THE CONTRACT OF HIRE PURCHASE

Definition Section 2 (1) of The Hire Purchase Act 1967 provides that; Hire Purchase agreement includes a letting of goods with an option to purchase and an agreement for the purchase of goods by installments (whether the agreement describes the installment as rent or hire or otherwise ), but does not include any agreementa) whereby the property in goods comprised therein passes at the time of agreement or upon or at any time before delivery of the goods ; or b) under which the person by whom the goods are being hired or purchased is a person who is engaged in the trade or business of selling goods of the same nature or description as the goods comprised in the agreement;

From the definition, the contract of hire purchase: Does not involve the passing of title in the goods to the hirer, until and unless certain specified conditions are fulfilled ; and May only be made between a trader and a customer, but not between traders.

From the definition also, it is clear that the Act is concerned with a transaction where a person acquires goods and pays them off by installments. Until full payment, title to goods remains with the person from whom possession was obtained by the hirer.

Goods The Hire Purchase Act 1967 covers only a limited range of goods listed in the First Schedule . This list may be varied from time to time by the Minister. The current list comprises the following: 1. Motor vehicles, namely:a. b. Invalid carriages; Motor Cycles;

c. d. e. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

Motor Cars including taxi, cabs and hire cars; Goods vehicles Buses

Radio sets, television sets, tape recorder and any combination thereof; Refrigerators and deepfreeze food preservers and any combination thereof; Sewing machines other than those used for industrial purposes; Washing machines; Vacuum cleaners Air conditioning Electric or gas cooker and ovens Video tapes/ cassettes recorder Organs and pianos; Photostat machines/ copiers Hi-fi Systems

Goods also includes any replacements or renewals by the hirer or any part or parts, and accessories added by the hirer during the period of the hiring.

Illustration A owns a sewing machine . He lets the machine to b for three (3) years on rental payment of RM100.00 per month. A says that after three years and payment of RM 3, 000.00, B may own the machine. After full payment within the specified period, B has the right to purchase the sewing machine.

Formalities of formation the hire purchase agreement. Formalities before entering hire purchase agreement Both parties are in the process of negotiating. During this period , the owner is required under Section 4(1) HPA to give the prospective hirer a written statement in accordance
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with the form set out in the Second Schedule. This Schedule requires a description of the goods and a summary of the hirers financial obligations under the proposed agreement. This mandatory pre contractual duty of disclosure is intended to protect the hirer by giving him the essential information as to his financial obligations , so that he is in better position to make an informed decision as to his likely financial commitments under the hire purchase agreement.

Formalities during performing the hire purchase agreement The hire purchase agreement must be made in writing- Section 4 A(1) HPA and if printed , must be printed in font size 10 points or larger. Non compliance by the owner is an offence and will be penalized according to Section 46 HPA. A hire purchase agreement that is not in writing is not enforceable by law. Every hire purchase agreement must also be signed by or on behalf of the hirer and all other parties to the agreements- Section (1) HPA. Absence of signature will disqualify an owner from enforcing the agreement. Section 4 C(1) HPA also requires a hire purchase agreement to contain the following: 1. 2. 3. A date on which the hiring starts; A statement of the number of installments the hirer has to pay; A statement of the amounts of each of the installments and the person to whom and the place in which the payments of installments are to be made; A statement of the time for the payment of each of the installment; A list of the goods to which the agreement relates sufficient to indentify them;

4. 5.

6. Where any part of the consideration is not in cash, for example, a trade in as part consideration. 7. A table giving the following information: a. b. c. d. e. Cash price; Deposit; Delivery charges or freight, if any; vehicles registration insurance;
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f. g. h. i.

the balance payable; terms of charges; balance originally payable under the agreement. Total amount payable

Under Section 4 (3) HPA an owner who enters into a hire purchase agreement but fails to comply with the formal requirements sets out is guilty of an offence and he/she will be penalized to pay fine not exceeding three thousand or to imprisonment for a term not exceeding six months or to both,. Section 4 D (1) and (4) also stipulates a separate agreement for every item of goods, unless they are essentially similar or complement to each other. i.e a computer and the printer.

Formalities after a contract of hire purchase has been made It is a duty of the owner of the goods to serve a copy of the hire purchase agreement and a notice in the terms prescribed in the Third Schedule to the hirer within 14 days after the making of the hire purchase agreement according to Section 5 (1) HPA. The Schedule prescribes certain information to be supplied , namely; a. That the hirer is entitled to a copy of the agreement;

b. that the hirer is entitled to a statement of the amount owing with such request being made in writing and no more than once in three months; c. that the hirer is entitled to assign his rights under the agreement, and the owner may not unreasonably refuse his consent to such assignment; d. that the hirer is entitled to complete the agreement at any time and his right for a rebate on such early completion; e. that the hirer is entitled to terminate the agreement by returning the goods to the owner at his expense but he will be liable to pay the owner an amount sufficient to cover the loss suffered by the owner; if any; f. that if the hirer removes the goods from the address where they are kept, he must inform the owner in writing or in his presence , of the removal and the new address where the goods are kept.

An owner that fails to comply with the section is not entitled to enforce the hire purchase agreement or any contract of guarantee or any rights to recover the goods from the hirer.

Statutory rights of the hirer The following rights of hirer are conferred by Part IV of Te HPA;

1. Right to a copy of agreement and statement of his current financial positions- Section 9 HPA At any time before the final payment has been made, the hirer has the right to receive a copy of the agreement together with a statement showing the information listed below buy making a written request to the owner; a. b. c. the amount paid to the owner by or on behalf of the hirer. the amount that has become due under the agreement but remains unpaid; and the amount that is to become payable under the agreement.

The owner is required to comply with the request within 14 days after the receipt of the request. In the event , the owner failed to comply with the request without reasonable cause, then while the default continues, the owner is not entitled; i. ii. iii. to enforce the agreement against the hirer; to enforce any rights to recover the goods from the hirer; to enforce any contract of guarantee relating to the agreement.

If the default continues for more than one year, the owner commits an offence under the HPA and shall be liable to a fine not exceeding RM1,000.00

2.

Right to appropriation of payment when more than one agreement-Section 10 HPA.

The intention of Section 10 HPA is that to give the hirer the same right as to appropriation where the hirer has more than one agreement, and the payment is insufficient to discharge the total amount due under all the agreements. The hirer may

require the payment to be appropriated to a particular agreement or to a satisfaction of the sums due under any two or more agreements in such proportions as he thinks fit.

3.

Right to apply for an order for goods to be moved Section 11 HPA

It is the common practice to insert into the agreement , a clause to the effect that the hirer must keep the goods in a place stated in the agreement. Consequently, any removal from the place stated, be a breach of agreement so that the owner may exercise his right to repossess. To alleviate any hardship that might be suffered by the hirer who may have a good cause for moving the goods to another location, Section 11 HPA confers a right on the hirer to apply to a Magistrates Court for an order permitting him to move the goods to some other place.

4.

Right to assign rights under the agreement-Section 12 HPA

Section 12 (1) HPA confers on the hirer right to assign his right, title and interest under the agreement with the consent of the owner . This right to assign cannot be excluded by a clause in the hire purchase agreement, and if there is such a clause, it is void under Section 34(g) HPA. Where an owner at request of the hirer the owner fails or refuses to give his consent to an assignment, the hirer may apply to court for an order declaring that the consent of the owner to that assignment has unreasonably been withheld.

5.

Right to operation of laws- Section 13 HPA

Section 13 HPA provides that 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. This occurs on the death or the bankruptcy of the hirer. Where the hirer is a company, the liquidator may exercise the same right under the agreement as to the company.

6.

Right to early completion of agreement-Section 14 HPA

Section 14 HPA confers on the right of hirer to an early completion of the hire purchase agreement by service of written notice to the owner. On or before the date specified for

the purpose in the notice, the hirer then completes the purchase of goods by paying or tendering to the owner the net balance due under the agreement. The net balance due for the purpose of early completion is the balance originally payable under the agreement, less: a. b. any amount paid, excluding the deposit, under the agreement; the statutory rebate for term charges; and

c. the statutory rebate for cancellation of insurance where the hirer requires such contract of insurance to be cancelled.

7.

Right to terminate agreement-Section 15 HPA

Section 15 HPA confers the right of hirer to terminate the agreement at any time by returning the goods .On determination of the agreement by the hirer, the owner has the right to recover from the hirer; a. the amount , if any , required to be paid in those circumstances under the agreement; or b. the amount, if any, that the owner would have been entitled to recover if he had taken possession of the goods at the date of termination of the hiring, whichever is the less

8.

Right on repossession by owner Section 16 HPA

Section 16 to 20 contain detailed provisions concerning the manner of repossession and the respective rights and liabilities of the owner and the hirer arising from repossession. The owner has right to repossess his goods from the hirer if the following situations as mentioned in Section 16 (1) of HPA; i. Default of the hirer to pay two(2) successive installments, or in the case of the last payment, default in respect of the last payment; ii. service of a Fourth Schedule notice on the hirer; and

iii. expiration of the period fixed by the notice which must not be less than 21 days after service of that notice
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9.

Right in respect of term charges which exceed the prescribed rate-Section 30 HPA

Where the term charges in a hire purchase exceeds the prescribed rate which is currently fixed at 10 % per annum, the hirer has the right, exercisable by written notice to the owner, either to treat the agreement as void or to have his liability reduced by the amount included in the agreement for term charges.