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Difficulty: MediumForms and Instruments of Credit

Under a standard hire purchase agreement, legal ownership of the goods transfers immediately to the buyer upon payment of the initial deposit.

Answer: Answer

Answer

False. Legal ownership of goods under a hire purchase agreement remains with the vendor until the final installment is fully paid, whereas possession alone is transferred upon delivery.
The statement is false because hire purchase grants immediate possession to the hirer while retaining legal ownership with the seller until the final installment and option-to-purchase terms are fully satisfied.

Step-by-Step Solution

1
Examine the legal nature of a hire purchase agreement.
Hire purchase is legally structured as a hiring contract with an option to purchase at the end of the term.
Differentiating between transfer of possession and transfer of title is essential for credit instruments.
2
Compare ownership transfer in hire purchase versus credit sale/deferred payment.
In credit sales, ownership passes immediately upon agreement or delivery. In hire purchase, ownership stays with the seller until the final installment is completed.
Retention of title gives the vendor legal rights to repossess the property if the hirer defaults prior to completing all payments.

Key Concept

Distinction between hire purchase and deferred payment regarding title transfer
Estimated Time:1m 0s
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Topics

Forms and Instruments of Credit

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