You can ask our solicitors online for advice on conditional sale agreements using the question box on the front of our website or the following free legal advice guide may answer your questions. 

When you buy something there are various laws that protect you as a consumer.  Conditional Sale Agreements deal with the sale of goods. On the surface, this type of agreement looks similar to other contracts that deal with the sale of goods that involve exchange of goods for money between a buyer and a seller. However, there are some key differences with this type of agreement which will be explored in detail through this article.

When you make a purchase under a conditional sale agreement, you will acquire goods from a seller, but they retain the title of the goods and right of repossession until full payment has been made. Usually these types of agreements are made for high value products that are paid in instalments over weeks, months or even years.

How Conditional Sale Agreements Work

Whatever you buy a product on a conditional sale agreement, the retailer who you buy the product from will act as an agent often on behalf of a creditor. The retailer will supply you with the product(s) such as a washing machine, piece of furniture or home appliance but the title of the goods will be retained by the creditor. Payment will be made by the creditor to the retailer for transfer of the title.

Consumers will be able to use the goods as though they have bought them outright, but you will have to keep up your repayments which will be agreed with the retailer until the total price of the item is paid. After the final instalment has been paid, the title to the goods will then pass from the creditor to you and you will have full ownership of the item.

In the UK conditional sale agreements are covered by the Consumer Credit Act. This piece of legislation defines quite specific rules surrounding the content of conditional sale agreements. In particular they must be in writing, it must include a statement that is properly regulated under the Consumer Credit Act and the agreement must include details on the Annual Percentage Rate of Interest (APR), the amount of credit being taken, the cash price of the item(s) and how many instalments have to be paid and when.

Furthermore, the agreement must be in clear and unambiguous terms, following a particular format. The debtor (the person buying the goods) should be provided with their rights of cancellation if the agreement is entered into away from the usual trade premises of the retailer and the agreement must be produced in multiple copies so each party can keep a copy.

Conditional Sale Vs. Hire Purchase

You may be wondering what the difference is between a conditional sale agreement and a hire purchase, perhaps if you are considering which one would be the best for you. When you take out a hire purchase agreement, you are not obliged to take the title of the goods. With a conditional sale agreement, the title will automatically transfer to you once you have made the final payment. .

Credit Sale Agreements

Similar to conditional sale agreements, a credit sale agreement has one key difference. If you buy something with a credit sale agreement you will immediately become the owner of the item(s) that you have bought. Often this type of arrangement will appear in a buy now pay later scenario where you will own the goods as though they were bought outright but the total price will be divided up into instalments to be paid over an agreed period of time.

This is completely different to a conditional sale agreement where you can’t assume ownership of the item(s) until you have fully paid for them.

Repayments

If you take out a conditional sale agreement but you can’t keep up with the repayments, perhaps due to a change in your circumstances, the retailer or creditor has the right to repossess or take back the goods. However, if you have already paid more than a third of the total price under the agreement the creditor must pursue legal action to recover the goods.

They cannot visit your property and reclaim the goods. On the other hand, if you have paid less than a third of the total amount that you owe, the creditor will still need to obtain a court order to take back the goods from your property. It is very important that you keep up repayments on the goods that you buy on a conditional sale agreement and if you run into any difficulty in terms of payment, you contact the creditor as soon as possible to avoid legal action and recovery of the goods.

There may be situations when a conditional sale agreement comes to an end, but all of the payments have not been made. In this scenario there are two options available. The first is to return the goods to the retailer and the second is to allow the creditor to repossess the goods and end the agreement.

If you need any advice about a conditional sale agreement, perhaps that you have entered, or you are looking at products to buy through one of these arrangements and you’re not sure whether they are right for you it is important to seek advice.

Most importantly you should make sure that you can keep up repayments for the duration of the agreement to avoid legal action and potential repossession of the goods.