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Hire purchase

Hire purchase as the word signifies is an agreement to sell which has features of an agreement of hire.
In this agreement the goods are let out by the owner to a hire purchaser or hirer on payment of rent to be made in installments upon an agreement that when a certain number of installments are paid, the property in the goods will transfer to the hire purchaser.
Hire purchase is not same as installment purchase/sale as one distinct feature of the hire purchase is that the hire purchaser has an option to buy and not an obligation to buy. In other words the hirer can opt out from purchase of the goods by not paying any further installments. Here the installments paid will operate as hire charges and he need not make any further payment neither he can be compelled to purchase the goods



X let a piano to Y on hire purchase terms. The terms were that, if Y regularly pays 24 installments then the piano will become his property. Y may terminate the hire purchase agreement at any time by returning the piano to X and he need not pay any further installments. Here Y has an option to buy and he is under no compulsion of making the purchase. Y can neither pledge the goods with any third person as he becomes the owner of the piano only on the payment of the last installment.

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