Introduction

Hire purchases Agreement or commonly known as H.P agreement in Malaysia has been
used by mostly financial institutions in Malaysia as to fund the purchase of consumer goods,
vehicles and other business equipment and industrial machinery.
In Malaysia, The Legislation governing hire purchase transactions is the Hire Purchase Act
1967, which came into force on 11 April 1968 after hire purchase became popular in the
acquisition of expensive consumer goods such as cars, business equipment and industrial
machinery. Purchasing cars is the most common type of hire purchase agreement in
Malaysia and the repayment could served up to 9 years from the date of agreement been
executed.
There are two types of car loans currently offered in Malaysia: variable rate and fixed rate
car loans. Fixed rate car loans are the most common type in the market, where there is no
fluctuations in interest during the loan tenure. The payments on this loan are fixed and
interest amount is calculated up front, thus additional payments do not reduce the principle
or interest amount on the loan. The variable rate car loan is linked to a current account,
whereby the funds deposited in your current account will reduce your payment on interest.

Law of Malaysia, Act (212);

Hire Purchase Act 1967:
An Act to regulate the form and contents of hire-purchase agreements and the rights and
duties of parties to such agreements.
[11 April 1968, P.U. (B) 150/1968]

From the above statement, we can conclude that Hire Purchase Act main aims and
purposes are to regulate the form and contents such as the performance of the contract and
the rights and duties of the parties whom involved and agreed to the contract.

Part I
Preliminary

(2) Hire Purchase Act shall apply throughout Malaysia and in respect only of hire-purchase
agreements relating to the goods specified in the First Schedule.
(4) This Act shall apply only to hire-purchase agreements entered into after the coming into
operation of the Act.

Part II
Formation and Contents of Hire-Purchase
Agreements

4A. Hire-purchase agreement to be in writing

(1) A hire-purchase agreement in respect of any goods specified in the First Schedule shall
be in writing.
(2) A hire-purchase agreement that does not comply with subsection (1) shall be void.
(3) An owner who enters into a hire-purchase agreement that does not comply with
subsection (1) shall, notwithstanding that the hire-purchase agreement is void, be guilty of
an offence under this Act.

4B. Hire-purchase agreement to be signed, etc.

(1) Every hire-purchase agreement shall be signed by or on behalf of all parties to the
agreement.

(2) No owner, dealer, agent or person acting on behalf of the owner shall require or cause
any intending hirer or his agent to sign a hire-purchase agreement or any other form or
document relating to a hire-purchase agreement unless such hire-purchase agreement, form
or document has been duly completed.
(3) A hire-purchase agreement that does not comply with subsections (1) and (2) shall be
void.
(4) An owner, dealer, agent or person acting on behalf of the
owner who:
(a) enters into a hire-purchase agreement in contravention of subsection (1); or
(b) requires or causes an intending hirer or his agent to sign a hire-purchase agreement in
contravention of subsection (2), shall, notwithstanding that the hire-purchase agreement is
void, be guilty of an offence under this Act.

Part III
Protection of Hirers and Guarantors
Warranties and Conditions

Conditions and warranties to be implied in every hire-purchase agreement

(1) In every hire-purchase agreement there shall be:
(a) an implied warranty that the hirer shall have and enjoy quiet possession of the goods;
(b) an implied condition on the part of the owner that he shall have a right to sell the goods at
the time when the property is to pass;
(c) an implied warranty that the goods shall be free from any charge or encumbrance in
favour of any third party at the time when the property is to pass.

(2) In every hire-purchase agreement there shall be an implied condition that the goods shall
be of merchantable quality, but such a condition shall not be implied:

(a) where the hirer has examined the goods or a sample thereof, as regards defects which
the examination ought to have revealed; or
(b) if the goods are second-hand goods and the agreement contains a statement to the
effect that:
(i) the goods are second-hand; and
(ii) all conditions and warranties as to quality are expressly negatived, and the owner proves
that the hirer has acknowledged in writing that the statement was brought to his notice.
(3) Where the hirer expressly or by implication makes known to the owner or the dealer or to
any servant or agent of the owner or the dealer the particular purpose for which the goods
are required, there shall be implied in the hire-purchase agreement a condition that the
goods shall be reasonably fit for that purpose, but such a condition shall not be implied if the
goods are second hand goods and the agreement contains a statement to the effect:
(a) that the goods are second-hand; and
(b) that all conditions and warranties of fitness and suitability are expressly negatived, and
the owner proves that the hirer has acknowledged in writing that the statement was brought
to his notice.
(4) Nothing in this section shall prejudice the operation of any other written law or rule of law
whereby any condition or warranty is to be implied in any hire-purchase agreement.

1 (THE COMMISSIONER OF LAW REVISION, MALAYSIA UNDER THE AUTHORITY OF

THE REVISION OF LAWS ACT 1968 , 2006)