Legal Aspects of Hire Purchase and Parties to a Hire Purchase Contract explained

The Hire Purchase Act, of 1972 defines a hire purchase agreement as an agreement under which goods are let on hire and under which the hirer has an option to purchase them by 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 a condition that such person pays the agreed amount in periodic payments, and

 (ii) The property in the goods is to pass to such person on the payment of the last of such installments, and

 (iii) Such person has a right to terminate the agreement at any time before the property so passes—Sec. 2(e).

Section 3 of the Act provides that every hire purchase agreement must be in writing and signed by all parties thereto.

In addition to the usual right of terminating the agreement at any time before the property passes to him and returning the goods to the hiree (vendor), the Hire Purchase Act, 1972 has provided the following rights to the hirer:

(i) The hiree (vendor) cannot terminate the hire purchase agreement for default in payment of hire or due to an un-authorised act or breach of expressed conditions unless a notice in writing is given to the hirer. The period of notice will be one week where the hire is payable weekly or less than that interval and two weeks in other cases.

(ii) The right to repossess the goods will not exist unless sanctioned by the Court in the following cases:

(a) Where the hire purchase price is less than Rs. 15,000, one-half of the hire purchase price has been paid.

(b) Where the hire purchase is not less than Rs. 15,000, three-fourths of the hire-purchase price has been paid.

However, this proportion in the case of motor vehicles is as under:

(a) One half, where the hire purchase price is less than Rs. 5,000.

(b) Three-fourths, where the hire purchase price is not less than Rs. 5,000 but less than Rs. 15,000.

(c) Three-fourths or such higher proportion not exceeding nine-tenth where the hire purchase price is not less than Rs. 15,000.

(iii) The hirer has a right of receiving a statement from the owner against a payment of rupee one showing the amount paid by or on behalf of the hirer, the amount which has become due under the agreement but remains unpaid and the date upon which each unpaid installment became due, and the amount of each such installment and the amount which is to become payable under the agreement and the date or the mode of determining the date upon which each future installment is to become payable, and the amount of each such installment.

(iv) If the amount paid by the hirer till the date of repossession of the goods or the value of the goods on the date of repossession of goods exceeds the total hire purchase price the excess payment made by the hirer will be returned to the hirer by the owner of the goods.

The owner or vendor, to calculate the value of the goods, has the right to deduct the reasonable expenses for repossessing the goods, for storing the goods or repairing them, for selling them, and for payment of arrears of taxes.

According to Sec. 4 contents of the hire-purchase agreement include the:

(i) the hire-purchase price of the goods to which the agreement relates;

(ii) the cash price of the goods, i.e., the price at which the hirer may purchase the goods for cash;

(iii) the date on which the agreement shall be deemed to have commenced;

(iv) the number of installments by which the hire-purchase price is to be paid, the amount of each of those installments 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;

(v) the goods to which the agreement relates, in a manner sufficient to identify them;

(vi) where any part of the hire-purchase price is to be paid otherwise than by cash or by cheque, the hire-purchase agreement shall contain a description of that part of the hire-purchase price; and

(vii) where any of the above requirements have not been complied with, the hirer may institute a suit to get the hire-purchase agreement rescinded. The court may, if it is satisfied that the failure to comply with any such requirement has prejudiced the hirer, rescind the agreement on such terms as it thinks just, or pass such other order as it thinks fit in the circumstances of the case.

The following terms are widely used in a hire-purchase transaction:

The Hire-Purchase Act defines various terms about prices which are:

(i) Cash Price Installment: An amount which bears to the net price the same proportion as the amount of the hire-purchase installment bears to the total amount of hire-purchase price.

(ii) Hire-Purchase Price: The total sum payable by the hire-purchase as per terms to complete the transactions.

(iii) Net Hire-Purchase Charges: Difference between the net hire-purchase price and the net cash price of the goods.

(iv) Net Cash Price: Total cash price less any deposit.

(v) Down Payment: The amount which is paid at the time of taking delivery of the goods.

(vi)  Net Hire-Purchase Price: Total amount of hire-purchase price minus delivery expenses, if any;

(b) Registration or other kinds of fees related to the agreement; and

(c) Insurance expenses, if any.

(b) Hirer: The person who obtains the possession of goods from the owner under a hire-purchase agreement;

(c) Hire: The sum payable periodically by the hirer under the agreement.

(d) Installment: The amount which is inclusive of interest together with principal paid at the end of the period.

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