Common law definition :

At common law, a contract of hire purchase is defined as an agreement under which an owner delivers goods on hire to the hirer in return for certain periodic payments made by the hirer and further agrees that the hirer may return the goods and terminate the hiring or elect to purchase the goods at the end of the hiring period.

In sum, a hire purchase contract is an agreement under which goods are delivered on hire to the hirer, and the hirer makes periodic payments to the owner, the hirer having an option to purchase the goods, but being under no obligation to do so.

Generally, a hire-purchase agreement may be likened to a bailment transaction, the owner being the bailor and the hirer, the bailee. After completing the agreement, the hirer is given actual possession and use of the goods hired.

The owner retains the property in the goods, or the title to the goods.

This property or title remains in the owner until such time that the hirer exercises his option to purchase –by paying the full hire purchase price.

The hirer therefore cannot lawfully dispose-off the property in the goods to a third party until he has exercised the option to purchase.

There can be a contract of sale where the goods are delivered to the buyer and payment to be made in a period. There are credit and conditional sales-here property passes only upon the payment of a price. These two kinds of sales are both different from the hire purchase because in a hire purchase agreement, the hirer has not agreed to buy the goods it is likened to a bailment transaction unlike the sale of goods where the buyer is bound to pay the price for the goods.