Hire puchase system is a special system of purchase and sale of goods. Under this system purchaser pays the price of the goods in installments. The installments may be annual, six monthly, quarterly, monthly fortnightly etc. Under this system the goods are delivered to the purchaser at the time of agreement before the payment of installments but the title on the goods is transferred after the payment of all installments as per the hire-purchase agreement.
The special feature of a hire-purchase transaction is that the payment of every installment is treated as the payment of hire charges by the purchaser to the hire vendor till the payment of the last installment.. After the payment of the last installment, the amount of various installments paid is appropriated towards the payment of the price of the goods sold and the ownership or the goods is transferred to the purchaser. Thus hire-purchase means a transaction where the goods are sold by vendor to the purchaser under the following conditions
1. the goods will be delivered to the purchaser at the time of agreement.
2. the purchaser has a right to use the goods delivered.
3. the price of the goods will be paid in installments.
4. every installment will be treated to be the hire charges of the goods which is being used by the purchaser.
5. if all installments are paid as per the terms of agreement , the title of the goods is transferred by vendor to the purchaser.
6. if there is a default in the payment of any of the installments, the vendor will take away the goods from the possession of the purchaser without refunding him any amount received earlier in the form of various installments.
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