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In the first
form
the goods are purchased by the financier from the dealer and
the financier
obtains a hire-purchase agreement from the customer,
under
which the customer becomes the owner of the goods
on payment
of all the installments of the stipulated hire and exercising
his option to purchase the goods on payment of a nominal price.
The owner
gets his money from the financier, who recovers the cost from
the customer.
In other
form
the customer
purchases the goods and he executes a hire-purchase agreement
with a financier,
under
which he remains in possession of goods, subject to payment
of amount paid by the financier on his behalf to the owner.
The financier
gets a right to seize the goods in the event of non-fulfillment
of conditions of hire-purchase agreement by the customer.
NATURE OF AGREEMENT
- The true nature of the transaction is determined from the terms
of the agreement and the court unless prohibited by statute can go
behind the documents to determine the true nature of the transaction.
If the purchaser desiring to purchase the goods, who is not having
sufficient money for purchasing the same, borrows the amount from
a third party and pays it over to the vendor, the transaction between
the customer and the third party will be a loan transaction.
The true nature of the transaction will not change if the lender
himself is owner of the goods and he accepts the promise by the
purchaser to pay the balance money due against delivery of goods.
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