Notesale: Turn your study into money

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HIRE-PURCHASE LAW
5
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1 Introduction
A person who wants to buy goods but does not have the "money
consideration" prescribed by the Sale of Goods Act as their price may
enter into an agreement with their owner whereby he will hire the goods
and ultimately purchase them
...
As a contract, the agreement is governed by the
rules of the common law
...
The preamble to the Act declares that it is "an Act of
Parliament to make provision for the regulation of certain hire-purchase
agreements, and for the licensing of hire-purchase concerns, and for
purposes connected therewith"
...
These are mentioned in S
...

This provision was amended by the Statute Law (Miscellaneous
Amendments) Act 1992 which provided, with effect from 23rd
October 1992, a new maximum limit of Shs 300,000 "or such other
higher or lower sum as the Minister may, after taking into account
market forces from time to time prevailing, prescribe"
...

(iii) An agreement which is not a scheme controlled, managed or
guaranteed by the Government for the purpose of providing loans to
any persons for the purchase of motor vehicles
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2
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2 provides that a "hire-purchase agreement" means "an agreement for
the bailment of goods under which the bailee may buy the goods or
under which the property in the goods will or may pass to the bailee"
...
The prospective
buyer in turn promises to pay the agreed amount every month, say
Shs 1,000
...

At the end of the 36 months, the hirer will have paid a total of Shs
36,000
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He is therefore prepared to let the hirer
take the goods
...
He does this by making an
"offer" to sell them to the hirer at a nominal consideration of, say,
Shs 20
...
If he accepts the
offer, a sale takes place and he "purchases" the goods
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In the example given above, the offer
would be made before the hire agreement is made and would be
incorporated as a term thereof
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Such an offer is
irrevocable provided that the hirer performs his obligations under
the hire agreement
...

(ii) Hire
The owner of the goods may agree that the goods will become the
property of the hirer on payment of the final or last instalment
...
This kind of transaction is covered by the second part of
the statutory definition and is an agreement "under which the
property in the goods will or may pass to the bailee"
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2
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The parties are the "owner" of the goods
and the "hirer"
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It is
this aspect of the transaction which constitutes the legal distinction
between a hire-purchase agreement and a sale of goods, as was
explained in Hebly v Mathews (45)
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5
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4 HIRE-PURCHASE AND CREDIT SALE
A Credit sale is a sale on credit
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It is open to the seller to give credit to the
buyer on whatever terms but once the owner parts possession with the
goods ownership passes immediately to the buyer and the owner loses all
his rights against the goods
...
The property in this case passes
on the payment of the first instalment and the owner loses his rights
against the goods
...

Lee v Butler (1893)
Y bought furniture under a credit agreement and resold them to D before
he had paid all the instalments
...

The distinguishing feature between a hire purchase agreement and a
credit sale is that whereas one is a contract of hire with an option to
purchase the other is a contract of sale without any option to purchase
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5
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5 HIRE-PURCHASE AND CONDITIONAL SALE
Conditional Sale is an agreement for the sale of goods under which the
purchase price or part of it is payable by instalments and the property in
the goods is to remain in the seller (notwithstanding that the buyer is in
possession) until such conditions as to the payment of instalments or
otherwise as may be specified in the agreement are fulfilled
...

The distinguishing feature however is that this is really a contract of sale
where payment is by instalments while the hire purchase agreement is a
contract of hiring with an option to purchase
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The parties in a conditional sale are
seller and buyer as opposed to owner and hirer under the hire purchase
agreement
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2
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Requirements
a)
b)
c)

Every Hire purchase Agreement must be in the English language
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e
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Upon registration, he issues a certificate which is Prima facie evidence
of its contents
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2
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(b) Any contract of guarantee made in relation to the agreements
unenforceable
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(d) Any person holding security given by the hirer or any guarantor in respect
of any payment under the agreement shall not be entitled to enforce it
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2
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Where
the owner has displayed or advertised the goods this requirement will be
deemed complied with if:
a)

the hirer has inspected the goods to which labels are attached
stating the cash price, or

b)

the hirer has selected the goods by reference to a catalogue, price
list or advertisement which stated the cash price
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Section 6 of the Act a hire purchase agreement shall not be enforceable
against the hirer unless:—
a)

a written agreement is made and signed by the hirer and all parties
thereto
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a copy of the hire purchase agreement is delivered by the owner to
the hirer within 21 days of its maturity
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PROTECTION OF THE HIRER

S
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g
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12

d)

any that imposes liability on the hirer in excess of that imposed by
S
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e)

any that makes any person acting on behalf of the owner in
connection with the formation or conclusion of the agreement an
agent of the hirer

f)

any that relieves the owner of liability for the acts or default of any
person acting on his behalf in connection with the formation of the
agreement
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2
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c)

Fitness for particular purpose: A condition that the goods will be
reasonably fit for the particular purpose for which they are required
(if the hirer expressly or impliedly makes known the purpose for
which he requires them)
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e)

Quiet possession: A warranty that the hirer shall have and enjoy
the quiet possession of the goods
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No conditions shall be implied for defects which the owner could
not reasonably have been aware of at the time the agreement was
made neither will any conditions be implied where the hirer had
examined the goods or a sample of them in respect of defects which
the examination revealed or ought to have revealed
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5
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10

DUTIES OR OBLIGATIONS OF THE HIRER

These are not provided in the Act but are usually found in the agreement
itself
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In the absence of express or
implied terms the place of delivery will be the owner's place of
business or the dealer's premises
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In absence of such provisions the
hirer is liable to take reasonable care of the goods but is not liable
for loss or damage not caused by his negligence
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c)

Pay instalments: Once the hirer takes delivery of the goods he

must pay the instalments under the agreement as and when they fall
due
...

d)

Continue hiring for the agreed period: In most agreements the
hiring is for a fixed period e
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two or three years and hiree has a
right to terminate the agreement at any time before the due date
...
If
he does not exercise his option to terminate and instead repudiates
the agreement he would be in breach of contract and liable to pay
damages for breach
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Breach of any of these duties may entitle the owner to remedies of
termination of the hire purchase agreement and damages for breach
of contract
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5
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11

TERMINATION

Under S
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Returning the goods to the owner
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Any provision in the agreement providing for a larger
payment than one half of the total hire-purchase price shall be void
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The hirer should return the goods at his own expense to the premises
from which they were supplied to him or to wherever the owner may
direct him
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5
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12

COMPLETION OF THE AGREEMENT

The hirer may give written notice of intention to complete the purchase
by paying the owner on a specified day the balance due and having given
such a notice complete payment accordingly on that day
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5
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13

RECOVERY OF POSSESSION OF GOODS

Under S
...

Should the owner violate this provision in repossessing the goods the
hire-purchase agreement would automatically come to an end and:
a)

the hirer would be released from any liability under the hire
purchase agreement and would be entitled to recover all sums paid
by him or any security given by him
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The owner is not entitled to take any steps to enforce payment of any
wrong under the hire-purchase agreement except by claiming the said
sum in a suit or court order
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On the hearing of the suit the court may make the following orders:
a)

for delivery of all the goods to owner

b)

for delivery of part of the good to the owner and transfer of title to
the goods to the hirer for the remainder of the goods

c)

for delivery of part of the goods to the owner and postpone
operation of the order on condition that the hirer pays the unpaid
balance of the hire-purchase price at such terms as the court deems
fit
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5
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14

HIRER REQUIRES INFORMATION FROM THE OWNER

If the hirer requires some information from the owner he should send
him a written request and pay to him KShs 10 for expenses
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the total amount due and unpaid the amount of each unpaid
instalment and the date when due
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The consequences of failure to comply with a request without reasonable
cause are:
a
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b
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c
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If the default continues for a period exceeding 30 days the owner would
be guilty of an offence and is liable to a fine not exceeding KShs
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