Identify which of the following statements correctly describes a hire-purchase agreement.
A)The contract does not create a bailment and the hirer has no contractual obligation to pay the purchase price.
B)The contract gives the hirer a lien on the goods preventing the owner from selling the goods to another.
C)This is simply another name for a chattel mortgage on an automobile.
D)The contract creates a bailment,but the hirer has a contractual obligation to pay the purchase price.
E)The contract creates a bailment and the hirer has an option to purchase the item at the end of the stipulated term.

Question

Quizplus · Accepted Answer

A hire-purchase agreement involves the hiring of goods with an option to purchase at the end of the stipulated term. It creates a bailment, meaning the possession and control of the goods are transferred to the hirer, but the ownership remains with the owner until the final payment is made. The hirer has an obligation to pay the purchase price and failure to do so could result in repossession of the goods. Therefore, option E is the correct statement.

Identify Which of the Following Statements Correctly Describes a Hire-Purchase