Default And Repossession

‘Default’ is the failure to act, appear or pay i.e., failure to meet obligation. Under a hire purchase agreement, the hirer has obligation to pay up to the last instalment so that the ownership of goods smoothly passes to him. If he fails to meet this obligation, it will be treated as default on his part.

Possession of goods means physical holding of goods. You know that under hire purchase agreement, the vendor simply transfers the possession of goods. He does not transfer the ownership, and if the hirer fails to pay even the last instalment, the vendor has the legal right to recover the possession of the goods. This act of recovery of possession is termed as ‘repossession’.

The legal position of the hire vendor and hire purchaser (hirer) in case of default is complicated. The Hire Purchase Act of 1972 did codify this issue first, but as this Act was not put to operation, the legal position is not very clear. However,the relevant provisions of the said Act are discussed below.


Rights of the Hire  Vendor

1. Rights of hire vendor to terminate hire purchase agreement: Where

the hirer makes more than one default in payment of instalment as provided

in the agreement, the hire vendor (the owner) shall be entitled to terminate

the agreement by giving the notice of termination in writing.


2. Rights of the hire vendor on termination: Where a hire purchase agreement is terminated, the hire vendor (the owner) shall-be entitled (i) to enter the premises of the hirer and seize the goods, (ii) to retain the hire charges already paid and to recover the arrears of hire charges due, and (iii) to claim damages for non-delivery of the goods.


Restrictions on the Owner

The above rights of the owner are, however, subject to the following restrictions:


1. Rights of hirer in case of seizure of goods by the owner: Where the owner seizes the goods lent under a hire purchase agreement, the hirer may recover from the owner the amount, if any, by which the hire purchase price falls short of the aggregate of two amounts (a) the amounts paid in respect of the hire purchase price up to the date of seizure, and (b) the value of the goods on the date of seizure.


2. Restrictions on owner’s right to repossess: Where goods have been let under a hire  purchase agreement, and the statutory amount of the hire purchase price has been paid, the owner shall not enforce any right to recover possession of the goods from the hirer otherwise than by verdict of any competent court.

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