HIRE PURCHASE AGREEMENT

Hire Purchase Agreement and consumer law

Hire purchase agreement and consumer law

Introduction

Hire purchase (HP) agreement is governed by consumer law. It is an agreement between individual (consumer of product) and a bank (or a financial entity) that is arranged by the vendor (seller or shopkeeper of that product). The factual interpretation of this agreement is that the bank has bought the product from vendor which then sells on instalment basis as explained under Hire Purchase agreement to the consumer or buyer. At the end of the contract period the buyer (consumer) has the option to buy the product outright from the bank by paying a fee at the end of the agreement period as per the agreement.

Discussion

Hire purchase agreements shall not be confused with conditional sale contracts where buyer or consumer owns the goods once all instalments have been paid. Contrary to Hire Purchase agreement, there is no extra fee payable at the end of the agreement. In Hire Purchase agreements buyer does not own the product during agreement period and therefore he is liable to any damage caused to the product during the contract period. Actual ownership of goods lies with the finance company.

In the case of William and Chantele buying a 50 inch Pony 3D interactive TV set from Purrys, Moyds finance initially bought that TV set from Purrys and then leased it to William and Chantele. Actual ownership of TV set lies with Moyds finance and William and Chantele are merely using TV set against monthly payments, that is, lease rentals. When the TV set exploded and caused damage to William and Chantele, it shall be noted if that TV set was covered under any warranty terms from Purrys or Moyds finance. Normally vendor provides warranty for product. In this case there is no mention of after sale warranty terms for TV set. In hire-purchase agreement anything bought must be in compliance with the Sale of Goods Act 1979 (as amended) and be reasonably durable and fit for its normal purpose, of tradable quality and be of the same quality as mentioned in the specification, wrapping or advertising, a label of something that was said by the vendor at the time of sale. In this case after two months of purchase the TV set exploded due to heating of a product used in TV set. Therefore this is in breach of TV set being reasonably durable, and thus William and Chantele can claim for damage cause to them due to TV set being exploded from both Moyds finance and Purrys. The consumer is legally empowered to claim for damages caused due to faulty product from both finance company (Moyds finance in this case) and salesperson or vendor (Purrys in this case). Purrys aired the warning notice regarding the faulty part used in the TV set and recalled that product from consumers but the event of explosion occurred two days before that announcement, therefore Purrys and Moyds finance are responsible for the financial and physical damage caused ...