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Difficulty: EasyHire Purchase, Deferred Payment, and Credit Sale Schemes

Match each credit transaction scheme listed on the left with its defining legal ownership characteristic on the right.

  • Hire Purchase SchemeOwnership remains with the seller until the final installment is fully paid by the buyer.
  • Deferred Payment SchemeOwnership of the goods passes to the buyer upon payment of the first installment or deposit.
  • Credit Sale SchemeOwnership passes immediately to the buyer upon signing the agreement before payment is completed.

Answer

Hire Purchase Scheme matches with ownership remaining with the seller until the final installment is fully paid. Deferred Payment Scheme matches with ownership passing upon payment of the first installment. Credit Sale Scheme matches with ownership passing immediately upon contract execution.
Hire Purchase reserves legal title with the vendor until the complete contract sum is settled in full. Deferred Payment transfers ownership once the initial deposit or installment is satisfied. Credit Sale conveys legal title immediately upon contract execution prior to installment settlements.

Step-by-Step Solution

1
Determine the timing of ownership transfer for Hire Purchase.
In Hire Purchase, the buyer is technically a hirer until the final installment is paid, meaning legal ownership remains with the seller until the last payment.
The seller retains title as security until full contract payment is realized.
2
Determine the timing of ownership transfer for Deferred Payment.
Under a Deferred Payment scheme, ownership transfers to the buyer after the initial payment or deposit is made.
The contract acts as a sale where payment is deferred, transferring ownership early in the installment cycle.
3
Determine the timing of ownership transfer for Credit Sale Scheme.
In a Credit Sale, legal ownership passes immediately to the buyer as soon as the contract is executed.
The seller extends credit for a completed sale, relinquishing ownership upfront.

Key Concept

Timing of ownership transfer across Hire Purchase, Deferred Payment, and Credit Sale transactions
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Topics

Hire Purchase, Deferred Payment, and Credit Sale Schemes

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