This is an agreement between two parties where one agrees to hire some goods for use after paying an initial deposit to the owners of the goods. The hirer agrees to make installment payments for a stipulated period of time, after which the ownership of the goods passes to him finally. A hire purchase contract can be in the following forms:
1. Contract of Bail Merit: this exists between a bailer and a bailer where the ownership of the goods does not change until full payment for the goods has been made.
2. Option Granted by the Owner to the Hirer: this is a situation in which the vendor allows the hirer to buy the goods after paying the stipulated installments.
3. A Contract of Sale: this makes the property in the goods pass to the hirer immediately. He is only expected to pay strictly on the agreed terms.
Termination of a Hire Purchase Contract
1. The vendor can terminate it within a few days after the contract was made.
2. The agreement can be terminated in accordance with the provisions in the contracts.
3. A breach of contract, probably default in installment payments, can lead to the termination of a contract.
4. The contract is terminated if the hirer dies, or is sent to prison, or is bankrupt.