LAW OF HIRE PURCHASE

HIRE PURCHASE

Introduction

• Hire purchase is an agreement between owner and hirer in which situation the owner letting goods to hirer by installment.
• The legislation which govern hire-purchase in Malaysia is the Hire Purchase Act 1967.
• A contract whereby the property in the goods comprised therein passes at the time of the agreement or upon at any time before the delivery of goods.
• A contract which the person by whom the goods are hirer or purchase is a person who is engage in the trade or business of selling goods of the same nature or description as the goods comprised in the agreement.

Definition

• Hire purchase transaction is a contract whereby the owner left out goods on hire and agrees that in complexion of the necessary payments the hirer may either return the goods and terminate the contract.
• Section 2(1) defines hire purchase as a contract of letting goods with an opinion to purchase and agreement for the purchase goods by installment.
• Hirer: A person who takes or has taken goods from an owner under hirer purchase agreement.
• Owner: people who lets goods to a hirer under a hire purchase agreements.

Goods specified in the First Schedule. HPA 1967

- All consumer goods: goods purchase for personal family or household purposes.

- Motor vehicle: motor cycle, motor cars including taxi cabs and hirer cars, goods vehicle (not exceed 2540kg) buses.

Section 2(1)

#A person not being the hire or the owner or a servant of the owner, or whose behave negotiation leading to making of the HP agreement with the owner were carried out by whom or whose behalf the transaction leading to a HP agreement with the owner was arranged.

Goods

Motor Vehicle

Consumer Goods

Credit Corp. (M) SDN BHD v The Malaysia Industrial Finance Corp

Held: Until the hire had exercised his option to purchase the vehicle by paying out the total rentals & fulfilling all the agreement, no property in the vehicle passed to him.

Formation of a Hire Purchase Agreement

Formalities	Effect of disabling to parties to the contract	Effect of disobeying to the contract
Sec 4(1)(b): owner must in a written statement as set out in part 1 of the part 2 schedule	-Sec 4(5): failure to comply is an offence. - Sec 46: Penalty of not more that RM3000/6 month jail	-Sec 4(4): contract is void
Sec 4A(1): agreement must in writing	-Sec 4A(3): failure to comply is offences -Penalty according Sec 46	-Sec 4A(2): Agreement is void
Sec 4B(1): agreement must signed all parties after completed	-Sec 4B(4): failure to comply is offences	-Sec 4B(3): Agreement is void
Sec 4B: agreement must completed before intending hirer to sign	-Sec 4B(4): failure to comply is offences -Penalty under Sec 46	-Sec 4B(3): Agreement is void
Sec 4C(1): agreement must include matters such as number of installment.	-Sec 4C(3): failure to comply is an offences -Penalty under Sec 46	-Sec 4C: Agreement is void
Sec 4D(1)(4): a separate contract for each types of goods	-Sec 4D(3): failure to comply is an offences -Under Sec 46 is penalty	-Sec 4D(2): Agreement is void
Sec 5: within21 days after HP complete, owner shall serve on each hire & guarantors, copy of the agreement.	-No penalty of crime	-Agreement is unenforceable by owner but faceable by the hirer

Protection For Hirer & Guarantors

Implied Condition

↓↓↓↓↓↓↓↓↓↓↓↓↓↓↓

Sec 7(1)(b) The owner 

has right to sell

-owners shall sell goods 

to X when the payment

are completed by the hirer

↓↓↓↓↓↓↓↓↓↓↓↓↓↓↓

Sec 7(2): The goods is 

Merchantable Quality

-where the hirer has examined 

the goods as regard defect 

which the examination ought to

have revealed

-if the goods secondhand

↓↓↓↓↓↓↓↓↓↓↓↓↓↓↓

Sec 7(3): The shall fit for the

 purpose

-not implied if hirer examined the

 goods and knew the defect.

-A breach of conditions entitling

the party not in breach to repudiate

 the contract & sue for the damages

-A breach of warranty it does not entitle 

the party not in breach to repudiate the

contract but to sue for damages only.

Implied Warranties

Sec 7(1)(a): The hirer shall have & enjoy

quiet possession of the goods

Sec 7(1)(c): Goods must be free from 

any charge at the time when the 

property is too pass

Statutory Right of Hirer

1. Sec 9(1) right to be supplied with the documents and information (at any time before final payment has been made)
2. Sec 10 right to appropriate payment made in Hire-Purchase agreement (Hirer require the payment to be appropriate to a particular agreement)
3. Sec 11 right to apply for an order approving the removal of the goods to another place. (hirer must keep the goods in a placed stated in agreement)
4. Sec 12 right of assignment (hirer may assign his right, title interest with the consent of the owner)
5. sec 14 right to complete the purchase earlier than due date (hirer may complete the purchase of the goods by paying net balance due under he agreement.
6. sec 15 right to terminate the agreement (hirer has right to terminate the agreement at time by returning the goods to the owner during ordinary business hour at the owner's place of business.
7. Sec 37(1) to pay regular installment (hirer under obligation to continue to pay the installment even the goods hirer has deteriorated or lost)
8. Sec 38 the hirer cannot sell or dispose the goods because he is not the owner of the goods until full payment.

Statutory Right & Obligation of Owner

To cover the goods with insurance

• For the first year of hire purchase agreement for motor vehicle. For other types of goods, cover with insurance at the time of hire purchase agreement. At repossession - sec 16(1) the right of the owner to repossess arises if there are default of the hirer to pay two successive payment and the installment not more than 75% of the total cash price of the goods.
• serve a notice of 21 day to the hirer in  the 4 schedule.
• Period of 21 day given to the hirer to surrender the goods or pay the arrears. Sec 17a person to show a written permit issued by the Controller or the Ministry.
• If the hirer deceased, sec 16(1A) provides that repossession arises after default to pay 4 successive payment.
• Sec 16(2) the owner need not serve the 4 schedule notice if there are reasonable ground believing that hirer will remove or conceal the goods.

After repossession

• Sec 16(3) within 21 days after repossession the owner shall serve on the hirer aand guarantor the 5 schedule notice. Give second change to claim the goods.
• Sec 16(4) after the owner has taken possession of the goods he shall deliver to the hirer a notice to show the receipt of the goods.
• Sec 17(1) prohibits the owner to resale the goods to the third party within 21 days after deliver a notice under 5 schedule, unless agrees by the hirer.

Why Repossession is Done?

If still alive:

Sec 16(1): 

Failure or hirer to pay 2 successive monthly installment and payment of installments amount to not more that seventy-five percent of the total cash price of the goods comprised in the hire-purchase agreement.

If deceased:

Sec 16(1C): four successive default of payment

Summary of Procedure of Repossession