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Answer: The two methods look similar but differ on key points. In a hire purchase system, the buyer pays in instalments but ownership remains with the seller until the last instalment is paid. The amounts paid are treated as hire charges, and on default, the seller can reclaim the goods and may sue for damages. In a sale through instalment payment system (deferred payment), the buyer becomes the owner immediately after the first payment and delivery. Payments are treated as part-payment of price. If the buyer defaults, the seller cannot take back the goods and can only sue for unpaid money. For example, a car on hire purchase stays the seller’s property till the last payment, while a laptop on instalment belongs to the buyer from day one.
Answer: Under hire purchase, the buyer gets possession but not ownership until the final instalment. The buyer must pay regular instalments, keep the goods with care, and may also have the right to terminate the agreement and return the goods, though charges may apply. The buyer can also pay off the balance early and become the owner sooner. The seller has the right to retain ownership until full payment, to repossess the goods if the buyer defaults, and to sue for damages if the agreement is breached. Amounts paid before completion are treated as hire charges, not as price. This system protects the seller’s interest in expensive and durable goods, while allowing the buyer to use the goods and manage payments over time.
Answer: In the instalment payment system, the buyer pays the price in instalments, but the ownership transfers immediately after the first payment and delivery of the goods. The instalments are treated as part-payments of the price. If the buyer stops paying, the seller cannot take back the goods, because the goods have already been sold outright. The only remedy for the seller is to sue the buyer in a court of law to recover the unpaid balance. For the buyer, this method is useful because they get full ownership early and can even gift or resell the item. However, the buyer is liable for the entire amount and cannot terminate the agreement midway. For the seller, the risk is higher because repossession is not possible on default.
Answer: Hire purchase is more suitable for expensive and durable items like cars, motorcycles, televisions, refrigerators, and machinery. Here, ownership stays with the seller until full payment, so the seller’s risk is lower. The buyer benefits by getting possession and using the item while paying gradually. The instalment payment system is preferable when the buyer wants immediate ownership and is confident of paying regularly, such as for furniture, laptops, or mobile phones. It gives the buyer freedom to gift or resell the item. However, the seller assumes higher risk as repossession is not allowed on default. Thus, sellers prefer hire purchase when they want to secure the goods, while buyers prefer instalments when they want ownership from the start.
Answer: The role play makes abstract rules visible and practical. When buyers pay in 5 instalments and hold (toy) goods, they experience possession without ownership under hire purchase. If a buyer misses a payment, the seller takes back the product, showing the seller’s right to reclaim goods. In contrast, under the instalment system, once the first payment is made, buyers keep the goods even if they later default, and the seller can only ask for money (sue), not the goods. Students observe that in hire purchase, ownership transfers only after the last instalment, while in instalments, ownership transfers immediately. The activity reinforces the ideas of default, repossession, right to sue, and treatment of payments (hire charges vs price), making the differences easy to remember.
Answer: Under hire purchase, the buyer has possession but not ownership until the last instalment is paid. By missing two instalments, the buyer is in default. The seller can exercise the right to repossess the TV and may also sue for damages if the agreement is breached. The buyer may choose to terminate the agreement and return the TV, though charges may apply. A fair resolution could be a mutual plan: the buyer pays the overdue instalments within a short grace period and continues the contract, or opts for early settlement if possible. If the buyer cannot pay, the seller may reclaim the TV as per the contract. This balances the seller’s security of ownership with the buyer’s opportunity to regularize payments.
Answer: In the instalment payment (deferred payment) system, ownership transfers immediately after the first instalment and delivery. Therefore, even if Ravi defaults later, the seller cannot repossess the washing machine. The seller’s only lawful remedy is to sue for the unpaid balance in a court of law. Ravi remains liable to pay the remaining instalments because the sale is outright and payments are merely deferred. The seller should send a formal notice demanding payment and, if unpaid, proceed with legal action to recover the dues. This scenario highlights the core difference between hire purchase (where repossession is possible) and instalments (where only money recovery is allowed), and it reminds buyers that ownership also brings continuing liability to pay the entire price.
Answer: Under hire purchase, Meera already has possession but not ownership. The system allows the buyer to pay the remaining amount in one go during the instalment period. Once she pays the balance, the ownership transfers to her immediately. This action also ends the agreement, and the payments already made are treated as hire charges up to that point, with the final payment completing the purchase. Early closure benefits Meera by giving her full ownership sooner, removing the risk of repossession for future defaults, and simplifying her obligations into a single payment. After settlement, the seller loses the right to reclaim the goods and cannot claim further hire charges, since the sale is complete. Thus, early payment converts a conditional holding into a full and final ownership.
Answer: In hire purchase, ownership stays with the seller until the last instalment is paid. Amit only has possession, not ownership, so he cannot legally gift the refrigerator because he does not have the title to transfer. If he defaults, the seller may reclaim it. In contrast, under the instalment payment system, ownership transfers immediately after the first instalment and delivery. Reena already has full ownership of the dining table, even though some instalments remain. She can resell or gift it because the goods are hers. If she later defaults, the seller cannot take back the table and can only sue for the unpaid amount. This comparison shows how ownership timing directly affects the buyer’s right to transfer the goods.
Answer: The shopkeeper should choose hire purchase to secure the goods until all instalments are paid. Under hire purchase, ownership remains with the seller, so if a customer defaults, the shopkeeper can take back the equipment and may sue for damages for breach. This protects the seller’s interest in expensive and durable items. If the shopkeeper uses the instalment payment system, ownership transfers immediately after the first payment, and on default, the seller cannot reclaim the goods and can only sue for money, which increases risk. While instalments may seem more attractive to customers because they get ownership early, hire purchase provides better control, reduces losses on default, and aligns with the need to protect high-value assets until full payment is received.