Hire purchase is a contractual agreement whereby the owner lets the goods out on hire and agree that the hirer may either return the goods and terminate the contract or elect. There is Hire Purchase Act 1967 (Amendment 2010), sought to redress the imbalance to some extent by conferring rights and imposing obligations in respect of certain largely consumer transactions. Section 2(1) of Hire Purchase Act 1967 (Amendment 2010) provided that “Hire Purchase agreement including a letting of goods with an option to purchase and an agreement for the purchase of goods by installments (whether the agreements describe the installments as rent or hire or otherwise).”
The property in goods is not transferred to the hirer at the time of the contract is made. Hirer only obtains possession over the goods. Property in goods remain with the owner until the full payment of the installment or hirer chooses to purchase the goods.
Case: Credit Corporation (M) Bhd v The Malaysian Industrial Finance Crop & Anor [1976] MLJ 83.
The court held that until the hirer had exercised his option to purchase by paying the total amount and fulfilling all his obligations under a hire purchase agreement, then only property in the car passed to the hirer.
Section 2(1) of HPA 1967 states that “ Owner is a person who lets or has let goods to a hirer under a hire-purchase agreement and includes a person to whom the owner’s rights or liabilities under the agreement have passed by assignment or by operation of law; Hirer is the person who takes or has taken goods from an owner under a hire-purchase agreement and includes a person to whom the hirer’s rights or liabilities under the agreement have passed by assignment or by operation of law; and Dealer is a person not being the hirer or the owner or a servant of the owner, by whom or on whose behalf negotiations leading to the making of a hire purchase agreement with the owner were carried out”. Hire purchase price is the total sum payable by the hirer under a hire purchase agreement in order to complete the purchase agreements includes deposit, monthly installments and monthly interest.
Categories of goods in HPA (First Schedule) divided into two which is all consumer goods and motor vehicles. It includes any replacements or renewals by the hirer of any part or parts thereof and any accessories added or additions made thereto by the hirer during the period of hiring. Moreover, consumer goods is the good purchased for personal, family or household purposes. Not only that, other than consumer goods and motor vehicles still can consider under Hire Purchase Act in the condition that both parties consented to be bound by the Hire Purchase Act.
Case: Kesang Leasing Sdn Bhd v Mohd Yusof B. Ismail & Anor [1990] 1 MLJ 291.
The goods involved are computers where the parties agreed to be bound by Hire Purchase Act. The court held that Section 2 (1) of the Hire Purchase Act did not exclude the application of the provisions of the hire purchase Act to hire purchase agreement in respect of goods outside its coverage provided that the parties to an agreement consented to be bound by them.
Formation of Hire Purchase Agreement
1. Notice of the 2nd Schedule before entering HPA
Before a hire purchase agreement, 2nd Schedule Notice to serve on the hirer. The purpose of the act is to inform the intending hire purchase concerning the financial obligations which may be incurred. Besides, a negotiation between dealer and hirer, the dealer shall serve a complete 2nd Schedule sign by dealer and the prospective owner. Section 4 (2) states that “If notice delivered to the person intended to be hirer must be acknowledge receipt of notice, signing the appropriate column.” Next, Section 4 (4) stated that “If a HP contract is made without serving/giving the notice as required by section 4(1), the agreement shall be void .”
Case: Affin Credit (M) Sdn Bhd v Yap Yuen Fui [1984] 1 MLJ 169.
There was a lack of offer and acceptance, the purported hire-purchase agreement was declared, the was void from the beginning. The court held that the Pre contractual disclosure is required even if the offer to enter into a hire purchase agreement emanated from the hirer.
2. Written Agreement
Section 4A of HPA states that “A hire purchase agreement to be in writing. An agreement is deemed not to be in writing and thus void if a handwriting (other than a signature or initials), “is not clear and legible and if the agreements is printed, the print is of size smaller than the type known as ten point Times.”
3. Signature of parties
Section 4B (1) of HPA states that “A hire purchase agreement to be signed by or on behalf of all parties to the agreement.” Section 4B (2) further provided that “The hirer purchase agreement, form or document has been duly completed before the intending hirer of his agent is required to sign thereon.” Its mean the owner or the agent cannot insist the hirer to sign incomplete HP agreement/blank agreement. Section 4B (2) (2B) appends that the owner cannot serve the agreement which is not complete. No compliance of Section 4B (1) AND 4B (2) is void.
4. Contents (s. 4c)
Section 4(C) of the Hire Purchase Act 1967 provides for the contents of a hire-purchase agreement. It includes: A date on which the hiring starts; The number of installments to be paid by hirer; The amounts of each of installments and the person to whom and the place at which the payments are made; The time for the payment of each of those instalments; A description of goods sufficient to identify them; and the address where the goods are to kept. Section 4C (1)(a)(b) further provided that every HP agreement shall specify the details. Among the details are date, address, no. of installments, time of payment, address, the cash price, insurance and vehicle registration fees.
Section 4C (2) provides that “Any agreement which does not comply with this requirement would render the HP agreement void .” Section 4C (3) mentioned that “If the owner enters into agreement without stating the above contents, apart from the agreement being void, the owner shall be guilty an offence as prescribed by.” The penalty for the above offence is fine not more than RM3,000 or imprisonment 6 months or both (Section 46).
by paying the balance due. Therefore, the owners had breached the implied condition. The Court also took a view that that section 7(4) preserved the common law principle that the owner had a good title when he entered the HP and not when the final payment was made.
Implied warranty that the goods under hire purchase must free from encumbrances (Section 7(1)(c) of HPA 1967).
Implied condition that the goods under hire purchase shall be of merchantable quality (Section 7(2) of HPA 1967).
There are some exceptions. Such condition should not be implied where the hirer has examined the goods or sample , as regards defects which the examination ought to reveal. Besides, if the goods are second hand goods and agreement contain a statement to the effect that: (a) the goods are second hand; and (b) all conditions and warranties as to quality are expressly negative, and the owner proves that the hirer has acknowledge in writing that the statement was brought to his notice.
Extra: Merchantable quality means the goods sold are for particular use for which they are sold. Goods is not of merchantable quality if it is “no use for any purpose for which it would normally be used and therefor not saleable under description.” Case: Lau Hee Teah v Hargill Engineering Sdn Bhd Goods are new and not considered 2nd hand if they have not been used and previously sold by retail. It considered 2nd hand if it is used for demonstration and regular testing by potential buyers. Case: john McGrath Motors v Applebee
Implied condition that the goods under hire purchase shall be reasonably fit for the purpose (Section 7 (3) of HPA 1967).
Where the hirer expressly or implication makes known to the owner or dealer or to any servant or agent of the owner or the dealer of the particular purpose for which the goods are required. That there shall be implied in the HP agreement a condition that the goods shall be reasonably fit for the purpose.
However, such condition shall not implied if the goods are second hand goods and the agreement contains a statement to the effect : The goods are second hand car (Section 7(3)(a)); and that all conditions and warranties of fitness and suitability are expressly negative, and the owner proves that the hirer has acknowledged in writing that the statement was brought to his notice (Section 7(3)(b)).
Case: Lau Hee Teah v Hargill Engineering Sdn Bhd. The 1st respondent had breached the implied condition as to fitness for the purpose. An agent of the respondent had, in fact, visited the mine and observed the work carried out. The appellant had made known for the purpose which the loader was
required. However, the Court decided that “they were no defects sufficiently serious to render the loader useless for any purpose which it would usually be used. And therefore, it cannot be said that the loader was unmerchantable quality or unfit for the Plaintiff’s purpose.
Liability of Owner & Dealer for Misrepresentation
Where there is misrepresentation by the dealer, owner or its agents in the negotiations leading to the hire purchase agreement, the hirer is conferred a statutory right to claim against the owner and the person who making the representation.
Section 8(1) states that “Owner or the dealer or any person acting on behalf of the owner or the dealer made representation to the hirer or prospective hirer orally or in writing to negotiate that leads to entering into HP agreement.”
Under Section 8 (1)(a), it states that “If the owner made a misrepresentation in the course of negotiations leading to the hire purchase agreement, the hirer has the right to rescind the agreement and sue for damages. Besides, under Section 8 (1)(b), it states that where the dealer has made a misrepresentation , the hirer cannot repudiate the agreement. He can only sue for damages.
Section 8(2) of HPA mentioned that “Any terms of the agreement purporting to exclude, limit or modify the rights of the hirer conferred by subsection (1) is void.” Section 8(3) provided that “An innocent owner who suffers any damages as a result of the misrepresentation of the dealer is entitled to be indemnified by the dealer.”
Statutory Right of hirer
Statutory rights of hirer are the right to obtain information, rights to distribution fees, the right to move goods, the right to assign the goods, the right to deliver the goods by operation of law, early settlement, and termination of the agreement.
1. Right to Copy Statement in Relating to His Financial Statement
The first statutory rights of the hirer is hirer has the right to copy statement in relating to his financial statement. Section 9 of Hire Purchase Act provided that “At any time before the final payment has been made under a hire purchase agreement the owner shall, within fourteen days after he has received a request writing from the hirer, supply to the hirer a statement signed by the said person or his agent showing: (a) The amount paid to the owner by or on behalf of the hirer; (b)The amount due to the owner but remained unpaid; (c)The amount that is become payable under the agreement; (d) The amount derived from interest on overdue installment.”
However , if the owner has sent to the hirer with in the period of three months the statements before the request , the owner need not to comply (Proviso in Section 9). Section 9(2) further provided that “if the owner defaults or fails to supply the statement without reasonable cause, the owner is not entitled to enforce: (i)The agreement against the hirer; (ii)Any right to repossess the goods from the hirer; and (iii) Any contract of guarantee relating to the
Not only that, Section 12(5) provided that “The owner requires other additional guarantors who have guaranteed hirer’s obligation under hire purchase agreement have agreed to guarantee the assignee’s obligation under the agreement or where the assignee has furnished the same number of guarantors.” The refusal on the part of owner to give consent to an assignment as in mentioned in subsection (1) on the ground that he requires other additional guarantors to guarantee the assignee’s obligation shall be deemed unreasonable.
Next, Section 12(3) stated that “If the owner refuses to give his consent to an assignment by the hirer or his right, title and interest under the agreement, the hirer may apply to the High Court for an order declaring that the consent of the owner to that assignment has unreasonably been withheld.”
5. Right by Operation of Law
Next, the hirer has the right to deliver the goods by operation of law. Section 13 of Hire Purchase Act 1967 mentioned that “The right, title and interest of a hirer under a hire- purchase agreement can pass by operation of law to the personal representative of the hirer .” If the hirer is a company, the liquidator may exercise the same right under the agreement as the company. In effect, the liquidators succeeds to the hirer’s right and liabilities under a hire purchase agreement.
6. Right to Early Completion of the Agreements
Hirer has the right to early completion of the agreements. Under Section 14(1) of Hire Purchase Act 1967, it stated that “The hirer gives a notice in writing to the owner of his intention to early completion of the agreements, on or before the day specified for the purpose in the notice, complete the purchase of the goods by paying or tendering to the owner the net balance due under the agreement.”
For the purpose of subsection (1), the term charges are at a fixed rate, the net balance due is the balance originally payable under the agreement less (i) any amounts (other than deposit) paid or provided or on behalf of the hirer under the agreement; (ii) The statutory rebate for terms charges; (iii) If the hirer requires any contract of insurance to be cancelled, the statutory rebate for insurance. (Section 14 (2)(a), Hire Purchase Act 1967)
It is stated in Section 14 (3) that the “Hirer can exercise the right to an early completion at any time during the continuance of the agreement; or where the owner has taken possession of the goods, upon payment to the owner (within 21 days after the owner has served a notice in the form set out in the Fifth Schedule); or where the hirer has returned the goods to the owner within 21 days after the service on him of the notice in the from set out in the Fourth Schedule due to failure to pay 2 successive installments or the last installment.
7. Right to Terminate the Agreement
Hirer has the right to terminate the agreement. According to Section 15(1) of HPA 1967, it provided that “The hirer of any goods comprised in a hire purchase agreement may terminate the agreement by returning the goods to the owner during ordinary business hours at the place at which the owner ordinarily carries on business or to the place specified for that purpose in the agreement.”
Duties / Obligation of Hirer
I. Continue Payment
Hirer is under the duty to pay the installments , even the goods hired is destroyed.
Case: Ka Yim Credit & Leasing Sdn Bhd v Pang Kim Cha.
Defendant hired a bulldozer from the Plaintiff under a hire-purchase agreement. The bulldozer then destroyed in fire. Defendant refused to continue payment of installment until his claim from the insurance company has been settled. The court held that the destruction of the goods did not discharged the duties of the hirer to pay the whole amount payable under the agreement. Thus, the Defendant must pay.
II. Inform Owner the Position of the Goods
According to Section 37 of HPA, it provided that “ Owner at any time, may serve a written notice to the hirer , requiring the hirer to state in writing the position of the goods; to whom the goods is delivered; and the circumstances under which he lost possession of them.
Besides, Section 37 (1) of HPA states that “Within 14 days after receiving notice, the hirer is under duty to give the owner such statement .” The hirer needs to inform owner that if he removes the goods from the address specified in the agreement; or if the goods is lost; or if the goods are taken out from the hirer’s possession. Besides, the hirer is also under duty to inform the owner in writing about the new address where the goods is kept; or the date and circumstances in which the goods was lost; or the date and circumstances in which the goods are taken out from the hirer’s possession. If the hirer fails to do so within 14 days, or gave false statement to the owner, the hirer shall be guilty of an offence (Section 37 (2) of HPA).
Rights & Duties of Owner In Repossession (HOT. )
The owner has the right to recover possession of goods if hirer commits a breach of his obligations under the Hire Purchase Act 1967.
Procedures for Repossession
1) Default in payment
Section 16 (1) of HPA states that “The owner may repossess the goods from hirer only if the owner assures that the balance of loan to be paid by the hirer must be more than one-third of the purchase price of the goods hired.” The hirer defaulted to pay 2 successive installments. Section 16(1) (1A) of the Hire Purchase Act 1967 further provide that “ An order of court needs to be obtained by the owner before repossess the hired goods if the
the good, within 21 days after the hirer received the 4th schedule notice, then owner shall not impose cost of repossession, cost incidental to repossession and cost of storage.”
5) Selling On Repossession by Owners
After Repossession, owner shall not sell or dispose of the goods without the written consent of the hirer until expiration of 21 days date of service of 5th Schedule Notice or expiration of the time for payment (the hirer has given notice to owner to reinstate the agreement) (S. 17(1)). If the owner dispose, contravention guilty (s. 17(2)).
Moreover, within 21 days after receipt of 5th schedule, the owner requires to redeliver the goods if the hirer give a written notice to the owner within 21 days. Besides, require the owner to sell the goods to any person introduced by the hirer who is prepared to buy the goods for cash. Owner can also sell by public auction. The owner is required to serve the hirer a copy of notice of such public auction not less than 14 days from the date of such public auction. (s. 18 (4)(a)). Owner can also sell other than public auction: the owner is required to serve the hirer an OPTION to purchase the goods at the price he intended to sell (s. 18 (4)(a)). If failure to do so, there was a guilty.