HIRE-PURCHASE TRANSACTIONS IN NIGERIA (part 2)

HIRE-PURCHASE AGREEMENT.

At common law, there is no formality required for a hire-purchase agreement. The agreement may be in writing or orally, it may be with or without seal. However it is necessary to put the agreement in writing so as to avoid undue manipulations and exploitation.

The Hire-Purchase Act on the other hand requires a note or a memorandum to be made. Sec 2(2)(a) of the Act provides that an owner shall not be entitled to enforce a hire-purchase agreement or any guarantee or security made here under unless a note or memorandum of the agreement is made and signed by the hirer and by or on behalf of all other parties to the agreement. Therefore a hire purchase agreement under the Act should be in a written document stating all the requirements stipulated by the Act.

OBLIGATIONS OF THE OWNER IN A HIRE-PURCHASE TRANSACTION.

1.     DISCLOSE THE PRICE OF THE GOODS: Sec 2 of the Hire-Purchase Act provides that the hirer is legally obligated to state the price of the goods in writing in a note or a memorandum. If the hirer had inspected the goods and at the time of inspection, the prices of the good were displayed on tickets or labels attached to the good, it will be deemed that the price was disclosed to the hirer. Also, if the hirer has selected the goods by reference to a catalogue, price list or advertisement and the cash price was clearly stated, it will be deemed that the price was disclosed to the hirer.

 Non-compliance with the above requirement makes the agreement unenforceable, which also include the action to recover the goods.  In Yusuf & Anor v Oyetunde & Anor(1975 NNLR 116) the owner did not state the cash price, the court held that he was not entitled to recover the goods.

However, the court has the discretion to dispense with the above requirement if the failure to comply did not prejudice the hirer. Sec 2(2) HPA

2.     DELIVER A NOTE OR MEMORANDUM TO THE HIRER: the  owner is obligated by law to deliver a note or memorandum to the hirer containing the following;

(i)                The hire-purchase price and the cash price of the goods.

(ii)              The amount of each installment by which the hire-purchase price is to be paid and the date on which the installment is payable.

(iii)           The deposit made and the true rate of interest calculated in the manner as provided in the Fourth Schedule of the Regulations. 

(iv)           The list of goods to which the agreement relates.

(v)              The note or memorandum must be signed by the hirer and by or on behalf of other parties to the agreement.

(vi)           The note or memorandum must contain a notice as specified in the Schedule to the Act.

(vii)         A copy of the note or memorandum must be delivered or sent to the hirer within 14 days of making the agreement.

Failure to comply with the above requirement will render the agreement unenforceable against the owner Sec 2(2).

 PROVISIONS PROHIBITED IN A HIRE-PURCHASE AGREEMENT.

Under the common law, the owner of the goods had the privilege to include certain clauses in the agreement that will exempt him from certain liabilities. The hire purchase transactions were tilted more in favour of the owner.  The Act prohibits the inclusion of such provisions in a bid to protect the hirer. Sec 3 provides that the following provisions in a hire purchase agreement shall be void, these incude:

11.    Any provision authorizing the owner or anyone acting on the behalf of the owner to enter upon any premises for the purpose of taking possession of goods let under a hire purchase agreement.

22.   Any provision excluding or restricting the right of the hirer to terminate the agreement or any provision imposing liability on the hirer above that provided in the Act.

33.  Provisions imposing liability on the hirer at the determination of the hire-purchase agreement which exceeds the liability he would have been subjected to if the agreement has been determined by the hirer under the Act. For instance, determination by the owner in the event of breach by the hirer.

45.     Any provision treating any person acting for the owner as the agent of the hirer.

56.     Any provision relieving the owner of liability for acts or defaults of his agents.

67.    Any provision compelling the hirer to avail himself of the services of an insurer or repairer named by the owner.  

HIRE PURCHASE AGREEMENT (part 1)

WHAT IS HIRE PURCHASE

Hire purchase is one of the ways by which goods may be obtained without the necessity of paying the full purchase price. In this transaction the hirer is required to pay a deposit and after which he is allowed to take possession of the goods on the agreement that he will pay instalments at stated intervals. In hire purchase the property does not pass to the hirer until he pays the last instalment. If the hirer defaults in his obligations to payment as at when due, the owner of the property will be entitle to repossess it. Also the hirer may hirer may terminate the agreement at any stage and return the goods to the owner, but in this instance, he is to satisfy any accrued obligations under the agreement including the satisfaction of the minimum payment requirement.

WHO ARE THE PARTIES TO A HIRE PURCHASE AGREEMENT.

1.       A hire purchase agreement may involve just the dealer/the owner of the goods and the hirer.

2.       Also, wherethe dealer or owner is not in the position to grant credit facility to the perspective hirer, he may bring in a financing company for the purpose of financing the transaction. In this case, the finance company pays the full purchase price of the goods to the dealer/owner of the goods and then becomes the owner of the goods, which it, in turns lets to the hirer. In this instance the parties to the transaction becomes the finance company and the hirer, even though the transaction is carried out in the office of the dealer/owner of the goods. The dealer/owner acts on behalf of the finance company. The rights of the hirer in this case is against the finance company and not against the dealer but the hirer can exercise his rights against the dealer in the following circumstances

a.      Where the dealer warrants or advertises the goods to be of a particular quality and then they is a breach to that warranty. The case of Andrew v Hopkins

b.     Where the dealer neglects to disclose the factual state of the goods to the customer. Andrew v Hopkins.

3.      In most cases, the owner may require the hirer to provide a guarantor for the agreement. The liability of the guarantor arises only when there is a default by the hirer. That is where the hirer fails to fulfill his obligations under the contract, then the owner has a right to resort to the guarantor for payment of the debt.

LAWS GOVERNING HIRE PURCHASE TRANSACTIONS IN NIGERIA.

The contract of hire purchase in Nigeria is governed by both the common law and the Hire Purchase Act 2004. The common law rules are applicable to hire purchase transactions with respect to items outside the scope of the Act or agreements made before the commencement of the Act. Adelabere v Niger Motors Ltd (1974) 5SC 1.l

CLASSES OF GOODS COVERED BY THE HIRE PURCHASE ACT

By the provision of Sec. 1 of the Act, the act is applicable to;

1.       All hire purchase agreement  where the hire purchase price or the total purchase price does not exceed two thousand naira; and

2.       All hire purchase agreement that concerns motor vehicles and other auto mobiles.