HIRE PURCHASEHIRE PURCHASEPresented by :

Group 4

Hire-purchase is basically a purchase through credit in which the hirer purchases by way of instalment. Hire-purchase transactions are governed by the Hire-Purchase Act 1967. Define the meaning of hire-purchase, describe the formation of hire-purchase agreement and the important terms in hire-purchase agreements.

Group 4 Question 3

Definition of Hire Purchase

Formation of Hire Purchase Agreement

The formation of a hire purchase agreement shall cover three different stages as follows

a. Pre-contract obligation

b. Construction of hire purchase agreement

c. Post-contractual obligations

Pre-contract Obligations

o Requires owner to give a prospective hirer a written statement in accordance with the form set out in the second schedule. In case of a dealer, the schedule requires information on the description of goods and a summary of the financial obligations of the prospective hirer.

o The prospective hirer is not obliged to enter into a transaction and therefore is not bound to make any payment for the preparation or service of such statement.

o Failure to observe the obligations shall render the hire-purchase agreement void.

Construction of Hire Purchase Agreement

o Any hire purchase agreement must be made on writing. Failure to observed this requirement would render the agreement void and the owner will be guilty of an offence.

o Requires the hire purchase agreement to be signed or on behalf of all parties to the agreement. The hirer must not sign a blank form or not duly completed as the requirement of this section.

Post-contract Obligations

o A copy of the hire-purchase agreement to be sent to the hirer and guarantors (if any) within 14 days after it is made otherwise it will be unenforceable by the owner.

o Any part of the total amount payable consists of an amount paid or to be paid under a policy, the owner must serve on the hirer a copy of the insurance payment receipt. The owner must also serve a copy of the policy within seven days of its receipt.

Every hire purchase agreement shall contain:

(i) specify a date on which the hiring shall be deemed to have commenced;(ii) specify the number of instalments to be paid under the agreement by the

hirer;(iii) specify the amounts of each of these instalments and the person to whom

and the place at which the payments of these instalments are to be made;(iv) specify the time for the payment of each of those instalments;(v) contain a description of the goods sufficient to identify them;(vi) specify the address where the goods under the hire-purchase agreement

are kept.

Implied Conditions

o The owner has the right to sell the goods at the time when the property is to pass

o The goods sold to the hirer must be merchantable qualityo The goods must be fit for the hirer’s purpose

Implied Warrantieso The hirer must enjoy quiet possession of the goodso The goods are free from any charge or encumbrance created by the

owner in favour of any third party

Liability of Owner and Dealer for Misrepresentation

o Hirer is entitled to claim against the owner or any person making misrepresentation in the negotiations leading to the hire-purchase agreement

Statutory Rights of the Hirero Right to a copy of statement of financial positiono Right to appropriation of payment when more than one agreemento Right to apply for an order to remove goodso Right to assign hirer’s right under the agreemento Passing of right by operation of lawo Right to terminate the agreement

Repossession of Goods by the Owner

The owner has the right to repossess the goods from the hirer when:

o The hirer has defaulted in making payments for two consecutive months, or

o The hirer has defaulted in making the last payment

Insuranceo The insurance has to take the insurance cover in the name of the hirer

for the goods under the hire purchase agreement