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Report No. 20

Clause 5

Substance.-Sometimes the parties instead of entering into a single hire-purchase agreement, execute two or more agreements which, taken together, amount to a hire-purchase agreement. (In such cases, there is a separate agreement of hire and a separate agreement of purchase). With reference to such agreements, four possible courses can be adopted:-

(a) Such agreements may be allowed, provided they conform to the other provisions of the Act. That is the course adopted in the English Act, vide the definition of "hire-purchase agreement" in section 21(1), H.P.A., 1938.

(b) The agreement for hire may be allowed to stand and the agreement for purchase may be declared to be void.

(c) Both the agreements may be allowed to stand, but they may be treated as not falling within the Act and as not constituting or having the effect of a hire-purchase agreement. Compare the treatment accorded to mortgages by conditional sale under section 58(c), proviso, of the Transfer of Property Act, 1882.

(d) Both the agreements may be declared to be void.

The course at (a) above has been adopted, as in the English Act, as just to all parties and as not likely to raise difficulty too often.

The course at (b) above has been rejected, because that would be contrary to the real intentions of the parties and would give the owner an advantage which was not agreed to by the parties.

The course at (c) above has been rejected, since it would enable many persons to evade the application of the proposed Act by splitting up the transaction into two agreements.

The course at (d) above has been rejected, as too drastic.

Form:-The language of the English Act has been followed with two changes:-

(i) the words "either the bailee may pass to the bailee" have been replaced by "the bailee has an option to purchase the goods", in consonance with the definition of 'hire-purchase agreement' as proposed.1

(ii) It has been made clear that the agreements taken together should satisfy the conditions of validity.

(iii) Instead of "single" agreement, the words "single hire-purchase agreement" have been used, for precision.

[In view of (ii) above, this is not likely to create any complications.]

1. See clause 2-"hire-purchase agreement".

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