Hire Purchase Agreement
Hire Purchase Agreement
Hire purchase agreement is an agreement by which goods are let on hire and the hirer has an option to purchase the goods in accordance with terms of the agreement. Hire purchase agreements are often used in the case of airline industry and auto industry while leasing aircrafts and automobiles.
Elements of Hire Purchase Agreement
To be termed as a hire purchase agreement, the terms of agreement must include the following elements:
- Possession of goods is delivered by the owner to a person on condition that such person pays the agreed amount in periodical instalments;
- The property in the goods is to pass to such person on payment of the last of instalments;
- The person has a right to terminate the agreement at any time before the property passes.
- The agreement is supported by consideration in the form of payment of rentals by the hirer to the owner at regular intervals, and the right to use the goods by the hirer.
Parties to a Hire Purchase Agreement
In a hire purchase agreement, the two parties to the agreement are the hirer and owner. The owner lets the goods on hire for a specified period of time with a provision for payment of rentals at regular intervals including an option to buy the goods at the end of the period. The parties entering into a hire purchase agreement must be capable of entering into a contract and there should be an intent to create a legal relationship between the parties.
Stamp Duty on Hire Purchase Agreement
Hire purchase agreement requires a stamp duty to be paid like any other ordinary agreement as per the Indian Stamp Act. However, registration of hire-purchase agreement is not required, as it mostly does not pertain to any immovable assets.
To draft a hire purchase agreement, talk to an IndiaFilings Business Advisor.
