Reading time: 3 minutes

Small businesses can manage their finances by choosing to obtain equipment under a hire-purchase agreement. This arrangement differs from a conventional loan in that there is, strictly speaking, no actual lending or borrowing of funds. Below, we explain what a hire purchase agreement is as well as a labour hire agreement and how they work. 

What Is A Hire Purchase Agreement?

A hire purchase agreement can be a substitute to a business loan whereby the party hiring the equipment pays the financier rent. The financier will continue to own the goods until the hirer makes the final payment. Typically, hire purchase agreements have fixed regular payments. The type of information you may see in such a contract includes:

  • A description of the goods;
  • The rate of hire and interest charges;
  • The total price to purchase the goods;
  • Details of the deposit; and
  • Information on both parties’ rights.

How Does It Work?

Sometimes a hire agreement is not exclusively between the hirer and the owner of the goods or services (financier). A typical example of having a third party involved is when you hire cars or other vehicles. In most vehicle hire agreements, a finance company will purchase the car on your behalf, and then give you possession in return for regular payments (including interest). When the agreement terminates or comes to an end, and the total price of the vehicle has been paid, as well as the interest charges, the hirer can take ownership.

What Is a Labour Hire Agreement?

There can also be hire agreements for labour. A labour hire agency, for example, will rely on a written agreement for the provision of workers to a company. The type of information that you may see in a labour hire agreement includes:

  • The nature of the services;
  • The supply of workers;
  • Insurance details, if any;
  • Applicable fees and methods of payment;
  • Occupational health and safety measures;
  • Details of intellectual property rights;
  • Avenues for terminating the agreement; and
  • Details of what security measures are taken in the event of loss of finance.

Should It Be In Writing?

You should ensure you reduce the terms of your hire agreement to writing. If the party you are contracting with is a professional hire firm, they will usually only allow you to hire on their terms and conditions, so it’s important you read these carefully. 

Who Is The Legal Owner?

Under a hire purchase agreement, the legal owner of the goods or services is the financier (a person or company to whom money is owed) until the hirer makes the final payment.

Is There Any Risk?

Firstly, if you do not understand the terms of your hire, then you are needlessly exposing yourself to risk. It is sensible to speak with legal professional and review your hire purchase agreement. Secondly, you may also be liable for any damage to goods belonging to another business. Similarly, ensure you understand your responsibilities if you fall behind on your repayments (such as whether the financier can repossess the equipment after an agreed time-frame).

Am I Protected?

Just as the Australian Consumer Law protects you when you make purchases and buy goods, there are also consumer protections for when you hire goods or services. These are known as the Consumer Guarantees, which work to both protect consumers and ensure that businesses comply with these standards when employing hire agreements to provide goods or services.

***

If you require assistance with drafting your hire purchase agreement, or have any questions about your rights and obligations, get in touch with our leasing and loans lawyers on 1300 544 755.

Webinars

Redundancies and Restructuring: Understanding Your Employer Obligations

Thursday 7 July | 11:00 - 11:45am

Online
If you plan on making a role redundant, it is crucial that you understand your employer obligations. Our free webinar will explain.
Register Now

How to Sponsor Foreign Workers For Your Tech Business

Wednesday 13 July | 11:00 - 11:45am

Online
Need web3 talent for your tech business? Consider sponsoring workers from overseas. Join our free webinar to learn more.
Register Now

Advertising 101: Social Media, Influencers and the Law

Thursday 21 July | 11:00 - 11:45am

Online
Learn how to promote your business on social media without breaking the law. Register for our free webinar today.
Register Now

Structuring for Certainty in Uncertain Times

Tuesday 26 July | 12:00 - 12:45pm

Online
Learn how to structure to weather storm and ensure you can take advantage of the “green shoots” opportunities arising on the other side of a recession.
Register Now

Playing for the Prize: How to Run Trade Promotions

Thursday 28 July | 11:00 - 11:45am

Online
Running a promotion with a prize? Your business has specific trade promotion obligations. Join our free webinar to learn more.
Register Now

Web3 Essentials: Understanding SAFT Agreements

Tuesday 2 August | 11:00 - 11:45am

Online
Learn how SAFT Agreements can help your Web3 business when raising capital. Register today for our free webinar.
Register Now

Understanding Your Annual Franchise Update Obligations

Wednesday 3 August | 11:00 - 11:45am

Online
Franchisors must meet annual reporting obligations each October. Understand your legal requirements by registering for our free webinar today.
Register Now

Legal Essentials for Product Manufacturers

Thursday 11 August | 11:00 - 11:45am

Online
As a product manufacturer, do you know your legal obligations if there is a product recall? Join our free webinar to learn more.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2022 Law Firm of the Year Winner 2022 Law Firm of the Year - Australasian Law Awards