A contract of hire, is governed by the provisions of Chapter IX of the Indian Contract Act. It usually covers the common day finance agreements like purchase of consumer durables like Motor Vehicles, Computers, Household appliances like Televisions, Refrigerators etc.
In the Industrial sector purchase of machinery etc is also financed by this method of hire purchase.
The basic principle underlying the transaction is that the installment determined is taken as hire (rental) till the time the agreement envisages such payments. On determination of the said period the Hirer (Purchaser) has the option of paying a nominal amount to become the owner of the goods.