Hire Purchase Agreement

Under a Hire Purchase Agreement, the Borrower agrees to pay money to the Lender. In return, the Borrower is allowed to hire goods for a specified period of time; Note that, at the end of the hiring period, the Borrower usually has the right to exercise an option to purchase those goods, usually if the Borrower has paid a deposit.

With such a Hire-Purchase Agreement the Borrower usually:

•  Agrees that the Lender owns the goods

•  Must pay for insurance against loss or damage or destruction of the goods

•  Must keep and maintain the goods in good order, condition and repair (including refraining from altering the appearance or identifying features of the good)

•  Must allow the Lender to inspect their goods and enter any premises where the Goods are located.

•  Must indemnify the Lender against any penalties, fines, or claims against certain actions of the Lender.

Chattel Mortgage Agreement

Under a Chattel Mortgage Agreement, the Borrower agrees to borrow money from the Lender to buy goods from the Lender. However, under the terms of the loan, the Lender holds a mortgage interest in those goods; this means that if the Borrower defaults on the loan, the Lender has the right to acquire the goods. Usually the goods in question are valuable such as cars or business equipment. The borrower usually is subject to similar terms as in a Hire-Purchase Agreement.


The substantial difference between the two forms of agreements is that a Hire-Purchase Agreement involves “renting” the Lender’s goods through the payment of regular instalments (with an option to purchase at the end of the Hiring Period); whereas a Chattel Mortgage Agreement involves an actual loan of monies for the Borrower to purchase goods.

Therefore, in the latter scenario, it is the Borrower who is the legal owner of the goods; in the former scenario, it is the Lender or Credit Provider who is the legal owner.

However, in both scenarios, the goods can be seized and sold by the Lender upon the Borrower’s failure to pay.

It is important that Borrowers read and understand the terms and conditions of their contract before signing anything. This is because each contract is different and can have their own unique terms and conditions. Therefore, it is wise not to make any assumptions about the nature of a contract (including those discussed above) before one has read all terms and conditions.

Should you have any enquiries in relation to a contract that you may have, or anything that you have read above, please do not hesitate to contact The Quinn Group on 1300 QUINNS (784 667) or 9223 9166 to arrange an appointment.