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Hire Purchase System

Theory of Hire Purchase System

Q. What is Hire Purchase System?
Ans. Hire purchase System is a system where buyer accrue the possession of the goods immediately and agree  to pay the total hire purchase price in installment. Each installment is treated as hire charge till the payment of last installment when ownership of good posses from the seller to buyer.

Q. Distinguish between Hire purchase agreement/system and sale?
Ans. HIRE PURCHASE SYSTEM:
1. In case of hire purchase, title passes through the buyer only after last payment is made.
2. Under hire purchase system buyer can not dispose off the goods until last payment is paid.
3. Under hire purchase system seller can reposes the goods if the buyer make any default in payment.
4. In case of hire purchase system position of buyer is just where that of bailee until the title passes through him.
5. In case of hire purchase system buyer can either retain or return the good.

Sale:
1. Under a sale the title of the goods passes through the buyer as the transaction completed.
2. In case of sale the buyer can dispose off the goods in any way in life after the sale transaction is completed.
3. In case of credit sale the seller can sue the buyer for the non-payment of goods.
4. In case of sale, buyer position is just like that of owner.
5. In case of sale, once the goods are sold they can not be return by the buyer.

Q. What is Repossession?
Ans. In case of hire purchase system when the purchaser failed to pay any installment to the vendor after giving notice to the buyer then the goods are taken back to him.

Q. What is loss on surrender?
Ans. When the vendor reposes the goods from buyer on failing to pay any installment the purchaser has to suffer certain loss which is called loss on surrender.


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