchase price is paid in instalments.

iii) Goods are delivered to the buyer.

iv) Buyer has a right to use these goods.

v) Seller remains the owner of the goods up to the time of payment of the last instalment.

vi) Hire-purchaser becomes the owner of these goods on a payment of the last instalment.

vii) It is the duty ofthese hirer to keep the goods in good condition upto the date of payment of last instalment.

viii) It is the responsibility of the owner to make normal repairs free of cost in these goods upto the date of payment of last instalment.

ix) Hirer has a right to terminate agreement at any time.

x) If default  is made in payment of instalment to the owner, the owner can take possession of the goods subject to legal requirements.

Q3) What is Hire-Purchase System?

A3) Hire-purchase System is a special system of purchase and sale. When goods are purchased on Hire-purchase system, purchaser pays the price in instalments, these instalments may be Monthly, Quarterly, Six monthly or Yearly or of any other period as mentioned in hire-purchase agreement. Goods are delivered to the purchaser and purchaser becomes the owner of these goods only on payment of the last instalment or fulfilment of certain other considerations mentioned in the contract of hire sale. All the instalments are treated as hire till the last instalment is paid off.

DEFINITIONS OF HIRE-PURCHASE SYSTEM BY AUTHORS

Under the Hire-purchase System, goods are delivered to a person who agrees to pay the owner by equal periodical instalments, such instalments are to be treated as hire of these goods until a certain fixed amount has been paid, when these goods become the property of the hirer"

       -J.R. Batliboi

"Hire-purchase is the system under which the property is acquired by payments made in instalments, during the period of which the title in the property remains with the Hire Vendor. The payments prior to the final are regarded as being purely in respect of hire, and the title of the property does not pass to the hire-purchaser until such final payment or some other consideration provided for in the contract has been fulfilled."

      -Pickles

"In the case of Hire-purchase Agreements the property in the goods does not pass to the buyer until all the instalments have been paid. Each hire-purchase instalment represents a payment on account of the cash value of the goods plus interest on the outstanding balance of the cash value. If, however, he defaults, then in most cases, the seller has power to recover the goods and the total amount which has been paid by the hire-purchaser represents the cost of hire-purchaser's use."

  -Andrew Munro

DEFINITION ACCORDING TO STATUTE

When goods are bought under Hire-purchase System, the property in the goods or ownership remains with the seller until the last payment is made and in the event of default, he can again take possession of them subject to legal requirements. (Hire-Purchase Act, 1938-England)

According to Section 2c) of the Hire-Purchase Act 1972,"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 an agreement under which i) possession of goods is delivered by the owner thereof to a person on condition that such person pays the agreed amount in periodical instalments, and (i) the property in the goods is  to pass to such person on the payment of the last of such instalments, and (ii) such person has a right to terminate the agreement at any time before the property to passes."

Every Hire-Purchase Agreement shall be in writing and signed by all the parties thereto. This Hire-Purchase Act, 1972 has not come in force in India, so far.

Q4) What is default in payment of installment ?

A4) DEFAULT IN PAYMENT OF INSTALMENT

If default is made by the hire-purchaser in payment of any instalment, Hire-Vendor has a right to take possession of the goods and file a suit for recovery of the amount. But provisions of Section 20 of the Hire-Purchase Act are important in this connection. Where goods have been let under hire purchase Agreement and the statutory proportion of the hire-purchase price has been paid, whether in pursuance of the judgement of a Court or otherwise, or tendered by or on behalf of hirer or any surety, the owner shall not enforce any right to recover possession of the goods from the hirer otherwise than in accordance withsub-section (3) or by suit. Sub-section (3) is as under:

"Where by virtue of the above possession, the owner is precluded from enforcing a right to recover possession of the goods, he may make an application for recovery of possession of goods to any Court having jurisdiction to entertain a suit for the same relief.

Statutory Proportion here means: (1) One-half where the hire-purchase price is less than fifteen thousand rupees, and (2) three-fourths where the hire-purchase price is less than fifteen

thousand rupees :

Provided that in the case of motor-vehicles statutory proportion shall mean

One-half, where hire-purchase price is less than five thousand rupees;  three-fourth, where the hire-purchase price is not less than five thousand rupees but less than fifteen thousand rupees;  three-fourth or such higher proportion not exceeding nine-tenths as the Central Government may, by notification in the official gazette, specify, where the hire-purchase price is not less than fifteen thousand rupees.

 If  the owner recovers possession of goods in contravention of the above provision, the

Hire-Purchase Agreement, if not previously terminated, shall stand terminated and the hirer shall be released from all liability under the agreement and shall be entitled to recover all sum paid by the hirer under the agreement or under any security given by him in respect there and the surety shall be entitled to recover from the owner all sums paid by him under the contract of guarantee or under any security given by him in respect there of.

 As the above Act has not come in force so far, taking possession  of goods by the vendors depends on the provisions of agreement entered into between the Hire-Vendor and Hire chaser, but the general rule is that on default of payment of instalment, hire-vendors reserves the  right of taking back the goods from Hire-Purchaser. This act of recovery of assets is termed as Repossession.

As regard repossession the hire-vendor has the right to take back the entire asset or any part of it depending on the agreement. When the entire assets are taken over then 1tas "Complete Repossession" and when only some part of assets are taken back as Partial Repossession".

Q5)  What is instalment Payment System?

A5) Installment Payment System is one of the methods of credit sale and purchase. Under this system, purchase price is paid by the buyer in instalments and becomes the owner on the date of entering into agreement.

DEFINITION OF INSTALMENT PAYMENT SYSTEM

"Under an agreement to purchase and pay by instalments, the goods become the property of the purchaser immediately when he receives the delivery of the same."

-JK. Batliboi

Under instalment system property in goods or ownership is transferred to the buyer immediately, though he has to make payment in many years. If buyer  is unable to make payment of any instalment, vendor cannot take back the goods, he can only file suit for recovery of amount."

-Carter

“Though hire-purchase and instalment system appear similar from outside because under both the systems, payment is made to the seller in instalments, but there is vast difference between the two. First system is a hire transaction which takes the form of a sale at the end, second method (Instalment Payment System) is a transaction of immediate sale; under this system instead of making payment in a lump sum, payment is made during a prescribed period by instalments and provision is made for payment of interest also."

-Pickles

Ideal Definition: Instalment Payment System is such a system of sale in which property in goods or ownership is immediately transferred to the buyer at the time of sale and sale price is paid in instalments along with the amount of interest on unpaid balance. On default of payment of any instalment, seller is not entitled to take back the goods, but he may file a suit for the amount due.

Characteristics of the Instalment Payment System

(1) Under this system goods are sold and delivery is also made to the buyer, but its full price

is not paid at the time of sale, therefore, this sale is like credit sale.

(2) Payment of purchase price is made in agreed instalments.

(3) Ownership is transferred to the buyer immediately at the time of sale.

(4) On making default in payment of instalment, seller cannot take back the goods, he can

only file a suit for the amount due.

(6) If buyer sells these goods before payment of the last instalment to the third party, third

party gets better title.