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CHAPTER 5
LAW OF HIRE-PURCHASE
5.1 Law applicable to hire-purchase
5.2 Formation of hire-purchase agreement
5.3 Hirers possession
5.4 Liability of owner and dealer for misrepresentation (S.8)
5.5 Statutory rights of hirer
5.6 Repossession of goods by the owner
5.7 Hirers duties after the owner has served the fourth
schedule notice
5.8 Hirers right after repossession of the goods

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LESSON OUTCOME
By the end of this chapter student will be able to:
Know the legal principles relating to hire-purchase in
Malaysia; in particular, the characteristics of a contract of
hire-purchase and the rights and liabilities of the parties to
such a contract.

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SUBTOPIC 1:
LAWS APPLICABLE TO HIRE-PURCHASE

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5.1

Laws Applicable to Hire-Purchase

The states government hire purchase is Hire purchase Act

1967.
Definition Section 2 (1) hire purchase act 1967 (HPA)
i) Hire purchase includes a letting of goods by installments
According to section 2(1) the property in the goods will pass
to the buyer after full payments.
Thus under section 38, the hirer cannot sell or dispose the
goods because he is not the owner of the goods untill full
payment is made.

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First schedule of HPA list of goods that can be subjected to
hire-purchase agreement.
1. All consumer goods e.g. radio sets, television sets,
sewing machine, washing machine.
2. Motor vehicle, namely :
a) Invalid carriages
b) Motor cycle
c) Motor cars including taxi cabs and hire cars
d) Goods vehicle
e) Buses
f) handset
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Kesang Leasing V Mohd Yusof Ismail
Whether a computer is a goods falls under HPA. If both parties
agreed, it is a goods under the act so it can be subjected to
hire- purchases agreement.

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SUBTOPIC 2:
FPRMATION OF HIRE-PURCHASE
AGREEMENT

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5.2

Formation of Hire-Purchase Agreement

1. S. 4(1) The owner is required to give a prospective hirer a

complete written statement signed by him. This form must be in
accordance to the Part 1 of the Second Schedule.
Contents of schedule:
i. Description of the goods
ii. The registration number for vehicles
iii. Statement whether the goods is new or second-hand.
iv. Address where the goods will be kept.
v. Cash price of the goods
vi. Deposit
vii. Insurance or fee
viii. Duration of hire purchase
ix. The installments payments
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These statement can be given in the form of advertisement,
label to the goods or leaflet. The purpose is to give
information to customer / hirer before they decide whether or
not to enter the hire purchase agreement.
Where the negotiation leading to the making of the hire
purchase agreement is carried out by a dealer, he shall server
the intending hirer, a written statement completed an signed by
him in accordance to part 1 of the second schedule and after
that a written statement duly completed and signed both by
him and the owner in a accordance to the form set out in part
11 of the second schedule.

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Effect if the owner fails to give the hirer the form in Second
Schedule:
i. S.4 (4) contravention with S.4 (1) and the hire purchase
agreements is void
ii. S.4(5) The owner shall be guilty of an offence under this
act. Penalty under S.46- fine not exceeding RM 3000 or
imprisionment not exceeding six months or both.
Affin Credit (M) V Yap Yuen Fui
S.4 (1) was a mandatory obligation before entering into a hire
purchase agreement. It ia an offer and acceptance and if the
owner fails to give the written form in the second schedule
or fails to sign it, the hire purchase agreement is void.
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2. S.4(A)(1) the hire purchase agreement must be in writing
Effect if it is not in writing the agreement is void.
3. S.4B(1) the hire purchase agreement must be signed by all
parties to the agreement after it is completed.
However if the parties signed the agreement with blank spaces
which is later filled by the owner as in the case of Ming Lian
Corporation V Haji Nordin the agreementmay be binding
provided that :
i. The hirer was aware of the term and knew what he was
signing
ii. There was no fraud or misrepresentation by the owner.
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4. The contents that must be in the hire-purchase agreement are
stated in S.4C(1)(a) :
i. The date of hiring
ii. The number of installments
iii. The amount of each installment
iv. The time for payments
v. The description of goods
vi. The address where the goods is kept
vii. Cash price, deposit, etc
If this is not complied with, the hire purchase agreement
is void.
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5. There must be a separate agreement for every item, S.4D(1),
unless the goods are sold as a set, then it can be considered as
one.
6. Service of document- within 14 days after the hire-purchase
agreement is completed, the owner shall serve on each hirer
and the guarantors, a copy of agreement, S.5(1)
If the owner fails to comply with this section the hire-purchase
agreement shall be unenforceable by the owner. That means if
there is any breach by the hirer, the owner cannot take action
against the hirer in the court.

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SUBTOPIC 3:
HIRERS PROTECTION

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5.3

Hirers Protection

Protection of the hirer are implied by the Hire-Purchase Act

1967, in the form of condition and warranties. If the owner
breaches the condition, by the owner, the hirer shall have the
right to rescind the agreement and be put into his original
position as if there is no contract. So if there was any payment
made it can be recovered. If the hirer incurred any damages,
the owner has to compensate him. However if it is a breach or
warranty the hirer is entitled to claim damages only, he can not
rescind the agreement.

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Implied warranties
1. According to S.7(1)(a), the hirer shall have and enjoy quiet
possession of the goods without any interruption by the owner.
2. S.7(1)(c) The goods shall be free any charge or encumbrance
for example government tax.
Implied conditions
1. S.7(1)(b) The owner shall have a right to sell the goods at the
time when the property is to passed to B or when the
payments are complete by the hirer. If the owner does not have
the title to the goods, (meaning that he is not the true owner),
the hirer may rescind ( terminate/end) the agreement as this a
breach of condition.
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2. S.7(2) The goods must be of mechantable quality.What is
merchantable quanlity?Basically it must be suitable for its
purpose.
3. S.7(3) The goods shall be reasonably fit for the purpose
Exception
This condition shall not be implied:
a) If the hirer has examined the goods and he knew about the defect
Case : Lau Hee Teah V Hargill Engineering Sdn Bhd
b) If the goods are second-hand and the hirer has acknowledged the
inapplicability in writing.

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SUBTOPIC 4:
LIABILITY OF OWNER AND DUTIES FOR
MISREPRESENTATION

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5.4

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Liability of Owner and Dealer for

Misrepresentation (S.8)

S.8 applies if misrepresentation is made by the owner or dealer

in the course of negotiation before entering hire purchase
agreement.
If misrepresentation takes place after agreement, the hirer
cannot rescind the agreement.
Misrepresentation may be in the form of statement,
representation or warranty, which is not true.
Effect of misrepresentation made by the owner.
Under S.8(1)(a), the hirer may rescind the agreement and claim
damages if there is any.
Effect of misrepresentation made by the dealer
The hirer can take action against the owner as well as the
dealer.
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Action against the owner is under S.8 (1)(a):
The hirer may rescind the agreement with the owner for
misrepresentation made by the dealer because the dealer is
treated as the agent to the owner.
Action against the dealer is under S.8 (1)(b):
The hirer may claim damages from the dealer.
Case : LEE HEE TEAH V HARGILL ENGINEERING SDN
BHD shows applicabilituy of S.8(1)(a) and S.8 (1)(b)

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SUBTOPIC 5:
DEFINITION OF LAW

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5.5

Statutory Rights Of Hirer

1. Right to be supplied with documents and information

section 9(1).
At any time before final payment has been made the hirer has
the right to be supplied with information statement by
making a written request to the owner.
The hirer may request any of this information :
i. The amount paid to the owner by or on behalf of the hirer
ii. The amount that has become due under the agreement
but remains unpaid.
iii. The amount that is to become payable under the
agreement.
iv. The amount derived from interst on overdue installment.

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The owner must reply and deliver the copy of statement within 14
days after the receipt of the request.
The hirer can make a written request once in 3 months.
Effect if the owner fails to comply with the request S.9(2)
i. The owner is not entitled to enforce the agreement against
the hirer
ii. The owner is not entitled to enforce any contract of
guarantee relating to the agreement
iii. The owner is not entitled to enforce any right to recover the
goods from the hirer.
Section 9 (3) : Effect if the default continues for a period of
one month the owner is liable to a fine of not exceeding
RM 1000
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2. Right to appropriation of payment when there are more
than one agreement- section 10:
If the hirer has more than one agreement and a payment is
insufficient to discharge the total amount due under all the
agreements, the hirer may ask the owner to appropriate
payment accordingly.
3. Right to apply for order to remove the goods- Section 11
The hirer must keep the goods in the place specified in the
hire purchase agreement : Section 37(2).
However the hirer has the right to write to the owner,
asking permission to remove the goods or if the owner
refused he can apply to the Magistrates Court for
permission.
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4. Right to assign right under the agreement (right of assignment)
Section 12:
The hirer has the right to assign his right, title and interest under
the agreement to somebody else with the consent of the owner.
If the owner fail or refuse to give his consent the hirer may
apply to the court for an order declaring that the consent of the
owner is unreasonably withheld.
Section 38(g) if the owner tries to exclude right of the hirer to
assign by a clause in the hire purchase agreement, the clause is
void.
Even though the hirer has the right to assign, he can not sell the
goods or dispose it until he get the title to the goods-s.38
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5. Section 13 : Right to pass the title, right and interest by
operation of law to the personal representative of the hirer on
death or bankruptcy of the owner
6. Section 14: right to early completion of agreement by service
of written notice to the owner.
The hirer can complete the purchase of the goods by paying
the net balance due under the agreement.
Section 34(g) : any clause to restrict this is void.
Section 14(3) : the right may be exercised in two
circumstances:
i. At any time during the continuance of the agreement
ii. After the owner has repossessed the goods.
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7. Right to terminate the agreement Section 15:
The hirer has a right to terminate the agreement at any time by
returning the goods to the owner during ordinary business
hour at the owners place of business.
The owner can recover :
i. The amount, if any, required to be paid
ii. The amount 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.

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SUBTOPIC 6:
DEFINITION OF LAW

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5.6

Repossession of Goods by the Owner

It is the hirers obligation to pay regular installment , section

37(1).
Section 16(1) If the hirer defaults two successive payments
or the last payment or if he deceased, his personal
representative fails to pay four successive payments, the
owner has the right to repossess.
In order to repossess, the owner must first, serve the fourth
schedule notice to the hirer to show his intention to repossess
after expiration of 21 days.
Section 16(2) : the owner needs not serve the fourth schedule
notice if there are reasonable grounds for believing that hirer
will remove or conceal the goods.
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CONTIN UE
What will happen if the owner served the notice less tahn 21
days?
Phang Brothers Motors V Lee Aik Seng
Facts: The owner served the notice but two days short of the
minimum 21 days requirement.
Held:The notice was null and void and the repossession was
illegal. The hirer was entitled to special and general damage.

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SUBTOPIC 7:
DEFINITION OF LAW

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5.7

Hirers Duties After the Owner has Served the

Fourth Schedule Notice

1. The hirer may within 21 days from the date of the notice, pay
the installments due and continue the hire purchase agreement.
2. If he is unable to pay, he may return the goods within 21 days
so that he will not be liable for :
i. Cost of repossession
ii. Incidental cost on taking possession
iii. Cost of storage
3. If the hirer failed to pay or return the goods after 21 days from
the Fourth Schedule notice, the owner may come to the hirers
places to repossess the goods.
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CONTINUE
Section 16 (3) : Within 21 days after repossession the owner
shall serve on the hirer and guarantor the Fifth Schedule
notice.This is to give them a second chance to claim the goods.
Section 16(4) :After the owner has taken possession of the
goods he shall deliver to the hirer a notice to show the receipt
of the goods.
Section 17 : After repossession, the owner cannot sell or
dispose the good until after the expiration of the 21 days
notice, given under S. 16(3).

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SUBTOPIC 8:
DEFINITION OF LAW

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5.8

Hirers Right After Repossession Of The

Goods

1. According to Section 18 (1)(a)(i),

Within 21 days after the repossession the hirer can give
notice to the owner to redeliver the goods or in other word
to regain possession but he has to settle the installments
due and other payments under section 19 such as the cost
and incidental cost of repossession, storage etc.
2. Otherwise under Section 18 (1)(a)(ii),
The hirer may introduce new a buyer who is prepared to
buy the goods for cash.

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QUIZ
1. The purpose is to give information to customer / hirer before
they decide whether or not to enter the hire purchase
agreement (True/False)
2. The states government hire purchase is Hire purchase Act
___.
A. 1976
B. 1967
C. 1978

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CONTINUE
3. Implied warranties is according to S.7(1)(a), the hirer shall
have and enjoy quiet possession of the goods without any
interruption by the owner (True/False)
4. Thus under section 48, the hirer cannot sell or dispose the
goods because he is not the owner of the goods until full
payment is made (True/False)

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CONTINUE
5. According to section 3(1) the property in the goods will pass to
the buyer after full payments (True/False)
6. Second schedule of HPA list of goods that can be subjected
to hire-purchase agreement (True/False)

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CONTINUE
7. The contents that must be in the hire-purchase agreement are
stated in S.4C(1)(a) is the date of hiring (True/False)
8. The hirer can make a written request once in 3 months
(True/False)

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CONTINUE
10.The hirer may within 31 days from the date of the notice, pay
the installments due and continue the hire purchase agreement
(True/False)

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Thank you!

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