Hire-Purchase Contract

A HIRE-PURCHASE contract is a contract by which goods are delivered to a person who agrees to make periodical payments by way of hire, with an option of buying the goods after the stated hire instalments have been paid.

The goods may be returned to the owner at any time before the option is exercised, on payment of the sum stated in the contract. Until the option is exercised there is no agreement to buy the goods.

The hire-purchase contract thus consists of three parts:

1. a contract of bailment under which the hirer obtains possesion of the goods, which remain in the ownership of the owner, and is thus enabled to use them before they are fully paid.
2. an option in favour of the hirer entitling him, after payment of the periodical instalments and usually for a nominal consideration, to purchase the goods.
3. and, if the hirer exercises the option, a contract of sale making him the owner of the goods already in his possession.

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