PREPARED BY: MADAM NORAZLA

INTRODUCTION

Hire purchase is a contractual agreement where by the owner lets the goods out on hire and agree that the hire may either return the goods and terminate the contract or elect.

There is Hire Purchase Act 1967

(Amendment 2010), sought to redress the imbalance to some extent by conferring rights and imposing obligations in respect of certain largely consumer transactions.

DEFINITION OF HIRE PURCHASE AGREEMENT

S. 2 (1) of HPA 1967 (Amendment 2010). CONTRACT that:

Letting of goods with an option to purchase; OR

purchase of goods by installments (whether the agreements describes the installments as rent or hire or otherwise

The property in the goods is not

transferred to the hirer at the

time of the contract is made.

The property in the goods is not

transferred to the hirer at the

time of the contract is made.

Property in goods REMAIN with the OWNER until the FULL PAYMENT of the installment

or the HIRER Chooses to

PURCHASE THE GOODS.

Property in goods REMAIN with the OWNER until the FULL PAYMENT of the installment

or the HIRER Chooses to

PURCHASE THE GOODS.

Hirer only

obtains possess

ion over the

goods.

Credit Corporation (M) Bhd v The Malaysian Industrial Finance Corp & Anor [1976]1 MLJ 83

Held: Until the hirer had exercised his option to purchase by paying the total amount and fulfilling all his obligations under a hire purchase agreement, then only property

in the car passed to the hirer

TERMINOLOGIES IN HIRE PURCHASE AGREEMENT

WHO IS THE OWNER?S.2 (1)

A person who lets or has lets goods to a hire purchase agreement

includes a person to whom the owner’s rights and liabilities under the agreement have

passed by assignment or by operation of law.

Continue…..WHO IS THE HIRER?

S. 2 (1)The person who takes or has taken goods

from an owner under a hire purchase agreement and

includes a person to whom the hirer’s rights and liabilities under the agreement have passed by assignment or by operation of

law

Continue….WHO IS DEALER?

S.2(1)

A person not being the hirer or the owner or a servant of the owner, by whom or on

whose behalf negotiations leading to the making of a hire purchase agreement with

the owner were carried out…..

Continue….

What is hire purchase price?The total sum payable by the hirer under a

hire purchase agreement in order to complete the purchase

agreements….includes deposits…monthly installments and monthly interest….

What is goods?• Categories of goods in HPA (First

Schedule)All consumer goodsMotor vehicles

Includes any replacements or renewals by the hirer of any part or parts thereof and any accessories added or additions made thereto by the hirer during the period of hiring

Continue….Consumer goods

Goods purchased for personal, family or household purposes

Kesang Leasing Sdn Bhd v Mohd Yusof B. Ismail & Anor [1990] 1 MLJ 291

Facts:The goods involved are computers where the parties agreed to be bound by Hire Purchase

Act.Held:

Section 2 (1) of the Hire Purchase Act did not exclude the application of the provisions of the hire purchase Act to hire purchase agreement

in respect of goods outside its coverage provided that the parties to an agreement

consented to be bound by them

FORMATION OF A HIRE PURCHASE

AGREEMENT

1. Notice of the 2nd Schedule before entering HPABefore a hire purchase agreement

2nd Schedule Notice to serve on the hirer

Purpose To inform the intending hire purchase

concerning the financial obligations which may be incurred

Negotiation between dealer and hirer….dealer shall serve a complete 2nd Schedule sign by

dealer and the prospective owner

Continue….Section 4 (2)

Notice delivered

To the person intended to be hirer

Acknowledge receipt of notice, signing the appropriate column.

Continue….Section 4(4)

If a HP contract is made without serving/giving the notice as required by section 4(1), the agreement shall be void.

Continue….

Affin Credit (M) Sdn Bhd v Yap Yuen Fui [1984] 1 MLJ 169

Held: The Pre contractual disclosure is

required even if the offer to enter into a hire purchase agreement emanated from

the hirer.

2. WRITTEN AGREEMENTSection 4A

A hire purchase agreement to be in writing. An agreement is deemed not to be in writing and thus void if a handwriting (other than a

signature or initials) , “is not clear and legible and if the agreements is printed, the print is of size smaller than the type

known as ten point Times”

Signature of partiesSection 4B(1)

A hire purchase agreement to be signed by or on behalf of all parties to the agreement.

Section 4B(2)………the hirer purchase agreement, form or

document has been duly completed…

NO COMPLIANCE OF SECTION 4B(1) and 4B(2) is void

3. CONTENTS (s. 4c)

A date on which the hiring startsThe number of installments to be paid by hirerThe amounts of each of installments and the

person to whom and the place at which the payments are made.

The time for the payment of each of those instalments

A description of goods sufficient to identify them

The address where the goods are to kept

Continue…The table of HP agreement:The cash price of the goodsThe deposit showing separately the amount

paid in cash and the amount provided by consideration other than cash

Delivery or freight charges, if anyVehicle registration fees, if applicableInsuranceThe total amount referred to above less

depositTerm chargesThe annual percentage rate for term charges

(calculated in accordance with the formula set out in the seventh schedule)

Continue…. Section 4C2 provides that any agreement which does not

comply with this requirement would render the HP agreement void

section 4C(3). If the owner enters into agreement without

stating the above contents, apart from the agreement being void, the owner shall be

guilty an offence as prescribed bysection 46

The penalty for the above offence is fine not more than RM3,000 or imprisonment 6

months or both.

4. Separate Agreement Section 4D(1)

There shall be a separate hire purchase agreement in respect of every item of

goods purchased under this Act

Section 4D(2)A hire purchase agreement that does not comply

with subsection (1) shall be void Section 4D(3)

The owner would be liable for an offence under the Act.

The penalty is under Section 46.

5. Alterations

No addition or alteration can be made to a hire purchase agreement or written

agreement or written documents containing the terms and conditions of

the agreement in relation to any of the matters state out in the pre contractual statement required to be served on the

prospective hirer pursuant to Section 4(1)(a) and (b) of the Act

6. Service of DocumentsSection 5(1)

Requires the owner to serve on the hirer and the guarantors a copy of the hire

purchase agreement within fourteen days (amendment: 21 days) after it is

made

FAILURE TO COMPLY WITH SECTION 5(1)

THE AGREEMENT IS UNENFORCEABLE SECTION 5(1A)

If includes with insurance policy should be served

7. DEPOSITS

Section 31(1)If there is no prescribed minimum deposit

required of a hirer, an owner entering into a hire purchase

agreement must first obtain from the hirer a deposit in cash or in goods, or partly in

cash and partly in goods, to a value of not less than one-tenth (1/10) of the cash price

of the goods

Issue: What if NO DEPOSIT require?

Protection of Hirers and Guarantors

Hirer and their guarantors are protected by way of several implied conditions and

warranties

Implies a warranty that the hirer shall have and enjoy quite possession of the goods.

Section 7(1)(a).An implied condition that the owner shall have the right to sell the goods at the time

when the property is to pass. Section 7(1)(b)

Continue….Public Finance Berhad v Ehwan Bin Saring

The respondent (hirer) entered into a hire purchase agreement with the appellant(owner) in

respect of the vehicle.The vehicle was subsequently seized by the Customs authorities after the hire purchase

agreement was executed and the vehicle was not returned to either party.

The respondent alleged that the appellant had breached the implied condition and

claimed for damages.

Continue…. Held:

The appellant represented themselves as owners in the agreement and they were capable of giving a

good title to the respondent whenever they he might choose to end by hiring by paying the

balance due.therefore, the owners had breached the implied

condition.The Court also took a view that that section 7(4) preserved the common law principle that the owner had a good title when he entered the HP and not when the final payment was

made.

Continue….

Implied warranty that the goods must free from encumbrances.

Section 7(1)(c)

Continue…. Implied condition that the goods

shall be of merchantable quality. Section 7(2)

EXCEPT

where the hirer has examined the goods or sample, as regards

defects which the examination ought to reveal.

if the goods are second hand goods and agreement contains a statement to the effect that-

a. the goods are second hand; and

b. all conditions and warranties as to quality are expressly negative, and the owner proves that the hirer has acknowledge in writing that the statement was brought to his notice.

Continue…e. Section 7(3)

Where the hirer expressly or implication makes known to the owner or dealer or to any servant or agent of the owner or the dealer of the particular purpose for which the goods are

requiredThat there shall be implied in the HP

agreement a condition that the goods shall be reasonably fit for the purpose,

BUT

Such condition shall not implied if the goods are second hand goods and the agreement

contains a statement to the effect

Continue…Section 7(3)(a)

The goods are second hand car; and

• Section 7(3)(b)That all conditions and warranties of fitness and suitability are expressly

negative, and the owner proves that the hirer has acknowledged in writing that the statement was brought to his

notice

Lau Hee Teah v Hargill Engineering Sdn Bhd

The 1st respondent had breached the implied condition as to fitness of the

purpose as to fitness for purpose.An agent of the respondent had, in fact, visited the mine and observed

the work carried out.

Continue…..HELD:

The appellant had made known for the purpose which the loader was required.

However the Court decided that “they were no defects sufficiently serious to

render the loader useless for any purpose which it would usually be used. And

therefore it cannot be said that the loader was unmerchantable quality or unfit for the

Plaintiff’s purpose.

Liability of Owner & Dealer for Misrepresentation

Where there is misrepresentation by the dealer, owner or its agents in the negotiations leading to the hire

purchase agreement,

the hirer is conferred a statutory right to claim against the owner and the

person who making the representation

Continue….. Section 8(1)

Owner or the dealer or any person acting on behalf of the owner or the dealer

made representation to the hirer or prospective hirer

orally or in writing

to negotiate that leads to entering into HP agreement.

Continue….Section 8(1)(a)

As against the owner, the same right to rescind the agreement

• Section 8(1)(b)As against the person who made the representation, entitled for

damages

Continue….. Section 8(2)

Any terms of the agreement purporting to exclude, limit or modify the rights of the hirer conferred by subsection (1) is void

• Section 8(3)An innocent owner who suffers any

damages as a result of the misrepresentation of the dealer is

entitled to be indemnified by the dealer

Statutory Rights and Duties of Hirer

1. Right to copy Statement in Relating to his Financial Statement

Section 9At any time before the final payment has been made

under a hire purchase agreement the owner shall, within fourteen days after he has received a request writing from the hirer, supply to the hirer a statement signed by the said person or his agent showing

a.The amount paid to the owner by or on behalf of the hirerb.The amount due to the owner but remained unpaidc.The amount that is become payable under the agreementd.The amount derived from interest on overdue installment

Continue….Proviso in Section 9

However if the owner has sent to the hirer with in the period of three months the statements before the

request, the owner need not to comply

Continue….

Section 9(2)If the owner defaults/ fails to supply the

statement without reasonable cause, the owner is not entitled to enforce:-

i. The agreement against the hirerii.Any right to recover/repossess the goods

from the hireriii.Any contract of guarantee relating to the

agreement

Continue…..

Section 9(3)If the default (to supply the statement)

continue for a period of 1 month, the owner shall be guilty of an offence and shall be liable to a fine not exceeding

RM1,000.00

2. Right to appropriation of Payment

Section 10When there is more than one agreement with same owner and the payment is insufficient to

discharge the total amount due under all agreement,

the hirer may require the payment be appropriated to a particular agreement or to the satisfaction of the sums due in such

proportion.

Continue….Alternatively, the hirer is entitled to

appropriate payment according to the sequence of the agreements

If the hirer fails to make such appropriation, the payment shall be appropriated towards the satisfaction of the sums due under the respective

agreements in order in which the agreements were entered into.

3. Right to Apply for an Order for Goods to be removed

Section 11It is a duty of a hirer to keep the goods

comprised in the agreement in his possession or control at a particular place

and not to removed

On the application of the Hirer, a Court of a magistrate may make an order approving the removal of goods to some other place.

4. Right to assign hirer’s rightSection 12(1)

The right, title and interest of a hirer under a hire purchase

agreement may be assigned

with the consent of the owner, or if his consent is unreasonably with

held, without his consent

Continue……What is the consent is unreasonably withheld?

Section 12(2)The owner request for extra payment or any other consideration for the purpose of giving his consent

Section 12(5)The owner requires other additional guarantors who have guaranteed hirer’s obligation under hire purchase agreement have agreed to guarantee the assignee’s obligation under the agreement or where the assignee has furnished the same number of guarantors

Continue….Section 12(5)

The refusal on the part of owner to give consent to an assignment as in mentioned

in subsection (1) on the ground that he requires other additional guarantors to

guarantee the assignee’s obligation

shall be deemed unreasonable

Continue….

The owner requires other additional guarantors who have guaranteed

hirer’s obligation under hire purchase agreement have agreed to guarantee the assignee’s obligation

under the agreement Where the assignee has furnished

the same number of guarantorsSection 12(5)(a) and (b)

Continue…If the owner refuses to give his

consent to an assignment by the hirer or his right, title and interest under the

agreement,

the hirer may apply to the High Court for an order declaring that the consent of the owner to that assignment has

unreasonably been withheld.Section 12(3)

5. Right by Operation of Law Section 13

The right, title and interest of a hirer under a hire-purchase agreement can pass by

operation of law to the personal representative of the hirer

If the hirer is a company, the liquidator may exercise the same right under the agreement

as the company. In effect, the liquidators succeeds to the hirer’s right and liabilities

under a hire purchase agreement.

5. Right to Early Completion of the Agreements

Section 14(1)The hirer gives a notice in writing to the

owner of his intention to early completion of the agreements,

on or before the day specified for the purpose in the notice, complete the purchase of the goods by paying or

tendering to the owner the net balance due under the agreement

Continue…..Section 14(2)(a)

The term charges are at a fixed rate, the net balance due is the balance originally

payable under the agreement LESSi. any amounts (other than deposit) paid or

provided or on behalf of the hirer under the agreement

ii. The statutory rebate for terms charges;iii. If the hirer requires any contract of insurance to be cancelled, the statutory

rebate for insurance;

Continue…. Section 14(3)

Hirer can exercise the right to an early completion in these situations:

a. at any time during the continuance of the agreement; or

b. where the owner has taken possession of the goods, upon payment to the owner

(within 21 days after the owner has served a noticed in the form set out in the Fifth

Schedule) in addition to the net balance due together with the reasonable costs including cost of storage, repair or

maintenance.

Continue….c. where the hirer has returned the goods to the owner within 21 days after the service on him of the notice in the

form set out in Fourth Schedule due to FAILURE to pay 2 successive installments or the last installment.

(the hirer may complete the hire purchase by paying the net balance due within 21 days after receiving the Fifth Schedule

notice from the owner.

6. Right to Terminate the AgreementSection 15(1)

The hirer of any goods comprised in a hire purchase agreement may terminate the agreement by returning the goods to the owner during ordinary business hours at the place at which the owner ordinarily carries on business or to the place specified for that purpose in the

agreement.

Statutory DUTIES / OBLIGATIONS of Hirer

1. Continue PAYMENT

Hirer is under DUTY to pay the installments, even the goods hired is

destroyed.

Ka Yim Credit & Leasing Sdn Bhd v Pang Kim Cha

D hired a bulldozer from the P under a hire-purchase agreement. The bulldozer then destroyed in fire. D refused to continue payment of installment until his claim from the insurance company has been settled.

Court held:The destruction of the goods did not

discharged the duties of the hirer to pay the whole amount payable under the agreement.

Thus, the D must pay.

2. Inform owner the POSITION of the Goods

S. 37 of HPAOwner at any time , may serve a written

notice to the hirer, requiring the hirer to state in writing:-

The position of the goods; to whom the goods is delivered;

The circumstances under which he lost possession of them

S. 37 (1) of HPAWithin 14 days after receiving NOTICE,

the HIRER is under DUTY to give the OWNER such statement.

If the HIRER fails to do so, or gave false statement to the owner, the HIRER shall

be GUILTY of an offence.

Where;The hirer removes the goods from the

address specified in the agreement; orIf the goods is lost; or

If the goods are taken out from the hirer’s possession

The Hirer is under DUTY to inform the OWNER in writing:

The new address where the goods is kept;The date & circumstances in which the goods

was lost;The date & circumstances in which the goods

are taken out from the hirer’s possession;

If the HIRER fails to do so, within 14 days

the HIRER shall be GUILTY of an offence.S. 37 (2) of HPA

Fine Not exceeding RM 10,000 Or to be IMPRISONMENT not exceeding 3 years or

both. S. 37 (2) of HPA

Procedures for Repossession

1. Default in paymentS. 16 (1) of HPA

The owner may REPOSSESS the goods from Hirer only if:

A) The hirer DEFAULTED to pay 2 successive installments; or

B) The hirer DEFAULTED to pay the LAST installment

2. Service of 4th Schedule NoticeOwner would REPOSSESS the goods

after the EXPIRATION of the 21 days from the date of the notice service

UNLESSThe hirer pays the arrears of

installments & interest due within 21 days .

S. 16 (1A) of HPAThe Hirer is dead, the OWNER SHALL

NOT REPOSSESS the goods UNLESS there is a DEFAULT to pay 4 successive

installments.

S. 16 (2) of HPAThe owner NEED NOT COMPLY with

the requirement of S. 16 (1), IF the Owner can prove that there are

reasonable grounds to believe that the goods will be removed or concealed by

the hirer.

3. Repossession Regulations- Hire-Purchase (Recovery

of Possession and Maintenance of Records by Owners) Regulations 1976.

Regulation 4a. If the repossession is carried out by the

owner personally, the owner shall produce and show his identity card &

provide the name & address of the company/ firm/ body of organization to

which he belongs to the hirer.

b. If the repossession is carried out by the servant or agent of the owner

such servant or agent of the owner shall produce and show his identity card & his

authority card

Failure to comply: OFFENCERegulation 9

Repossession must be exercised in lawful manner.

( the owner or his agent is authorized to enter into any premises in proper &

lawful manner). s. 34 (e) of HPA

If the servant or agent of the owner commits offence the owner is deemed GUILTY and

liable for PUNISHMENT.

UNLESSThe act was not within the ordinary scope

of agent’s employment.act done without the owner’s consent,

owner has exercised all diligence to prevent the commission of the crime

Immediately after Repossession (s. 16 (4) )

the owner shall deliver to hirer personally a document acknowledging receipt of the

goods. Document (s. 16 (5) ) :

Description of the goods Date, time & place where the owner took

possession of the goods.

4. Service of 5th Schedule notice and procedures after repossession

Within 21 days- after repossession – owner – serve on the hirer +

guarantor-the 5TH Schedule Notice. (s. 16 (4))

5TH Schedule Notice

= option to the hirer:-

a.Pay arrears + interest + cost of delivery – REDELIVER to Hirer

b.Pay the balance due + cost of repossession- REDELIVER to Hirer

If owner fails to serve the 5th Schedule (S. 16 (6)

Lose his right No remedy.

If HIRER RETURNED THE GOOD, WITHIN 21 DAYS after the Hirer received

the 4th Schedule Notice (s.16A)

Owner shall not impose:Cost of repossession

Cost incidental to repossessionCost of storage

5. Selling on repossession by owners

After Repossession – owner shall not sell or dispose of the goods without the written consent of the hirer UNTIL : expiration of 21 days date of service of 5th Schedule Notice or expiration of the time for payment (the hirer has given notice to owner to reinstate the agreement) (S. 17(1)).

IF THE OWNER DISPOSE- CONTRAVENTION-GUILTY (S. 17(2)).

RIGHTS OF HIRER AFTER REPOSSESSION 1. WITHIN 21 DAYS- after receipt of

5th Schedule

a) Require the owner to redeliver the goods.

Hirer give a written notice to the owner Within 21 days- hirer may reinstate :

1) Pay arrears + interest (S. 19 (1) (a))2) Pay remedy for breach of the agreement

(S.19 (1) (b))3) Pay any cost incurred by owner –

repossession (S. 19 (1) (c))4) Pay the cost of redelivery (s. 19 (1)(c))

a) Require the owner to sell the goods to any person introduced by the hirer

who is prepared to buy the goods for CASH..

Sell by public auction:

a) The owner is required to serve the hirer a copy of notice of such public auction not less than 14 days from

the date of such public auction. (s. 18 (4)(a)).

Sell other than public auction:

a) The owner is required to serve the hirer an OPTION to purchase the

goods at the price he intended to sell (s. 18 (4)(a)).

Failure

GUILTY