Hire purchase agreement

In Section 2(1) of the Hire-Purchase Act 1967, hire-purchase is defined as,

"a letting of goods with an option to purchase and an agreement for the purchase of goods by instalments (whether the agreement describes the instalments as rent or hire or otherwise), but does not include any agreement:

(a) whereby the property in the goods comprised therein 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 or purchased is a person who is engaged in the trade or business of selling goods of the same nature or description as the goods comprised in the agreement.

The above provision explains that hire-purchase is:

(a) Letting of goods with an option to purchase, and

(b) An agreement for the purchase of goods by instalments.
In hire-purchase, property in the goods does not pass at the time of the agreement, before delivery of the goods or at the time of delivery.

In hire purchase agreement, there would be a seller or dealer who offers the goods for sale to a purchaser.

However this seller does not offer payment by instalment to the purchaser. Thus, the seller will sell the goods to a finance company which will subsequently hire the goods to the purchaser under the hire-purchase terms.

Therefore there would be an original sale between a seller and and a finance company and a hire-purchase agreement between a purchaser and a finance company.