Long-term contracts often involve a clause that provides for a seller’s right to repossess goods when they involve installment payments (multiple payments for a single item over a period of time). When a buyer purchases an item using installment plans, she gains possession of the item to use while she continues to pay for it. However, even though the buyer has possession of the item, she does not have “ownership” of it. A seller’s right to repossess goods means that if a buyer fails to make a payment, the seller can take it back. Often, this means that the buyer loses both the item AND any money she has paid for the item to that point. This type of clause is often found in the purchase of high-value items such as furniture or electronics.

Example:

Lenny bought a couch for his new house from a Rent-To-Own store. His sales agreement, which included a seller’s right to repossess, stated that he would pay for the couch in twelve monthly payments. After Lenny had paid ten of the twelve payments, he missed the 11th. Per his sales agreement, the RTO store took back the couch and did not refund Lenny the ten monthly payments he had already made.

Sample – Rent-To-Own Agreement:

If you (Lessee) are in default of any sum due under this Agreement, or if you destroy or damage the rental property, we (Lessor) may repossess the rental property by legal process or self help without the use of force. Nothing in this Agreement shall authorize a violation of criminal law or other applicable statute. In the event of default, we may take possession of the rental property wherever found, including at school. In order to reinstate the Agreement after repossession occurs, you must pay: All past due rental charges, the reasonable cost of pick-up and delivery and a reinstatement fee of $5.00.