Hire-Purchase Law

The Hire-Purchase Act 1967 regulates all hire-purchase

transactions in respect of goods specified in the First
Schedule.

Hire-Purchase agreements relating to other goods are

governed by common law.
 A hire-purchase transaction
Usually involves three parties a dealer, a customer and a
third party finance company.

Usually, the dealer does not provide the credit when the
customer chooses to buy the goods on hire-purchase.
The dealer will sell the goods to a finance company (who thus
becomes the owner) for cash.

The finance company will then hire the goods to the customer
(who thus becomes the hirer).
The hire-purchase agreement will therefore be between the
finance company and the hirer, not between the dealer and
the hirer.
Questions

Think about the words Hire and Purchase. A hire-

purchase is when you rent something and then later you
can buy it.
Have you or someone in your family ever done this?
What kinds of items are hired and then purchased?
Ummmm, no!
Hire-Purchase Act

The Hire-Purchase Act 1967 regulates all hire-purchase

transactions in respect of goods specified in the First
Schedule.

Hire-Purchase agreements relating to other goods are

governed by common law.
 1st Schedule
All consumer goods
Consumer goods are defined in section 2(1) as goods purchased for
personal, family or household purposes. Examples that would be in hire-
purchase agreements are television sets, washing machines, air conditioners
and sewing machines.

Motor vehicles, namely

Invalid carriages;
Motorcycles;
Motor cars including taxi cabs and hire cars;
Goods vehicles (where the maximum permissible laden weight
does not exceed 2540 kilograms); and
Buses, including stage buses.
Invalid carriage
Motorcycles
Motor cars
Goods vehicles
Buses
 1st schedule
All consumer goods; Eg. goods are television sets, washing
machines, air conditioners and sewing machines.
Motor vehicles, namely
Invalid carriages;
Motor Cycles;
Motor Cars including taxi cabs and hire cars;
Goods Vehicles (where the maximum permissible laden weight
does not exceed 2540 kilograms);
Buses, including stage buses.

Consumer goods is defined in section 2(1) as goods

purchased for personal, family or household purposes.
Examples of such consumer goods are television sets, washing
machines, air conditioners and sewing machines.
Cont..

Goods also include any replacements and renewals by the hirer

of any part or parts and any accessories added or additions
made by the hirer during the period of the hiring

It is a contract wherein the owner lets out goods on hire and

agrees that on completion of the necessary payment, the hirer
may either return the goods and terminate the contract or elect
to buy the goods.

Hirer is given an option to purchase at the end of the duration of

hire.
The Consumer
Consumer means a person who:
Acquires or uses goods or services of a kind ordinarily acquired
for personal, domestic, or household purpose use or
consumption , and
Does not acquire or use the goods or services or hold himself out
as acquiring or using the goods or services, primarily for the
purpose of :
Resupplying them in trade
Consuming them in the course of a manufacturing process
In the case of goods repairing or treating in trade other goods or
fixtures on land
 Ownership

A hirer is a person who takes or has taken goods from an

owner under a hire-purchase agreement.

The owner is the person who lets or has let goods to a hirer
under a hire-purchase agreement.
 Ownership

A hirer is a person who takes or has taken goods from an

owner under a hire-purchase agreement.

The owner is the person who lets or has let goods to a hirer
under a hire-purchase agreement.
 Nature of a Hire-Purchase Agreement

A hire-purchase agreement is a contract of hire for a fixed

period at a fixed rental which also grants the hirer an option
to buy.

Under a hire-purchase agreement entered between a hirer and

the owner of the goods, the hirer obtains possession of the
goods and is also given an option to purchase the goods at the
end of the duration of hire.

The hirer is not obliged to purchase and thus is not a person who
has agreed to buy the goods. Therefore, if he sells the goods
before he has exercised the option to purchase, he cannot pass a
good title to the buyer.
Cont..
In a hire-purchase agreement, property in the goods does
not pass at the time of the agreement whilst in a contract of
sale, property in the goods passes at the time of the
agreement.
Hire Purchase Agreement v Lease Agreement

A lease is a contract by which a rightful possessor conveys

the right to use and occupy the property in exchange for
rental
If the consumer cannot afford to pay the asked price for an
item of property as lump sum but can afford to pay a
percentage as a deposit, a lease agreement allows him to
hire the goods for a monthly rent.
When a sum equal to the original full price plus interest
has been paid, the buyer may then exercise an option to
buy the goods at the fixed price.
Lease Agreement
The lease agreement is important for situations where the
consumer is not allowed to purchase goods on hire-
purchase
Hire-purchase is for consumer goods and motor vehicles
Example: vehicles for commercial use, photocopying
machine, computer for office use
 Ownership

A hirer is a person who takes or has taken goods from an

owner under a hire-purchase agreement.

The owner is person who lets or has let goods to a hirer under
a hire-purchase agreement.

Dealer means a person by whom negotiations leading to the

making of a hire-purchase agreement are carried out
 Repossession

Because the owner retains the ownership of

the goods, he can repossess the goods from a
defaulting hirer or an innocent purchaser to
whom the hirer may have sold the goods.
 Formation of a Hire-Purchase Agreement

The Hire-Purchase Act seeks to protect the hirer by

ensuring that the terms of the hire-purchase agreement are
made clear to him before or at the time when he enters into
the transaction.
Purchaser

Hire-Purchase Agreement over

specified time period

Finance
Company
 When the Hire-Purchase Agreement is
signed

Purchaser

Possession of
goods home
theatre system

Hire-Purchase Agreement over

specified time period

Volume Sdn
Bhd

Cash price
Finance
Company
Title of
goods
 At the End Of Hire Purchase Agreement

Purchaser

Final payment exercising option

to purchase

Volume Sdn
Bhd Title of
Goods

Finance
Company
 When the Hire Purchase Agreement signed

TAN
Possession of Goods Hire Purchase Agreement over agreed
(Preve Proton) period
Cash price
Proton Maybank
Company
Title of Goods

At the End Of Hire Purchase Agreement

TAN
Final Payment exercising option to
purchase
Title of Goods
Proton Company Maybank
 Hire-Purchase Act

The Hire-Purchase Act seeks to protect the hirer by

ensuring that the terms of the hire-purchase agreement are
made clear to him before or at the time when he enters into
the transaction.
 Agreement Formation .. Section 4(1)

Agreement must be in writing.

Information includes a short description of the goods.

A summary of the prospective hirers financial obligations

under the agreement.

A hire-purchase agreement to be signed by or on behalf of all

parties to the agreement.

A hirer cannot be required to sign a blank or uncompleted

hire-purchase agreement or any other form or document
relating to a hire-purchase agreement.
Cont
The agreement shall be in the national language or English
Agreement not in the relevant language or in writing will
be void
Every hire-purchase agreement shall be signed by or on
behalf of all parties to the agreement
A separate agreement in respect of every item of goods
purchased.
Owner must serve a copy of the agreement on the hirer
within 21 days after the making of the agreement
 Content of the agreement,
The agreement must contain:

A statement of the hire-purchase price; the cash price;
the number of the instalments; the date of the
instalments.
A list of the goods which is sufficient to identify them.

A notice of the right of the hirer to terminate the
agreement and the restriction of the owners right to
recover the goods.
Warranties and Conditions
There are certain terms which are implied in a hire-
purchase agreement
These are warranties and conditions
A breach of condition is a serious breach and it goes to the
root of the contract
The party not in breach to repudiate the contract and sue
for damages
Breach of warranty is a less serious breach and does not
entitle the party not in breach to repudiate the contract but
to sue for damages only
 Question
The information on the previous slide
is:
1. Information that must be contained in the
hire-purchase agreement.
2. Information that must be given to the
hirer before the hire-purchase agreement.
3. Information that must be provided by the
hirer and owner to the government.
 Question

The Hire-Purchase Act primarily seeks

to protect:
A. The hirer

B. The dealer
C. The finance company
 Liability of Owner and Dealer for
Misrepresentation

By section 8(1), If in the course of negotiation, the dealer,

owner or its agents made a misrepresentation, the hirer has
the right to rescind the agreement and sue for damages.

Any representation, warranty or statement made by a dealer

or its agent is treated as if it was made by an agent of the
owner.

A dealer, its agent or an agent of the owner, who prepares an

agreement or offer in writing and knowingly includes a
misrepresentation (i.e. a false statement of a material fact),
commits an offence.
 It is common for hirers to obtain goods from dealers who
are not financial institutions. The dealers sells the goods to
the finance company which will in turn enter into a hire-
purchase agreement with the hirer. The dealer would then
only be a third party to the hire-purchase agreement.
Therefore, in the event that the dealer has made a
misrepresentation, the hirer cannot repudiate the
agreement. He can only sue for damages.
Cont
Every covenant, condition, or term in any hire-purchase
agreement or other document purporting to exclude, limit,
or modify the operation of Section 8 (1) of the HPA 1957
or to preclude any right of action or any defence based on
or arising out of any such representation, warranty or
statement shall be void.
 Statutory Rights of Hirer

i) The right to be supplied documents and information.

A hirer is entitled to request the owner for a written

statement regarding:

The amount paid to the owner by the hirer or his agent;

The amount which he has become due under the
agreement but remains unpaid; and

The amount which is to become payable under the

agreement.
 cont..

ii) The right to require the owner to appropriate

payments made in hire-purchase agreements.

Where the hire-purchase agreement stipulates that the

hirer is bound to keep the goods under hire in a specified
place, cannot remove the goods anywhere else without
the consent of the owner.

iii) The hirer can apply to the Magistrates court for an

order approving the removal of the goods to some other
place.
 Cont

iv)Right to assign his right, title and interest under the hire-
purchase agreement: section 12.

v) Right to have his rights, title and interest passed on by

operation of law.

vi) Right to complete the purchase of the goods earlier than

due date.

When a hirer wishes to complete the purchase of the goods before

the due date, he may do so by written notice to the owner and
paying to the owner the net balance due under the agreement.

vii)Right to terminate the hiring.

Question

State five (5) of the statutory rights of hirers under a hire-

purchase contract.
 Right of repossession by the owner

The owner has the right to repossession if the hirer commits a

breach of his obligations under the hire-purchase agreement,
usually non-payment of instalments.

Section 16 requires the owner to give notice to the hirer warning

him of impending repossession.

Under section 17, the owner, after repossession, must not sell or
dispose of the goods for 21 days.

When goods are repossessed,, the hirer may within 21 days of the
repossession give notice to the owner requiring him to sell the
goods to any person introduced by the hirer who is prepared to buy
for cash at a price not less than the estimated value of the goods.
 The HPA 1967 lays down various restrictions on the power of the
owner as a means of protecting the hirer.
The relevant sections are 16 to 19
The restrictions imposed on the power of the owner are as follows:-
A. notice must be given to the hirer when goods are to be
repossessed
After repossession the owner must not sell or dispose of the goods
for 21 days
Hirers rights and immunities when goods are repossessed
Hirer can regain possession of the goods in certain circumstances
 The owner shall not exercise any power of taking
possession of the goods unless:-
A. payment of instalment amounts to not more than 75% of
the total cash price
B. two successive defaults of payment by the hirer
C. A notice has been served on the hirer
D. The notice has expired (after 21 days)
If payment of instalments made amounts to more than 75%
of the total cash price then an order of the court need to be
obtained
 The owner can only repossess the goods after following
certain procedures:-
A. serve a notice to retake possession
B. the notice has expired ( 21 days)
C. personally deliver to the hirer a document acknowledging
receipt of the goods
D. the owner must serve on the hirer within 21 days after take
possession. The owner cannot sell or dispose of the goods
without the written consent of the hirer until the expiration of
21 days after the date of service of the said notice.
 A hirer who returns good comprised in a hire-purchase
agreement within 21 days after the service on him of the
notice shall not be liable to pay:-
A. the cost of repossession
B. the cost incidental to taking possession
C. the cost of storage
 The hirer can regain possession of the goods if the hirer
does the following:-
A. pays or tenders to the owner any amount due by the
hirer
Remedies any breach of the agreement
Pays or tenders to the owner the reasonable costs and
expenses of the owner of and incidental to his taking
possession of the goods and of his returning them to the
hirer
 Fraudulent Sale by Hirer

By section 38:
If the hirer fraudulently disposes of or sells any
goods comprised in a hire-purchase agreement, or
attempts to defraud the owner by such means, he
will be guilty of an offence.
 Rights and Liabilities of a Guarantor

A guarantor is a person who guarantees to the owner that

the hirer would perform his obligations
and normally in hire-purchase agreements undertakes to repay
the hirers debt to the owner should the hirer fail to pay the debt
by the due date.

The rights of a guarantor include the following:

i) The right to secure discharge by paying the amount due to
the owner;

ii) After paying off the owner, he can sue the hirer in the name
of the owner for breach of obligation;
 (cont)
iii) Right to insist that the owner transfer all securities taken
from the hirer to secure performance of the hirers obligation;

iv) Right to be indemnified by the hirer against claims by the

owner.

The guarantor is liable to the owner in the event the hirer defaults in
his payments of instalments or breaches the terms of the hire-
purchase agreement.
Question
Typically, who would be your
guarantor?
1. Your boss
2. Your parents
3. Your colleague
4. A bank
 Continued
The guarantor is liable to the owner in the event the hirer defaults
in his or her payments of instalments or breaches the terms of the
hire-purchase agreement.
The guarantor has rights that are usually triggered when the hirer
fails to make a payment. The rights of a guarantor include the
following:
The right to secure discharge by paying the amount due to the owner;
After paying off the owner, he can sue the hirer in the name of the owner
for breach of obligation;
Right to insist that the owner transfer all securities taken from the hirer to
secure performance of the hirers obligation;
Right to be indemnified by the hirer against claims by the owner.
Indemnify = to compensate someone for harm or loss
Question
According to the Hire Purchase Act
1967, is it compulsory that a hire
purchase agreement must be in
writing?
Question
Describe and define the two
parties to a hire-purchase
agreement
Question
Ali bought a car under a hire-
purchase agreement with Ting Ting
Bank Bhd with Ahmad as his
guarantor. Ali defaulted in his
monthly instalments for the last
two months.
Discuss the legal position of all the
parties concerned.
Question
Ahmad bought a car from Song Motor
which was financed by Easy Bank Bhd.
When Ahmad defaulted in making two
monthly instalment payments and after
due compliance with the Hire-Purchase
Act, the car was repossessed by Easy
Bank Bhd.
What are the rights of Ahmad as a hirer
under the Hire Purchase Act 1967?
Question
Paul wants to purchase office
furniture on hire-purchase.
What type of law governs this
transaction?
Question
State the various types of goods
covered by the Hire Purchase Act
1967?
Question
According to the Hire-Purchase Act
1967, is it compulsory that a hire-
purchase agreement must be in
writing?
Question
The five statutory rights of hirers
under a hire-purchase contract.
Question