Hire Purchase Agreement

    What is Hire Purchase Agreement?

    Hire purchase agreement is an agreement of purchase - where the goods are let out on hire by the seller to the user of these goods (hirer). The hirer pays consideration in instalments and becomes the owner of the goods after paying the last instalment. Thus, there are two elements of ‘hire’ and ‘purchase’, involved in hire purchase agreements. The first element is the bailment of goods subject to hire, and the second aspect is the sale of these goods. Terms, conditions and promises between the parties (seller and hirer/purchaser) are mentioned in the agreement. 

    Among various goods, consumer products such as AC, fridge, car, bikes, electronics etc. can be purchased by way of hire purchase. 

    Why is it required?

    An agreement for hire purchase of goods  is drafted stating a seller’s and purchaser's willingness to sell and hire/purchase the goods, respectively.  It determines the terms and conditions of hire and purchase between the parties. The agreement is binding on both the parties. It is an important step as all the rights and liabilities of the parties are stated clearly and thus avoids future legal trouble and confusion. One of its main purposes is to serve as written evidence of the selling and hiring/purchasing of such goods. It safeguards the interests of both the seller and the purchaser. It is a legal document and can be enforceable in the Court of law. 

    What should it cover?

    1. The relevant personal details of the parties such as full name, residential addresses and ages of the parties to the agreement, 

    2. The name, type, model no. etc of the good(s) being hired/purchased through the agreement 

    3. Duties and responsibilities of and between the parties,

    4. The consideration / price to be paid and duration and method of payment (in installment or otherwise - as the case may be)

    5. Duration or the term of the agreement, 

    6. Penalty clause explaining the details of what the penalty would be if either party defaults in fulfilling its duties in accordance with the agreement, 

    7. Warranty details, mentioning the product and service warranties as agreed between the parties,

    8. General clauses such as termination of agreement, applicable laws, dispute settlement clause, confidentiality, intellectual property rights, etc.), and

    9. Date of signing of the agreement.  

    Documents Required

    There are no specific documents required for the drafting and execution of an agreement for hire purchase. However, ID proofs of the parties in order to confirm the names and permanent addresses of the seller and purchaser should be scrutinised. Documents evidencing clear title of the goods of the seller in question should also be examined. In addition, documents stating the warranty and guarantee of the goods could be examined too. 


    No set procedure is applicable in the making of a hire purchase agreement. Once the agreement has been drafted by a lawyer, it should be specifically and carefully read by both the parties to the agreement. Any necessary changes required to be made shall be carried out and once the agreement is finalised, it shall be signed by both the parties along with the requisite witnesses. The agreement for hire purchase must be printed on judicial stamp paper/e-stamp paper of proper value and signed by both the parties. The stamp paper value depends on the particular State in which it is executed. Each party should thereafter keep a signed copy of the hire purchase agreement.

    How can a lawyer help?

    One of the first and the most important steps that you must undertake is to hire a good documentation lawyer as he/she is aware of the nitty gritty of the legal procedures and necessary requirements involved in drafting of hire purchase agreements. A lawyer would draft such an agreement, better than you can yourself, since he/she has the necessary legal knowledge and experience to handle and draft such documents. He/She will be able to guide you and draft for you according to your particular situation -  the facts, circumstances and needs involved. A documentation lawyer is aware of good drafting technique and the clauses that must be included in your agreement. Hiring a good lawyer in order to draft such important legal documents is a prerequisite and will help you in more ways than one. He/She can also help with proper stamping as the case may be. Even if you have received a hire purchase agreement from the other party, it is the best step to hire a lawyer to proofread / vet the agreement before signing, in order to ensure that the terms and conditions stated in agreement are not against your interests or that it is not a one-sided agreement.

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