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Credit transactions 421

Usually, a third party finances the deal, although the customer might not be aware of
this. If the finance is provided by a third party, the hire-purchase agreement takes the form
of a triangular transaction as shown below.

(i) The dealer sells the goods to the finance company.

(ii) The finance company makes the hire-purchase agreement with the customer.

(iii) The dealer may be regarded as the agent of the finance company, as explained below.

Hire-purchase presents difficulties when the goods do not match the description given to them
by the dealer. It would seem that the customer has no rights. His contract was not with the
dealer but with the finance company, which did not make the description. However, as long
as the hire-purchase agreement is a regulated agreement, s. 56 of the Consumer Credit Act
will make the dealer the agent of the finance company. This agency relates only to misrep-
resentations and breach of descriptive terms made by the dealer before the hire-purchase
agreement was made. The effect of this will be that the finance company is liable for any
misrepresentation or breach of term as to description even though these were made by the
dealer (see s. 56 of the Consumer Credit Act 1974, considered later in this chapter on p. 427).
If the car is not of satisfactory quality, then s. 10 SGITA 1973 will give the customer rights
against the finance company (see p. 89).

Conditional sales

A conditional sale is an agreement to sell under which ownership of the goods stays with
the seller until the buyer has paid the full price for the goods. The buyer usually takes
immediate possession of the goods.

Example

A garage makes a conditional sale of a delivery van to a florist. The terms of the contract

might provide that the florist is to pay for the van in 36 monthly instalments. The florist will

take immediate possession of the van, but the van will remain the property of the garage until

all the instalments have been paid.

Conditional sales often involve a triangular transaction. So, in our example, the garage might
sell the car to a finance company and the finance company then make a conditional sale to
the florist.

Figure 16.1A triangular transaction in hire-purchase