1911 Encyclopædia Britannica/Hire-purchase Agreement

HIRE-PURCHASE AGREEMENT, in the law of contract, a form of bailment of goods, on credit, which has extended very considerably of late years. Originally applied to the sale of the more expensive kinds of goods, such as pianos and articles of furniture, the hire-purchase agreement has now been extended to almost every description. The agreement is usually in writing, with a stipulation that the payments to purchase shall be by weekly, monthly or other instalments. The agreement is virtually one to purchase, but in order that the vendor may be able to recover the goods at any time on non-payment of an instalment, it is treated as an agreement to let and hire, with a provision that when the last instalment has been paid the goods shall become the property of the hirer. A clause provides that in case of default of any instalment, or breach of any part of the agreement, all previous payments shall be forfeited to the lender, who can forcibly recover the goods. Such agreements, therefore, do not pass the property in the goods, which remains in the lender until all the instalments have been paid. But the terms of the agreement may sometimes purposely obscure the nature of the transaction between the parties, where, for example, the hire-purchase is merely to create a security for money. In such a case a judge will look to the true nature of the transaction. If it is not a real letting and hiring, the agreement will require registration under the Bills of Sale Acts. If the agreement contains words to the effect that a person has “bought or agreed to buy” goods, the transaction comes under the Factors Act 1889, and the person in possession of the goods may dispose of them and give a good title. The doctrine of reputed ownership, by which a bankrupt is deemed the reputed owner of goods in his apparent possession, has been somewhat modified by trade customs, in accordance with which property is frequently let out on the hire-purchase system (see Bankruptcy).