1. Introduction to Hire Purchase Law
2. What Is the Hire Purchase Agreement?

Hire purchase in commercial law is an agreement where the owner of any goods can permit a person, or the hirer, to hire goods from him or her for a certain period of time. During that time, the hirer will pay installments for the use of the goods. The hirer has the option to buy the goods at the end of the agreement if all installments have been paid to the owner.

This is not considered a contract of sale, as the hirer has the opportunity to buy the goods after the agreement has been upheld on both sides. While the hirer has the right to use the goods, he or she does not legally own the goods during the time the agreement is set. The hirer does have the option to own them legally after the agreement ends.

Introduction to Hire Purchase Law

The hire purchase law is mentioned in the Hire-Purchase Act 1967, which became active on April 11, 1968, and in the Consumer Protection Act 1999, which became active in November 1999.

The hire purchase law is an agreement where an owner of goods agrees to hire out his or her goods to a hirer with the option that the hirer will be able to purchase the goods at the end of the agreement.

The Hire-Purchase Act stipulates that:

  • The hire-purchase agreement needs to be in writing and signed by all parties involved in the agreement. The intent of the Act is to provide protection to the consumer.
  • This Act does not cover all items and goods under the hire purchase law. It applies only to all hire purchase agreements involving the goods included in the First Schedule of the said Act, section 1(2) of the Hire-Purchase Act 1967.

Hire purchase agreements include other goods that are regulated by common law. According to common law, a hire purchase agreement is a contract where the owner of goods lets out those goods on hire for a specified time. The owner then agrees that after all the payments have been made, the hirer can either return the goods and end the contract with the owner, or the hirer can decide to buy the goods from the owner.

What Is the Hire Purchase Agreement?

The hire purchase agreement is a contract where the owner of goods permits a person, or hirer, to hire the goods from the owner for a specified duration of time, while the hirer pays installments for the goods to the owner. At the end of the agreement, the hirer can decide to buy the goods if he or she has paid all the installments. The hire purchase agreement is not a contract of sale. It is a contract of bailment. This is because the hirer only has the choice to buy the goods in question.

During the time of the contract, the hirer has paid for the right to use the goods. However, he or she does not legally own them. The hire purchase agreement is permitted for use as credit, which has been used by people to buy goods that are more expensive. These include items such as:

  • Automobiles
  • Large household appliances
  • Jewelry

With the hire purchase agreement, the creditor is the legal owner of the goods until the hirer has paid the full amount of the agreed-upon sum of money for it, as per the agreement.

When the hirer falls behind on paying the installments, or does not finish paying all the installments, the creditor will try to repossess the goods from the hirer and will ask the hirer to return the goods back to the creditor. However, this will not end the hirer's liability according to the agreement. This is because even when the goods have been repossessed and sold, the creditor will pursue the hirer for any other outstanding costs associated with the agreement.

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