Explain the nature of Hire-purchase agreements. How does a hire purchase agreement differ from a credit sale, and a conditional sale agreement?

A Hirer-purchase contract is a contract of bailment with an option to purchase the goods. The owner of the goods will transfer possession of them for a stipulated periodic payment of rent (installments). Once the hirer pays all the rent for the relevant period he exercises an option to buy and becomes the owner. The hirer need not exercise his option to buy and this is done by termination of the contract before the period expires. Hire-purchase legislation is contained in the Hire-purchase Act, when the total price does not exceed Sh. 80,000.

A credit sale contract is one for the sale of goods, the purchase price not pay-able immediately but by installments. Under such contracts the ownership of the goods passes to the credit-sale buyer as soon as the agreement comes into effect.

A conditional sale is very similar to a hire purchase agreement. It is an agreement for the sale of goods, whereby the purchase price is payable by installments and ownership remains with the seller until all installments of the price are paid. The distinction between the three types of installments sales   mentioned above becomes important when the buyer (or hirrer) disposes of the goods before having paid all the installments.

With a credit sale the buyer who owns the goods can confer a good title on a buyer or pledgee and the seller has no right against either. With a conditional sale, the property in the goods remains in the seller until such conditions as to the payment of installments or otherwise as may be specified in the agreement are fulfilled. With hire-purchase agreement, the hirer cannot confer a good title to a a third party if he sells them before paying the full hire-purchase price.

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