Distinguish between Sale and Hire purchase.

Distinguish between Sale and hire purchase :

  1. It may be made either orally or in writing.
  2. It is governed by the Sale of Goods, Act, 1930.
  3. The ownership of the goods is transferred from seller to the buyer as soon as the contract is made.
  4. After sate- buyer cannot return the goods.
  5. The buyer becomes the owner and gets all the rights of an owner i.e. right to pledge, resale, etc.
  6. If price is paid in installments, each installment paid is regarded as part of payment of price.
  7. In a sale, sales tax is levied at the time of the contract.

Hire Purchase Agreement

  1. It must be in writing.
  2. It is governed by the Hire Purchase Act, 1972.
  3. The ownership of the goods is transferred from the seller to the hire only when all the agreed number of installments are paid.
  4. The hire had an option to terminate the agreement at any stage. He may or may not but the goods. After the termination of agreement, the hire cannot be compelled to pay the remaining installments.
  5. The hire does not become the owner. His position is that of a bailed only. He becomes the owner after the payment of last installment.
  6. The installment paid is considered as the hire charges for the use of the goods. However, if the hire exercise the option to purchase the goods, then each installment is regarded as the part payment.
  7. Sales tax is not payable on hire purchase are until it becomes sale.


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