Methods of Sale – Long Answer Questions
Medium Level (Application & Explanation)
Q1. What is a hire-purchase sale? Explain how payment and ownership work under it.
Answer:
- In a hire-purchase sale, the buyer pays the price in instalments over time.
- The goods are delivered to the buyer early, but they are treated as on hire.
- The ownership stays with the seller till all instalments are fully paid.
- Each instalment is treated as hire charges till the last payment.
- If all instalments are paid, the ownership passes to the buyer.
- This method helps people buy durable and expensive items like a car or TV.
Q2. Why are goods considered “on hire” until all instalments are paid in hire-purchase?
Answer:
- The sale is based on the idea of hire first, ownership later.
- The buyer only gets possession, not ownership, at the start.
- Each payment is counted as hire until the final instalment.
- This protects the seller, as the title remains with the seller.
- If the buyer defaults, the seller can take back the goods.
- Only after full payment does ownership transfer to the buyer.
Q3. What is the instalment payment (deferred instalment) system? Explain the rule on ownership and default.
Answer:
- In the instalment payment system, the price is also paid in instalments.
- But here the ownership passes to the buyer once the goods are sold and the initial payment is made.
- The buyer becomes the owner at the start of the contract.
- If the buyer defaults later, the seller cannot repossess the goods.
- The seller can only sue the buyer in a court of law for the balance due.
- So, the remedy is legal recovery, not taking back the goods.
Q4. Differentiate between hire-purchase and instalment payment systems on default and ownership.
Answer:
- In hire-purchase, ownership stays with the seller till full payment.
- In instalment system, ownership passes to the buyer at the start.
- On default in hire-purchase, the seller can ask for goods back and sue for damages.
- On default in instalment system, the seller cannot take back the goods.
- The seller can only sue for the remaining amount in instalment sales.
- Thus, hire-purchase gives the seller stronger control over the goods.
Q5. Why is hire-purchase common for durable and expensive goods?
Answer:
- Items like cars, motorcycles, TVs, and machinery are costly.
- Many buyers cannot pay the full price at once.
- Hire-purchase allows payment in easy instalments.
- The buyer gets to use the goods early while paying over time.
- The seller feels safe because ownership stays with them until full payment.
- This balance of use for buyer and security for seller makes it popular.
Q6. Explain the buyer’s right of early purchase in a hire-purchase contract.
Answer:
- In hire-purchase, the buyer can purchase early by paying the total remaining amount.
- This can be done at any stage during the instalment period.
- After paying the balance, the ownership transfers to the buyer.
- This right gives the buyer more flexibility and control.
- It helps buyers who later get funds and want to close the deal.
- It also reduces the ongoing risk of default and repossession.
High Complexity (Analysis & Scenario-Based)
Q7. Riya buys a motorcycle on hire-purchase and misses an instalment. What can the seller and Riya do? Explain.
Answer:
- Under hire-purchase, the ownership is with the seller till full payment.
- If Riya defaults, the seller can ask for the bike back.
- The seller can also sue for damages caused by the default.
- Riya can try to clear the missed instalment and continue, if allowed by the terms.
- Riya also has the option to pay the remaining amount and get ownership.
- If she cannot pay, she may have to return the bike and face a claim for damages.
Q8. Amit buys a TV under the instalment payment system and defaults. Can the seller take back the TV? What remedy is available?
Answer:
- In the instalment payment system, ownership passes to Amit at the start.
- Even if he defaults, the seller cannot repossess the TV.
- The seller’s remedy is to file a case for the balance due.
- The court can order payment of the unpaid amount.
- The seller must rely on legal recovery, not taking the TV back.
- So, repossession is not allowed in this system.
Q9. A buyer wants immediate ownership to use the goods as security for a loan. Which method should they choose? Justify your answer.
Answer:
- The buyer should choose the instalment payment system.
- Here, ownership passes to the buyer at the time of sale after the initial payment.
- With ownership, the buyer can use the goods as security.
- In hire-purchase, ownership stays with the seller till the last instalment.
- So, the buyer cannot pledge or mortgage the goods under hire-purchase.
- Therefore, the instalment system fits the buyer’s need for immediate title.
Q10. A store must choose between hire-purchase and instalment sale for expensive machinery. Advise them with reasons.
Answer:
- If the store wants strong control and lower risk on default, choose hire-purchase.
- Under hire-purchase, the store keeps ownership and can take back the machinery on default.
- This protects the store from non-payment and losses.
- If the store wants to transfer ownership early and only use legal recovery, choose instalment sale.
- But then, on default, they cannot repossess the machinery.
- For very high-value items, hire-purchase is usually safer for the seller.