
According to J.R. Batliboi “Under the Hire
Purchase System, goods are delivered to a
person, who agree to pay the owners equal
periodical instalment, such instalment to be
treated as hire of those goods, until a certain
fixed amount has been paid, when these goods
become the property of the hirer.
1.
2.
3.
4.
Sale of Goods on Credit.
Payment in Instalments.
Right of Possession and Use of Goods.
Ownership of Goods.
5. For not making the payment of Instalmnet.
a. Right of Repossession of Goods to the Seller.
b.Forfeiture of Received Instalments.
c. Right of receiving the Oustanding
Instalment.
6.
7.
8.
Responsibility of Maintenance of Goods in
good Condition.
Responsibility for Repairs.
No right to Sell or Pledge the Goods.



Advantages to Buyer
Advantages to Seller
Advantages to Society
1.
2.
3.
4.
East method of Payment.
Purchases of Valuable Goods.
Encouragement to Savings.
Free repairs.
1.
2.
3.
4.
5.
Increase in Sales.
Increase in Income.
Easy realisation of Instalments.
Close relation between Buyer and Seller.
Possibility of Sale of Other goods.
1.
2.
3.
Increase in Production
Increase in Employment
Increase in Standard of Living.

Disadvantages to Purchaser.
a. High Price
b. Fear of Repossession of Goods.
c. Purchase of Unnecessary Goods.
d. No Ownership on Goods.
e. Mental Disturbance.

Disadvantages to Seller.
a. Need of More Capital
b. Difficulty in Realising Instalments.
c. Difficulty in Repossession of Goods.
d. More expenditure on Accounting.
e. Bear of Loss of Depreciation of goods.

Disadvantages to Society
S.No Basis of
.
Difference
Hire Purchase
Credit Sale
1.
Act
Purchase Act 1972
Sales of goods Act,1930
2.
Nature of
Contract
Hire purchase contract
Contract of Sale
3.
Mode of
payment
Installment
Cash
4.
Transfer of
Ownership
After the payment of last
installmnet.
On signing the contract of Sale
5.
Right of
repossession of
Goods
Default in the payment.
Cannot repossess the goods.
6.
Repair of Goods
Vendor
Purchaser
7.
Right to Sell or
Pledge the
Goods
No right to sell or pledge the
goods
Sell or Pledge.
8.
Termination of
Contract
Purchaser can terminate the
Contract
Purchaser cannot terminate the
contract.
Cash Price + Total Interest = Hire Purchase Price
1.
2.
3.
4.
Assets Account
Vendor’s A/c
Interest Account.
Depreciation Account.
1.
2.
Purchaser’s Account.
Interest Account.
(i)
Particul (2) Cash
ars
Price
Particulars
about
Instalments
(3) Principal
Cash Price of Amount of
the Assets
instalment
excluding
Interest
(4) Interest
(5)
Instalment
Amount of
Interest
Amount of
instalment
including
interest
Instalment payment system like hire purchase
system is a system of sale in which the
payment is made in instalment. Under this
system, the buyer becomes the owner of the
goods immediately on signing the contract of
sale. If the buyer makes default in the payment
of instalment, then the seller cannot reposses
the goods. He can only sue the buyer for
unpaid instalments.
“ Under an agreement to purchacse and pay by
instalments, the goods become the property of
the purchaser immediately when he receives
the delivery of the same” J. R. Batliboi.
1.
2.
3.
4.
5.
6.
Contract of Credit Sale.
Payment in Instalments.
Transfer of Ownership
Delivery of Goods.
In case of default of payment of instalment.
Right of Sale or Mortgage of Goods.