Legal Definitions - retail installment contract

A retail installment contract is a legally binding agreement between a consumer and a seller for the purchase of goods or services. Under this type of contract, the consumer agrees to pay the total purchase price in a series of scheduled payments (installments) over a specified period, rather than paying the full amount immediately. These contracts typically detail the purchase price, any interest charges, the payment schedule, and the consequences of missed payments. Often, the seller retains a security interest in the purchased item until all payments have been successfully completed.

Here are some examples to illustrate how a retail installment contract works:

• Example 1: Furniture Purchase

  Imagine a customer wants to buy a new dining room set from a furniture store that costs $2,500. Instead of paying the entire amount upfront, the customer signs an agreement with the store to pay $120 per month for 24 months, which includes interest. This agreement is a retail installment contract because it's a sale from a retailer to a consumer, and the payment is spread out over time in fixed installments. The contract specifies the total cost, the interest rate, and the monthly payment schedule, and the furniture store might legally retain an interest in the dining set until all payments are made.

• Example 2: Appliance Financing

  A homeowner needs a new refrigerator and stove, totaling $3,000, but prefers not to pay the full sum at once. The appliance store offers a financing option where the homeowner agrees to pay $100 per month for 36 months, with a certain annual percentage rate. This arrangement constitutes a retail installment contract. It's a direct agreement between the consumer and the retail store for the purchase of goods, with the payment structured into regular, fixed installments over a defined period, rather than a single payment. The contract outlines all the financial terms and conditions of the purchase.