Instalment Payment System also called the Deferred Instalments is a system where the buyer is given the ownership as well as the possession of the goods right at the time of signing the contract. The buyer has the facility to pay the price in instalments. The features of Instalment Payment System are as follows:
i) It is an outright sale.
ii) The possession as well as the ownership is passed to the buyer on signing of the contact.
iii) The buyer can make the payment in instalments.
iv) In case of default in payment, the seller cannot repossess the goods.
v) The amount paid up to the default is not forfeited and the seller can sue the buyer for the amount due.
From the above discussion we can see that the Instalment Payment System has some similarities with the Hire Purchase System, but there are some points of difference as well. They are as follows:
(1) Nature of Contract
- Hire Purchase System: It is a hiring goods agreement. System of buying goods by making regular payments until the full price is paid.
- Installment System: It is an agreement of sale. System of credit sale in which a sum of money or debt is paid regularly in installment.
(2) Ownership
- Hire Purchase System: Ownership of goods is transferred after the payment of the final installment. Ownership of goods remains with the seller until the full price is paid
- Installment System: Ownership of the goods passes to the buyer just signing the agreement. Ownership is transferred immediately after the first installment
(3) Right
- Hire Purchase System: The buyer can not sell, destroy or transfer the goods.
- Installment System: The buyer can sell, destroy or mortgage or transfer as his/her wish.
(4) Risk
- Hire Purchase System: All the risks are borne by the vendor before the payment of the final installment.
- Installment System: All the risks are to be borne by the buyer from the date of the agreement.
(5) Right of Return
- Hire Purchase System: The buyer can return the goods before making the final installment. Goods can be returned to the seller before the final installment.
- Installment System: The buyer can not return the goods to the seller.
(6) Repair and Maintenance
- Hire Purchase System: The liability of repair and maintenance lies with the seller-provided that the buyer takes the utmost good care.
- Installment System: The buyer is responsible for repair and maintenance. Goods cannot be returned.
(7) Forfeiture of Installment Paid
- Hire Purchase System: In case of default in payment of installment, paid installment will be forfeited and treated as hire charges.
- Installment System: The act of forfeiture can not be activated.
