Hire purchase is a popular method of obtaining goods when you don`t have the cash to buy them outright. It`s also known as installment buying or deferred payment plan. Under hire purchase, you pay for an item in installments over a specified period until the full price is paid. During this period, you have use of the item but don`t own it until the final payment is made. In this article, we will explore the legal aspects of hire purchase and explain why hire purchase is a contract of sale.
Hire purchase is a contract of sale because it involves the transfer of goods from the seller to the buyer. The buyer obtains the use of the goods and has an option to purchase them at the end of the hire purchase agreement. The seller retains ownership of the goods until the final payment is made. The rights and obligations of both parties are set out in the hire purchase agreement, which is a legally binding contract.
In a hire purchase agreement, the buyer agrees to pay for the goods in installments, including interest charges. The terms of the agreement are set out in detail, including the amount of each payment, the duration of the agreement, and the interest rate. The agreement also specifies the consequences of default, including the repossession of the goods.
One of the advantages of hire purchase is that it allows you to obtain goods without having to pay the full price upfront. This can be particularly useful for expensive items such as cars or furniture. Hire purchase agreements also offer some protection to the buyer, as the goods can`t be repossessed without a court order if you`ve paid more than half the total cost.
On the other hand, hire purchase agreements also come with some disadvantages. Interest charges can make the overall cost of the goods significantly higher than the actual purchase price. Additionally, if you default on the agreement, you could lose the right to use the goods and may be liable for repossession charges. Furthermore, if you don`t purchase the goods at the end of the agreement, you may be left with nothing to show for your payments.
In conclusion, hire purchase is a contract of sale that involves the transfer of goods from the seller to the buyer. Under a hire purchase agreement, the buyer pays for the goods in installments until the full price is paid. Although hire purchase can be a useful method of obtaining goods, it`s important to carefully consider the terms and conditions of the agreement before entering into it. If you`re unsure about any aspect of a hire purchase agreement, seek legal advice to avoid any potential pitfalls.