Management 202: Hire Purchase and Credit

BUSINESS LAW

hp

HIRE PURCHASE AND CREDIT SALE AGREEMENT

Credit sale agreement means a contract for sale of goods on credit basis where by the buyer is given the option of paying the purchase price by four or five installments

Hire Purchase: A person who wants to buy goods but does not have sufficient money consideration as the price may enter into an arrangement with the owner of goods so that the goods are given to him on hire purchase with the intention of finally purchasing them. This arrangement is known as a Hire purchase agreement.

Following are the distinctions between hire-Purchase and credit sale agreement.

  • Regulatory acts: Hire purchase agreement are regulated by the provisions of the hire purchase Act (Cap 507) whereas credit sale agreements are controlled by the sale of goods Act (cap 31)
  • Parties involved: The parties to a hire purchase agreement are called the owner and the hirer while in a credit sale agreement, they are known as the seller and buyer.
  • Transfer of ownership: In a hire Purchase agreement, ownership of the goods is to be transferred to the hirer at a future date on payment of the last and final installment while in a credit sale agreement; ownership of the goods is transferred to the buyer immediately on payment of the 1st installment.
  • Risk of loss: in a Hirer purchase agreement, if the goods are lost or destroyed without any fault of the parties, the owner will bear the risk of their loss. While in a credit sale agreement, the buyer will bear the risk of such loss. This is because Risk of loss follows ownership.
  • Repossession of Goods: In a hire purchase agreement, the Owner can repossess the goods at any time if the hirer fails to pay any installment. In a credit sale agreement, the seller cannot repossess the goods but may sue the buyer for the unpaid price.
  • Return of goods: In a hire purchase agreement, the hirer can terminate the agreement and return the goods to the seller unless there is a breach of condition.
  • Re-sale of goods: In a hire purchase agreement, the hirer cannot resale the goods to a 3rd person and transfer ownership rights. In a credit sale agreement, the buyer being the owner can resale the goods to a 3rd party and transfer ownership rights all along.

 

THE MANAGEMENT SYLLABUS

© 2016 Management Tutorials Africa

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Winston_Tony Eboyi is a Project Manager who runs programs on Personal Development and matters Business Branding. www.twicgroup.com

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