Management 202: Conditions and Warranties

BUSINESS LAW

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IMPLIED TERMS IN HIRE PURCHASE AGREEMENT

(Conditions and Warranties)

A condition is a provision presumed to exist by law in a hire purchase agreement. It is of great importance to the contract such that if it is not fulfilled, the whole contract is terminated. On the other hand, a warranty is also a provision presumed by law to exist in a hire purchase agreement but is is subordinate to the conditions. Therefore if it is not fulfilled, the injured party cannot terminate the contract but may claim a remedy

Following are the conditions and warranties implied by law in every hire purchase agreement:

Conditions:

  • There is an implied condition that the owner will have the right to sale the goods and transfer their legal ownership to the hirer when the hirer pays the hire purchase price in full.
  • There is an implied condition that the goods given on hire purchase are of merchantable (Commercial) quality, unless they are second hand goods and the agreement indicates so.
  • There is an implied condition that the goods will be reasonably fit for the particular purpose for which they are required by the hirer if the hirer makes it known to the owner, the purpose for which he requires the goods.
  • Where the goods are hired based on sample/description, there is an implied condition that the goods actually given on hire shall correspond with the sample or description given.

Warranties:

  • There is an implied warranty that the hirer shall have and enjoy quite a peaceful possession of the goods while they are in his custody.
  • There is an implied warranty that the goods on hirer shall be free from any change or claim by a third party at the time when their ownership is to pass to the Hirer.
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