hire purchase
A method of buying goods in which the purchaser takes possession of them as soon as he has paid an initial instalment of the price (a deposit) and obtains ownership of the goods when he has paid all the agreed number of subsequent instalments and exercises his option to purchase the goods. A hire-purchase agreement differs from a credit sale agreement and a sale-by-instalments contract because in these transactions ownership passes when the contract is signed. It also differs from a contract of hire, because in this case ownership never passes. Hire-purchase agreements were formerly controlled by government regulations that stipulated the minimum deposit and the length of the repayment period. These controls were removed in July 1982. Hire-purchase agreements were also formerly controlled by the Hire Purchase Act 1965, but most are now regulated by the Consumer Credit Act 1974. In this Act a hire-purchase agreement is regarded as one in which goods are bailed in return for periodical payments by the bailee; ownership passes to the bailee if he complies with the terms of the agreement and exercises his option to purchase. A hire-purchase agreement often involves a finance company as a third party. The seller of the goods sells them outright to the finance company, which enters into a hire-purchase agreement with the hirer. In this situation there is generally no direct contractual relationship between the seller and the buyer. |