HIRE PURCHASE PREPARED BY: MADAM NORAZLA
INTRODUCTION • Hire purchase is a contractual agreement where by the owner lets the goods out on hire and agree that the hire 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.
DEFINITION OF HIRE PURCHASE AGREEMENT • S. 2 (1) of HPA 1967 (Amendment 2010). • CONTRACT that: • Letting of goods with an option to purchase; OR • purchase of goods by installments (whether the agreements describes the installments as rent or hire or otherwise
The property in the 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 the HIRER Chooses to PURCHASE THE GOODS.
Credit Corporation (M) Bhd v The Malaysian Industrial Finance Corp & Anor 1 MLJ 83 Held: 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
TERMINOLOGIES IN HIRE PURCHASE AGREEMENT WHO IS THE OWNER? S.2 (1) A person who lets or has lets goods to a hire purchase agreement includes a person to whom the owner’s rights and liabilities under the agreement have passed by assignment or by operation of law.
Continue….. WHO IS THE HIRER? S. 2 (1) 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 and liabilities under the agreement have passed by assignment or by operation of law
Continue…. WHO IS DEALER? S.2(1) 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…..
Continue…. What is hire purchase price? The total sum payable by the hirer under a hire purchase agreement in order to complete the purchase agreements….includes deposits…monthly installments and monthly interest….
What is goods? • Categories of goods in HPA (First Schedule) • All consumer goods • Motor vehicles • 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
Continue…. Consumer goods Goods purchased for personal, family or household purposes
Kesang Leasing Sdn Bhd v Mohd Yusof B. Ismail & Anor  1 MLJ 291 Facts: The goods involved are computers where the parties agreed to be bound by Hire Purchase Act. Held: 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
1. Notice of the 2nd Schedule before entering HPA • Before a hire purchase agreement • 2nd Schedule Notice to serve on the hirer Purpose To inform the intending hire purchase concerning the financial obligations which may be incurred Negotiation between dealer and hirer….dealer shall serve a complete 2nd Schedule sign by dealer and the prospective owner
Continue…. Section 4 (2) Notice delivered To the person intended to be hirer Acknowledge receipt of notice, signing the appropriate column.
Continue…. Section 4(4) If a HP contract is made without serving/giving the noticeas required by section 4(1), the agreement shall be void.
Continue…. Affin Credit (M) Sdn Bhd v Yap Yuen Fui  1 MLJ 169 Held: 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 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”
Signature of parties Section 4B(1) A hire purchase agreement to be signed by or on behalf of all parties to the agreement. Section 4B(2) ………the hirer purchase agreement, form or document has been duly completed… NO COMPLIANCE OF SECTION 4B(1) and 4B(2) is void
3. CONTENTS (s. 4c) • 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 • The address where the goods are to kept
Continue… The table of HP agreement: • The cash price of the goods • The deposit showing separately the amount paid in cash and the amount provided by consideration other than cash • Delivery or freight charges, if any • Vehicle registration fees, if applicable • Insurance • The total amount referred to above less deposit • Term charges • The annual percentage rate for term charges (calculated in accordance with the formula set out in the seventh schedule)
Continue…. • Section 4C2 • provides that any agreement which does not comply with this requirement would render the HP agreement void • section 4C(3). • If the owner enters into agreement without stating the above contents, apart from the agreement being void, the owner shall be guiltyan offence as prescribed by • section 46 • The penalty for the above offence is fine not more than RM3,000 or imprisonment 6 months or both.
4. Separate Agreement Section 4D(1) • There shall be a separate hire purchase agreement in respect of every item of goods purchased under this Act • Section 4D(2) A hire purchase agreement that does not comply with subsection (1) shall be void • Section 4D(3) The owner would be liable for an offence under the Act. • The penalty is under Section 46.
5. Alterations No addition or alteration can be made to a hire purchase agreement or written agreement or written documents containing the terms and conditions of the agreement in relation to any of the matters state out in the pre contractual statement required to be served on the prospective hirer pursuant to Section 4(1)(a) and (b) of the Act
6. Service of Documents Section 5(1) Requires the owner to serve on the hirer and the guarantors a copy of the hire purchase agreement within fourteen days (amendment: 21 days) after it is made
FAILURE TO COMPLY WITH SECTION 5(1) THE AGREEMENT IS UNENFORCEABLE SECTION 5(1A) If includes with insurance policy should be served
7. DEPOSITS Section 31(1) If there is no prescribed minimum deposit required of a hirer, an owner entering into a hire purchase agreement must first obtain from the hirer a deposit in cash or in goods, or partly in cash and partly in goods, to a value of not less than one-tenth (1/10) of the cash price of the goods Issue: What if NO DEPOSIT require?
Protection of Hirers and Guarantors Hirer and their guarantors are protected by way of several implied conditions and warranties • Implies a warranty that the hirer shall have and enjoy quite possession of the goods. Section 7(1)(a). • An implied condition that the owner shall have the right to sell the goods at the time when the property is to pass. Section 7(1)(b)
Continue…. • Public Finance Berhad v Ehwan Bin Saring The respondent (hirer) entered into a hire purchase agreement with the appellant(owner) in respect of the vehicle. The vehicle was subsequently seized by the Customs authorities after the hire purchase agreement was executed and the vehicle was not returned to either party. The respondent alleged that the appellant had breached the implied condition and claimed for damages.
Continue…. • Held: The appellant represented themselves as owners in the agreement and they were capable of giving a good title to the respondent whenever they he might choose to end by hiring 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.
Continue…. • Implied warranty that the goods must free from encumbrances. Section 7(1)(c)
Continue…. • Implied condition that the goods shall be of merchantable quality. • Section 7(2) EXCEPT where the hirer has examined the goods or sample, as regards defects which the examination ought to reveal.
if the goods are second hand goods and agreement contains 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.
Continue… e. Section 7(3) 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, BUT Such condition shall not implied if the goods are second hand goods and the agreement contains a statement to the effect
Continue… • Section 7(3)(a) The goods are second hand car; and • Section 7(3)(b) 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
Lau Hee Teah v Hargill Engineering Sdn Bhd • The 1st respondent had breached the implied condition as to fitness of the purpose as to fitness for purpose. An agent of the respondent had, in fact, visited the mine and observed the work carried out.
Continue….. HELD: 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
Continue….. • Section 8(1) 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.
Continue…. • Section 8(1)(a) As against the owner, the same right to rescind the agreement • Section 8(1)(b) As against the person who made the representation, entitled for damages
Continue….. • Section 8(2) 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) An innocent owner who suffers any damages as a result of the misrepresentation of the dealer is entitled to be indemnified by the dealer
1. Right to copy Statement in Relating to his Financial Statement Section 9 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 • The amount paid to the owner by or on behalf of the hirer • The amount due to the owner but remained unpaid • The amount that is become payable under the agreement • The amount derived from interest on overdue installment
Continue…. • Proviso in Section 9 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
Continue…. Section 9(2) If the owner defaults/ fails to supply the statement without reasonable cause, the owner is not entitled to enforce:- • The agreement against the hirer • Any right to recover/repossess the goods from the hirer • Any contract of guarantee relating to the agreement
Continue….. Section 9(3) If the default (to supply the statement) continue for a period of 1 month, the owner shall be guilty of an offence and shall be liable to a fine not exceeding RM1,000.00
2. Right to appropriation of Payment Section 10 When there is more than one agreement with same owner and the payment is insufficient to discharge the total amount due under all agreement, the hirer may require the payment be appropriated to a particular agreement or to the satisfaction of the sums due in such proportion.
Continue…. Alternatively, the hirer is entitled to appropriate payment according to the sequence of the agreements If the hirer fails to make such appropriation, the payment shall be appropriated towards the satisfaction of the sums due under the respective agreements in order in which the agreements were entered into.
3. Right to Apply for an Order for Goods to be removed Section 11 It is a duty of a hirer to keep the goods comprised in the agreement in his possession or control at a particular place and not to removed On the application of the Hirer, a Court of a magistrate may make an order approving the removal of goods to some other place.