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.