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THE HIRE-PURCHASE ACT, 1972

Title : THE HIRE-PURCHASE ACT, 1972

Year : 1972



(1) Notwithstanding anything contained in any contract, in every hire-purchase agreement there shall be an implied warranty-

(a) That the hirer shall have and enjoy quiet possession of the goods; and

(b) That the goods shall be free from any charge or encumbrance in favour of any third party at the time when the property is to pass.

(2) Notwithstanding anything contained in any contract, in every hire-purchase agreement there shall be-

(a) An implied condition on the part of the owner that he has a right to sell the goods at the time when the property is to pass;

(b) An implied condition that the goods shall he of merchantable quality, but no such condition shall be implied by virtue of this clause-

(i) As regards defects of which the owner could not reasonably have been aware at the time when the agreement was made, or

(ii) As regards defects specified in the agreement (whether referred to in the agreement as defects or by any other description to the like effect), or

(iii) Where the hirer has examined the goods, or a sample thereof, as regards defects which the examination ought to have revealed, or

(iv) If the goods are second-hand goods and the agreement contains a statement to that effect.

(3) Where the hirer, whether expressly or by implication,-

(a) Has made known to the owner the particular purpose for which the goods are required, or

(b) In the course of any antecedent negotiations, has made that purpose known to any other person by whom those negotiations were conducted, there shall be an implied condition that the goods shall be reasonably fit for such purpose.

(4) Where the goods are let under a hire-purchase agreement by reference to a sample there shall be-

(a) An implied condition on the part of the owner that the bulk will correspond with the sample in quality, and

(b) An implied condition on the part of the owner that the hirer will have a reasonable opportunity of comparing the bulk with the sample.

(5) Where the goods are let under a hire-purchase agreement by description there shall be an implied condition that the goods will correspond with the description; and if the goods are let tinder the agreement by reference to a sample as well as by description, it shall not be sufficient mat the bulk of the goods correspond with the sample if the goods do not also correspond with the description.

(6) An owner shall not be entitled to rely on any provision in a hire-purchase agreement excluding or modifying the condition set out in sub-section (3) unless he proves that before the agreement was made the provision was brought to the notice of the hirer and its effect made clear to him.

(7) Nothing in this section shall prejudice the operation of any other enactment or rule of law whereby any condition or warranty is to be implied in any hire-purchase agreement.



(1) In this section, -

(a) "cash price installment", in relation to a hire-purchase installment, means an amount which bears to the net cash price the same proportion as the amount of the hire-purchase installment bears to the total amount of hire-purchase price;

(b) "Deposit'" means any sum payable by the hirer under the hire-purchase agreement by way of deposit or other initial payment or credited or to be credited to him under the agreement on account of any such deposit or payment. whether that sum is to be or has been discharged by payment of money or by transfer or delivery of goods or by any other means;

(c) "Net cash price", in relation to goods comprised in a hire-purchase agreement, means the cash price of such goods as required to be specified in the hire-purchase agreement under clause (b) of sub-section (1) of section 4, less any deposit as defined in clause (b);

(d) "Net hire- purchase charges", in relation to a hire-purchase agreement for any goods, means the difference between the net hire-purchase price and the net cash price of such goods;

(e) "Not hire-purchase price", in relation to goods comprised in a hire-purchase agreement, means the total amount of" hire-purchase price of such goods as required to be specified in the hire-purchase agreement under clause (a) of sub-section (I) of section 4 less, -

(i) Any amount which is payable to cover the expenses of delivering the goods or any of them to or to the order of the hirer and which is specified in the agreement as included in the hire-purchase price;

(ii) Any amount which is payable to cover registration or other fees under any law in respect of the goods or the agreement or both and which is specified in the agreement as included in the hire-purchase price; and

(iii) Any amount which is payable for insurance (other than third party insurance) in respect of the goods and which is specified in the agreement as included in the hire-purchase price:

(f) "Statutory charges", in relation to a hire-purchase agreement, means the aggregate of the amounts calculated in accordance with the provisions of subsection (2) as statutory charges in respect of each of the cash price installments corresponding to each of the hire-purchase installments under the agreement.

(2) The statutory charges, in respect of a cash price installment, shall be an amount calculated at the rate of thirty per centum per annum or, if a lower rate is specified under sub-section (3), as such lower rate, in accordance with the following formula:-

SC  =  ClxRxT
           100

where,--SC,- represents the statutory charges;

Cl.-represents the amount of cash price instalment expressed in rupees or fractions of rupees;

R.-represents the rate; and

T.-represents the time, expressed in years and fractions of years, that elapses between the date of the agreement and the date on which the hire-purchase installment corresponding to the cash price installment is payable under the agreement.

(3) The Central Government may, by notification in the Official Gazette, and after consultation with the Reserve Bank of India, specify the rate per centum per annum, being a rate which shall not be less than ten per centum per annum, at which statutory charges may be calculated under sub-section (2) and different rates may be so specified in respect of hire-purchase agreements relating to different classes or sub-classes of goods.

(4) Where the net hire-purchase charges in relation to a hire-purchase agreement exceed the statutory charges in relation to such agreement calculated in accordance with the provisions of sub-section (2), the hirer may, by notice in writing to the owner, either elect to treat [he agreement as void or to have his liability reduced by the amount by which the net hire-purchase charges exceed the statutory charges aforesaid.

(5) Where a biter elects, in accordance with the provisions of sub-section (4), to treat the hire-purchase agreement as void, the agreement shall be void, and the amount paid or provided whether by cash, cheque or other consideration, by or on behalf of the hirer in relation to the agreement shall be recoverable by the hirer as a debt due to him by the owner.

(6) Where the hirer elects to have his liability reduced by the amount referred to in sub-section (4), his liability shall be reduced by that amount and that amount may be set off by the hirer against the amount that would otherwise be due under the agreement and, to the extent to which it is not so set off, may be recovered by the hirer as a debt due to him by the owner.



Subject to the provisions of this Act, the property in the goods to which a hire-purchase agreement relates shall pass to the hirer only on the completion of the purchase in the manner provided in the agreement.

Last updated on July, 2016

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