HIRE HIRE PURCHASEPURCHASE

Rajesh Rajesh SharmaSharma

MBA 0741MBA 0741

Meaning of Hire Meaning of Hire PurchasePurchase

Hire purchase means a transaction where goods Hire purchase means a transaction where goods are purchased and sold on the terms that:-are purchased and sold on the terms that:-

1.1. Payment will be made in installmentPayment will be made in installment

2.2. The possession of the goods is given to the buyer The possession of the goods is given to the buyer immediately.immediately.

3.3. The ownership remains with the vendor till thr last The ownership remains with the vendor till thr last installment is paid.installment is paid.

4.4. The seller can repossess the goods in case default The seller can repossess the goods in case default in payment of any installment.in payment of any installment.

5.5. Each installments in the hire purchase is treated Each installments in the hire purchase is treated as higher charges till the laser installment is paid.as higher charges till the laser installment is paid.

Characteristics of Hire Characteristics of Hire PurchasePurchase

1.1. The payment is to be made by the hirer The payment is to be made by the hirer (Purchaser) to the hiree, usually the vendor, in (Purchaser) to the hiree, usually the vendor, in installments over a specified period of time.installments over a specified period of time.

2.2. The possession of the goods is transferred to the The possession of the goods is transferred to the buyer immediately.buyer immediately.

3.3. The property in the goods remains with the The property in the goods remains with the vendor (hiree) till the last installment is paid. The vendor (hiree) till the last installment is paid. The ownership passes to the buyer (hirer) when he ownership passes to the buyer (hirer) when he pays all installments.pays all installments.

4.4. The hiree or the vendor can repossess the goods The hiree or the vendor can repossess the goods in case of default and treat the amount received in case of default and treat the amount received by way of installments as hire charged for that by way of installments as hire charged for that period.period.

5.5. The installments in hire purchase include interest The installments in hire purchase include interest as well as repayments of principal.as well as repayments of principal.

6.6. Usually, the hiree charges interest on flat rate.Usually, the hiree charges interest on flat rate.

Legal Position of Hire Legal Position of Hire PurchasePurchase

The hire purchase act, 1972defines a hire purchase The hire purchase act, 1972defines a hire purchase agreement as “an agreement under which goods are agreement as “an agreement under which goods are let on hire and under which the hirer has an option let on hire and under which the hirer has an option to purchase them in accordance with the terms of to purchase them in accordance with the terms of the agreement which includes:the agreement which includes:

1.1. Possession of goods is delivered by the owner there Possession of goods is delivered by the owner there of to a person on a condition that such person paid of to a person on a condition that such person paid the agreed amount in periodic payments.the agreed amount in periodic payments.

2.2. The property/ownership in the goods is to pass to The property/ownership in the goods is to pass to such person on the payment of the last of such such person on the payment of the last of such installments.installments.

3.3. Such person has the right to terminate the Such person has the right to terminate the agreement at any time before the property so agreement at any time before the property so passes.passes.

4.4. According to Sec. 3 of the Hire Purchase Act, 1972 According to Sec. 3 of the Hire Purchase Act, 1972 every hire purchase agreement must be in writing every hire purchase agreement must be in writing and signed by all parties thereto.and signed by all parties thereto.

Rights of HirerRights of Hirer1.1. The hiree (vendor) can not terminate the hire purchase The hiree (vendor) can not terminate the hire purchase

agreement for default in payment of hire or due to an agreement for default in payment of hire or due to an unauthorised act or breach of expressed conditions unauthorised act or breach of expressed conditions unless a notice in writing in this regard is given to the unless a notice in writing in this regard is given to the hirer the period of notice will be one week where the hirer the period of notice will be one week where the hirer is payable weekly or less than that interval and two hirer is payable weekly or less than that interval and two weeks in other cases.weeks in other cases.

2.2. The right to repossess the goods will not exist unless The right to repossess the goods will not exist unless sanctioned by the court in the following cases:sanctioned by the court in the following cases:(a) Where the hire purchases price is less than Rs. 15,000 (a) Where the hire purchases price is less than Rs. 15,000 one one

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

three fourth of hire purchase price has been paid.three fourth of hire purchase price has been paid.

Rights of Hirer (Cont…..)Rights of Hirer (Cont…..)However this proportion in case of motor vehicles is as However this proportion in case of motor vehicles is as under :under :(a) One half, where the hire purchase price is less than (a) One half, where the hire purchase price is less than

Rs. 5,000.Rs. 5,000.(b) Three fourths, where the hire purchase price is not (b) Three fourths, where the hire purchase price is not

less than Rs. 5,000 but less than Rs. less than Rs. 5,000 but less than Rs. 15,000.15,000.(c) Three fourth or such higher proportion not (c) Three fourth or such higher proportion not

exceeding nine-tenth where the hire purchase exceeding nine-tenth where the hire purchase price price

is not less than Rs. 15,000.is not less than Rs. 15,000.3.3. The hirer has a right of receiving a statement from the The hirer has a right of receiving a statement from the

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

Rights of Hirer (Cont…..)Rights of Hirer (Cont…..)

4.4. If the amount paid by the hirer till the date of If the amount paid by the hirer till the date of repossession of the good or the value of the repossession of the good or the value of the goods on the date of repossession of goods goods on the date of repossession of goods exceeds the total hire purchase price the exceeds the total hire purchase price the excess payment made by the hirer will be excess payment made by the hirer will be returned to the hirer by the owner of the returned to the hirer by the owner of the goods. The owner or the vendor, for the goods. The owner or the vendor, for the purpose of calculating the value of the goods, purpose of calculating the value of the goods, has the right to deduct the reasonable has the right to deduct the reasonable expenses for repossessing the goods, for expenses for repossessing the goods, for storing the goods, or repairing them, for selling storing the goods, or repairing them, for selling them and for payment of arrears of taxes.them and for payment of arrears of taxes.