Distinction between a sale and a hire-purchase agreement

In hire purchase agreement the goods are delivered to the hire purchaser for his use at the time of the agreement but the owner of the goods agrees to transfer the property in the goods to the hire purchaser only when the hirer pays a certain fixed number of installments of price.

However, Distinction between a sale and a hire-purchase agreement are as follows:

Under the Sale-->Ownership is transferred from the seller to the buyer as soon as the contract is entered into.

Under the Hire-purchase agreement-->Ownership is transferred from the seller to the hire-purchaser only when a certain agreed number of installments are paid.


In the Sale -->The position of the buyer is that of the owner.
In Hire-purchase agreement-->The position of the hire-purchaser is that of the bailee.

In Sale -->The buyer cannot terminate the contract and as such is bound to pay the price of the goods.

In Hire-purchase agreement-->The hire-purchaser has an option to terminate the contract at any stage, and cannot be forced to pay the further instalments.


In Sale -->If the buyer makes the payment in instalments, the amount payable by the buyer to the seller is reduced, for the payment made by the buyer is towards the price of the goods.

In Hire-purchase agreement-->The instalments paid by the hire-purchaser are regarded as hire charges and not as payment towards the price of the goods till option to purchase the goods is exercised.