Theory question 107
Purchase and Sale of GoodsCommerce 2 (answer any five questions)
(a) Give three similarities and three differences between hire purchase and deferred payment.
(b) Explain four reasons why a trader would prefer the use of cheque to cash for large payments.
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(a) Similarities (any three): both are forms of credit buying; buyer takes possession of the goods at once; payment is by instalments; usually a deposit is paid; both cost more than the cash price; both are used for durable goods.
Differences (any three): ownership – under hire purchase it passes only when the last instalment is paid, under deferred payment it passes at once; repossession – seller can repossess under HP on default but can only sue for the debt under deferred payment; the HP buyer cannot resell the goods before full payment, a deferred-payment buyer can; HP is governed by the Hire Purchase Act; HP buyer is a hirer, deferred-payment buyer is an owner/debtor; HP often involves a finance company.
(b) Any four, explained: safety – less risk of theft or loss than carrying cash; convenience – easy to carry and write any amount; serves as evidence/receipt of payment (the paid cheque); can be crossed or stopped for security; saves time counting cash; can be sent by post; payment can be made without the payer being present; encourages banking habits and keeps records.
Keep similarities and differences clearly separate in (a).