A hire-purchase aggreement is one where goods are rented out with the opportunity for the renter, subject to the terms of the agreement, to acquire the products.
1. The owner of the goods transfers ownership to the recipient in exchange for periodic instalments of the agreed-upon price;
2. Upon payment of the final instalment, ownership of the goods will pass to that person; and
3. This person has the right to end the contract whenever they want before the property actually passes.
In other words, under a hire-purchase agreement, goods are delivered to a person who agrees to pay the owner in equal monthly instalments. These instalments are to be treated as hire payments for the goods until a set amount is paid, at which point the goods become the hirer's property.
Therefore, a hire-purchase agreement is an irrevocable offer to purchase that, upon the intended buyer's fulfilment of the condition, i.e., payment of all hire instalments, transforms into a contract of sale.
Features of a Hire-Purchase Agreement
The following are some of the primary features of a hire-purchase agreement:
(1) Purchase on credit - Purchase is made using credit.
(2) Instalment payments - Payment for the item is made in instalments.
(3) Shipping - The buyer receives the provided goods.
(4) Right to Use - The items may be used by the buyer.
5) Possession - Until the final instalment is paid in full, the seller will still be the owner of the goods.
(6) Ownership Transfer - After the final instalment is paid, the hire-purchaser owns the goods.
(7) The Hirer's Obligation - The hirer is responsible for maintaining the goods until the last instalment is paid in full.
(8) Repair expenses - Normal repairs must be made by the owner at no expense to them.
(9) Termination - Agreement may be terminated at any moment by the Hirer.
