18-12-2012, 02:00 PM
PROJECT REPORT ON HIRE PURCHASE
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Introduction of Hire Purchase
Purchase and sale of goods under Hire-Purchase system is governed by the Hire-Purchase Act, 1972. This Act was passed on 8th June, 1972 and came into force with effect from September 1, 1973.
Here, the word “hire” denotes, the sum payable periodically by the hirer under a hire-purchase agreement.
Under the Hire Purchase System, the owner of the goods lets his goods on hire and gives an option to the hirer to purchase the goods in accordance with a specific agreement called Hire Purchase Agreement.
Definition of 'Hire Purchase'
A system by which a buyerpays for a thing in regular installments while enjoying the use of it.During the repayment period, ownership (title) of the item does not pass to the buyer. Upon the full payment of the loan, the title passes to the buyer.
What is Hire Purchase?
Hire-purchase system is a special system of purchase and sale of goods. Under this system purchaser pays the price of the goods in instalments. The instalments may be annual, six monthly, quarterly, monthly fortnightly etc. Under this system the goods are delivered to the purchaser at the time of agreement before the payment of instalments but the title on the goods is transferred after the payment of all instalments as per the hire-purchase agreement. The special feature of a hire-purchase transaction is that the payment of every instalment is treated as the payment of hire charges by the purchaser to the hire vendor till the payment of the last installment... After the payment of the last instalment, the amount of various instalments paid is appropriated towards the payment of the price of the goods sold and the ownership or the goods is transferred to the purchaser.
Historyof hirepurchase
Hire Purchase was first used in the 19th Century as a means of enabling carriers to purchase wagons for use in their business. Basically, it means exactly what its name suggests; a hiring of the goods until a certain condition is met, when they become the property of the hirer. This condition is usually the completion of all of the payments. The advantage to the finance company is obvious; the property in the goods remains theirs until the goods are paid for. Therefore the finance company has, at least a partial security for their debt. In the 1950s and 1960s it acquired a bad reputation. This was due to the way that some finance companies were dealing with their customers. This lead to the first hire purchase Acts.
Hire-Purchase Act 1967
The Act is under the jurisdiction of the Ministry of Domestic Trade andConsumer Affairs. It does not set down any licensing requirements butprovides for the regulation of hire-purchase activities relating toscheduled goods.According to Section 2 of the Hire-Purchase Act, hire-purchase includes aletting of goods with an option to purchase and an agreement for thepurchase of goods by instalments (whether the agreement describes theinstalments as rent or as hire or as otherwise), but does not include any
Agreement:
(a) Whereby the property in the goods passes at the time of the agreement or upon or at any time before delivery of the goods; or
(b) Under which the person by whom the goods are being hired orpurchased is a person who is engaged in the trade or business ofselling goods of the same nature or description as the goodscomprised in the agreement.Based on the above, subsection (a) seeks to exclude outright sale(ownership transfers to buyer upon sale). Likewise, a dealer cannotfinance his stock under hire-purchase as the owner and hirer cannot be thesame person.