A hire purchase agreement is a legal contract between the buyer and seller, in which the buyer agrees to purchase goods on credit and repay the amount over a specified period. In this arrangement, the buyer takes possession of the goods but doesn`t become the owner until all the payments are complete.
There are three parties involved in a hire purchase agreement, including the seller, the buyer, and the finance company. Each of these parties plays a critical role in the process of hire purchase. Let`s take a look at each of them in detail.
1. Seller
The seller is the person or company selling the goods under hire purchase agreement. The seller is responsible for providing all the necessary information about the goods, such as its quality, price, and other terms and conditions. Once the agreement is signed, the seller transfers the ownership of the goods to the buyer but retains the legal title until all payments have been made. The seller also has the right to repossess the goods if the buyer fails to make payments according to the agreement.
2. Buyer
The buyer is the person or company purchasing the goods under the hire purchase agreement. The buyer agrees to pay the full price of the goods in installments over a specified period. The buyer is responsible for keeping the goods in good condition throughout the hire purchase period. In case of any damage or loss of the goods, the buyer is liable to compensate the seller.
3. Finance Company
The finance company is the third party that provides the funds to the buyer to purchase the goods. The finance company pays the full price of the goods to the seller on behalf of the buyer, and the buyer repays the loan amount to the finance company in installments. The finance company charges interest on the loan amount, which is added to the total cost of the goods.
In conclusion, the parties involved in a hire purchase agreement are the seller, buyer, and finance company. Each of them plays a vital role in ensuring the successful completion of the hire purchase process. It`s essential to read and understand the terms and conditions of the agreement before signing it to avoid any misunderstanding or conflict in the future.