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Installment
Installment Purchase Agreement
An Installment purchase agreement is a contract entered into by the buyer and seller wherein the former pays the consideration of the purchase in tranches or installments on a regular basis, until the total amount has been paid. Such an agreement is agreed upon on occasions when goods to be purchased are expensive and the buyer is unable to pay the amount in lump sum during the purchase.
With an increase in the complexities and well as the exponential rise in the number of transactions that relate to sale and purchase of goods and services among parties, Installment purchase agreements have soon become one of the widely and extensively used type of agreements in businesses all over the world.
Inclusions in an Installment Purchase Agreement
The following information should be included while drafting an Installment purchase contract:
- Consideration or the total amount of the sale transaction that is involved in the Installment purchase contract.
- The Installment plan that provides for the time frame and the interest rate of each Installment.
- Warranties, express or implied, that the seller may have made with respect to the goods such as its quality, the condition in which it is to be delivered to the buyer, replacement or repair in case of defect, etc.
- Action in case of default of payment such as penalties, if any.
When Do You Need an Installment Purchase Agreement?
The basic purpose of entering into this agreement is so that the obligation of the buyer to pay the consideration for the goods purchased becomes well defined through the terms and conditions of the agreement. This way, the buyer becomes legally bound to pay the whole amount to the seller on the default of which, he may be liable to pay damages.
An Installment contract frees the seller from any stress that he might incur with respect to receiving his payments since he is sure to receive all installments as per the conditions laid down in the agreement.
Benefits of an Installment Purchase Agreement
- It enables buyers to purchase goods that are expensive
- It eliminates middlemen by directly striking a deal between the buyer and the seller, thus stabilizing the price of the commodity or service.
- It widens the market for sellers looking for purchasers to buy their service/goods.
- It helps businesses grow without having to bear a monetary burden with respect to their purchases.