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11 Cards in this Set
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Development of Hire Purchase |
As trade and commerce grew complex in the late 18th to 19th century, sellers of goods had to extend credit sales to prospective buyers. In the course of extending credit to purchasers, owners of goods quite often experienced situations where the purchasers of the goods would purport to alienate the goods to a third party. In such situations, the initial purchaser came under the definition of a seller who either bought or agreed to buy goods, and who obtained possession of the goods from the owner, within the meaning of Sections 9 and 25 (2) of the Factors and Sale of Goods Acts respectively. As a result of this, the purchaser may be in a position to transfer valid title to an innocent purchaser for value. Consequently, the owner of goods lost ownership of the goods and the rights which would have ordinarily been available to him. This was exactly what gave rise to the case of Lee V Butler, where a man, being in possession of some pieces of furniture under an agreement that is akin to a hire-purchase agreement with the plaintiff, sold and delivered the same to the defendant before the final installment was paid. The defendant actually received the goods in good faith and without any knowledge of defect in the seller's title. The English Court of Appeal had no difficulty in holding that the sale an delivery to the defendant were within the provisions of Section 9 of the Factors Act. It was as a result of the need to protect the owners of goods who may be faced with a "Lee Butler situation" that the hire purchase system as we know it today came about.
Hire Purchase as a legal concept was first given judicial recognition in the case of Helby v. Matthews where the owner of a piano let it out on hire to someone at the monthly rate of 10 shillings 6 pence. The agreement gave the hirer the right to return the piano to the owner subject to the payment of any installment due at the date of return. By the agreement, it was provided that if the hirer should pay punctually all the installments, the ownership of the piano would be vested in him but until such full payment the piano remained the sole property of the owner. The agreement also gave the hirer the right to own the piano in the event that installments paid by the hirer totaled 18 guineas. After taking possession of the piano, the hirer subsequently pledged it as security for a loan. In an action by the owner for the recovery of the piano from the pawn broker, the House of Lords held that the action succeeded and distinguished the case from that of Lee V Butler by holding that since the hirer could return the piano before the sum of 18 guineas was paid, the hirer was not a person who had bought or agreed to buy within the meaning of Section 9 of the Factors Act. Lord Shand aptly made the distinction when he stated thus: "An agreement to purchase would infer an obligation to pay a price, the payment of which could be enforced by action, while here it is plain that no action for any balance of the alleged price could be maintained if (the hirer) thought it fit at any time to return the instrument to its owner."
The Hire - Purchase Act, 1965 came into force on October 1, 1968 and has been amended by the Hire Purchase (Amendment) Decree No. 23 of 1970. The Act is as contained in Cap. H4 Laws of the Federation, 2004. The scope of application of the Hire - Purchase Act is as provided for in Section 1: Transactions to which the Act shall apply include the following: (a) All hire purchase agreements and credit sale agreements (other than motor vehicles) under which the hire purchase price does not exceed two thousand naira; (b) All such agreements in respect of motor vehicles irrespective of the hire purchase price or the total purchase price.
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Definition |
Chitty on Contract An agreement under which an owner lets chattels of any description out on hire and further agrees that the hirer may either return the goods and terminate the hiring or elect to purchase the goods when the payments for hire have reached a sum equal to the amount of the purchase price stated in the agreement or upon payment of a stated sum.
Section 189 (1) Consumer Credit Act 1974 of the United Kingdom
An agreement, other than a conditional sale agreement, under which (a) goods are bailed in return for periodical payments by the person to whom they are bailed, and (b) the property in the goods will pass to that person if the terms of the agreement are complied with and one or more of the following occurs: (i) the exercise of an option to purchase by that person,
(ii) the doing of any other specified act by any party to the agreement,
(iii) the happening of any other specified event.
Prof. Igweike
agreement for the delivery of goods under which the recipient pays a small deposit to the owner of the goods while promising to pay certain sums as installments usually each month in consideration of being granted possession and use of the goods and an option to purchase them after a stipulated period having paid the stipulated purchase price.
Section 20 (1) Hire Purchase Act Nigeria
the bailment of goods in pursuance of an agreement under which the bailee may buy the goods or under which property in the goods will or may pass to the bailee..." |
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Hire Purchase Distinguished |
Hire Purchase and Contract of Sale Raimi v. Akintoye The test in determining whether a contract is that of hire purchase or otherwise is whether the so-called hired has an option of determining the contract, if not, he is a purchaser or whatever the contract may call him.
Hire Purchase and Credit Sale Section 9 Factors Act The seller under a credit sale has either transferred or agreed to transfer property in the goods to the buyer within the meaning of credit sale in the above section.
Ajagbe v. Idowu Distinguishes between the two.
Hire Purchase and Conditional Sale In the case of a conditional sale, the seller may be unable to recover possession of the goods where the buyer had already sold the goods to a subsequent purchaser for value without notice.This is because the buyer is one who, having agreed to buy goods, obtains possession of the goods with the consent of the seller within the contemplation of Section 25 (2) of the Sale of Goods Act This is with reference to the provisions relating to a buyer in possession of goods or the documents of title over the goods being able to transfer the goods to a 3rd party who has no notice of any lien or other right of the original owner.
Hire Purchase and Chattel Mortgage
Hire Purchase and Loan on Security |
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Relationship between Finance Company and Dealer |
Liverpool and Country Discount Co. v. A. B. Motors Co. Ltd. In other cases, the dealer has to give a warranty to the finance company that the statements made by the hire are true. If they turn out to be untrue, the dealer may be liable for a breach of warranty.
Whether the dealer is the agent of the financier.
Campbell Discount Co. Ltd. v. Gall a case involving the insertion of false figures in the hire-purchase documents, the Court of Appeal (England) held that the dealer was not the agent of the finance company.The dealer was described as an intermediary whose responsibility it was to submit offers to the finance company for the latter to either accept or reject the same.
Financing Ltd. v. Stimson the issue arose as to whether the dealer should be regarded as agent of the Finance Company for purposes of receiving and accepting a notice of revocation of offer to purchase.The majority of the Court of Appeal (England) held the dealer to be an agent; stating that the dealer was the finance company's agent on the basis of ostensible authority.
Mercantile Credit Co. Ltd v. Hamblin also a case involving the insertion of false particulars in the finance company's forms, it was held (after considering the cases cited earlier) that there is no rule that the dealer is never, or is always, the agent of the finance company.
Similarly, the Nigerian courts have on occasion made pronouncements on this same issue.
Igbadume v. Bentworth Finance (Nig) Ltd. the court held that a dealer may become agent of the finance company by express or implied authority or even by conduct and that to lay down a dogmatic rule may work injustice to an innocent third party.
Amusan & Anor. v. Bentworth Finance (Nig) Ltd. the dealers, i.e. SCOA motors Ltd. had represented that the vehicles were in repairable condition. It turned out not to be so.The court held that the dealer could have been treated as an agent of the finance company in order to deliver the vehicles, but could not be taken to be her agents for all purposes. |
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Obligations of the Parties |
Owner's Obligations Duty to Deliver Karsales Ltd v. Wallis followed by the Nigerian case Ogwu v. Leventis Motors Ltd. In the event that the hirer had inspected the goods, which are subject of the agreement but the owner delivers different goods from what was inspected, then the hirer would be entitled to repudiate the agreement.
Hirer's Obligations Duty to Take Delivery of Hired Goods Greaves v. Ashlin If the hirer refuses or neglects to take delivery, any loss arising from such refusal or neglect and such expenses that may be reasonably made for the care and safe custody of, the goods will be payable by the hirer.
Custody and Care of the Goods Alhaji Shehu Tijani (Nig.) Motors v. Otuemu Aure While the hired goods are in his custody he has an obligation to take proper care of the goods.
Olametan v. C. F. A. O. Failure of the hirer to return the goods on a lawful demand by the owner, particularly after the hirer is in breach of the agreement for either selling or pledging the goods, the hirer will be liable to the owner in conversion.
Bentworth Finance Nig. Ltd v. Alhaji Sani Bakori Car was involved in an accident. Hire purchase terminates by frustration. Cannot demand for balance of hire purchase price as long as there's no arrears of rentals.
Bentworth Finance Nig. Ltd v. Salami Goods stolen, hirer excused from liability for failing to redeliver since he could not be blamed.
Duty to Promptly Pay Installments Offodile and Sons Enterprises v. SCOA Nig. Ltd Motor vehicle hire purchase during civil war. Owners didn't demand payment until after the war. They were entitled to arrears of rentals as it was only waived because of the war.
Rotimi v. Bentworth Finance An action for recovering arrears of rentals is not a claim for damages but a simple action of claim for a debt.
Duty to Insure Motor Vehicles In the case of motor vehicles, recourse must be had to the provisions of Section 68 of the Insurance Act 2003 which makes it illegal to use or caused to be used a motor vehicle without an insurance policy. |
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Formalities |
Notice of Cash Price
Section 2 (1) of the Hire-Purchase Act provides that before the hire-purchase agreement is entered into the owner should notify the prospective hirer in writing of the price for which the goods may be purchased by him (the prospective hirer) for cash, otherwise than in the note or memorandum.
The provisions of Section 2 (1) are, however, not absolute in the sense that there proviso to that section, which is to the effect that the said section would be deemed to have been complied with it if:
(a) The hirer had inspected the goods or like goods and at the time of inspection tickets and labels were attached to or displayed with the goods clearly stating the cash price of the goods as a whole, or of all the different articles or sets of articles that comprised the goods.
(b) The hirer had selected the goods by reference to a catalogue, price list advertisement which clearly stated the cash price either of the goods as a whole or all the different articles or sets of articles comprised in the goods.
Note or Memorandum of Understanding in Writing Section 2 (2) of the Hire-Purchase Act requires that a note or memorandum of the agreement be made and signed by hirer, and by or on behalf of all other parties to the agreement.
It is permissible for the note or memorandum to be signed for and on behalf of other parties to the agreement, like the owner.
Obisesan v. Adetoro the hirer's husband signed the agreement and not the hirer herself.
This is a reversal of the position under common law where the agreement could be signed on behalf of the hirer. Adebare v. Niger Motor
Delivery of the Note or Memorandum Section 2(2) (d) stipulates that a copy of the note or memorandum shall be delivered or sent to the hirer within fourteen days of the agreement.
Effect of Non-Compliance Section 2(2) of the Hire-Purchase Act makes clear provisions for the effect of non- compliance with any of the requirements of Section 2 (1) and (2). The effects of non-compliance are as follows:
(a) The agreement becomes unenforceable by the owner
The agreement becomes unenforceable by the owner, but does not thereby become void. There is a clear distinction between the two. Yusufu v. Oyetunde & Anor. It merely becomes unenforceable by the owner, suggesting that the hirer may enforce the agreement against the owner.
(b) The owner cannot enforce any contract of guarantee relating to the hire purchase agreement.
(c) The owner's right to recover is restricted This restriction means that the owner can neither recover the goods extra-judicially nor institute an action for their return. In spite of this, the property in the goods remains with the owner - Eastern Distributors Ltd. v. Godring
Therefore, the hirer may keep the goods without paying for them but he may not be able to transfer a good title to a third party.The owner may, therefore, be able to recover the goods from a third party who was let into possession of the goods by the hirer.
In the event that the owner goes ahead to extra-judicially recover the goods from the hirer it has been held that he would not be liable for detinue or conversion, but may only be liable for a breach of statutory duty.
The extent of damages recoverable is the value of the goods which the hirer is entitled to retain at the time of the seizure Carr v. James Broderick & Co
Dispensing Power of Court The proviso to Section 2(2) (d) gives the court a discretion to dispense with any requirement specified in paragraphs (b), (c) or (d) of the same sub-section.
The court may do so where non-compliance with any of those requirements has not prejudiced the hirer, and it would be just and equitable to dispense with that requirement.
In doing so, the court is allowed to impose any conditions that it may consider fit, and dispense with that requirement for purposes of that action.
Protection for Illiterate Hirers Section 3 of the Act makes provision for a person who makes a document on behalf of an illiterate to append his name and signature to the document after reading over the contents of the same to the illiterate in a language that he (the illiterate) understands; before the document was either signed or marked by the illiterate. |
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Terms in a Hire Purchase Agreement |
Terms to be avoided Section 3 of the Hire Purchase Act voids certain provisions, if they are inserted in a hire purchase agreement.
(a) Whereby an owner or a person acting on his behalf is authorized to enter up any premises for the purpose of taking possession of goods which have be let under a hire-purchase agreement or is relieved from liability for any such entry.
(b) Whereby the right conferred on a hirer by this Act to determine the hire purchase agreement is excluded or restricted, or any liability in addition to the liability imposed on a hirer by reason of the termination of the hire purchase agreement by him under this Act.
(c) Whereby a hirer, after the determination of the hire-purchase agreement or the bailment in any manner whatsoever, is subject to a liability which exceeds the liability to which he would have been subject if the agreement had been determined by him under this Act.
(d) Whereby any person acting on behalf of an owner or seller in connection with the formation or conclusion of a hire - purchase or credit-sale agreement is treated as or deemed to be the agent of the hirer or buyer.
(e) Whereby an owner or seller is relieved from liability for the acts or defaults ofany person acting on his behalf in connection with the formation or conclusion of a hire-purchase or credit-sale agreement.
(f) Whereby a hirer is required to avail himself of the services, as insurer or repairer or in other capacity whatsoever, of a person other than a person selected by the hirer or buyer in the exercise of his unfettered discretion.
Implied Terms These are as provided for in Section 4 of the Act.
(1) Implied Warranty of Quiet Possession Section 4 (1) (a) of the Act provides that in every hire-purchase agreement there shall be:- "an implied warranty that the hirer shall have and enjoy quiet possession of the goods."
Lloyds & Scottish Finance Ltd. V Modern Cars and Caravans Ltd. is a demonstration of this point where a caravan was let out on hire-purchase but unknown to the finance company it was subject of a writ of fifa in execution of a judgment obtained against the previous owner. A Sheriff in execution of a writ of fifa attached the caravan that was the subject of the agreement and it was held that this disturbed the quiet and peaceful possession of the hirer, even though the execution of the writ of fifa was a lawful act.
(2) Implied Condition as to Title Section 4 (1) (b) of the Act provides that there shall be:-"an implied condition on the part of the owner that he shall have a right to sell the goods at the time when property is to pass."
Implied condition as to title arises on the date the goods are delivered to the hirer. Mercantile Union Guarantee Corporation Ltd. v. Wheatley. Section 4 (1) (b) of the Act the time at which the implied condition arises is at the time when property in the goods is to pass to the hirer.
(3) Implied warranty that the Goods are Free from Charge or Encumbrance Section 4 (1) (c) of the Act provides that in every hire-purchase agreement there shall be "an implied warranty that the goods shall be free from any charge or encumbrance in favour of any third party at the time when property is to pass."
(4) Implied condition as to the Merchantable Quality of the Goods Section 4 (1) (d) of the Act provides that in every hire-purchase agreement there shall be:"except where the goods are let as second-hand goods and the note or memorandum of agreement made in pursuance of section 2 of this Act contains a statement to that effect, an implied condition that the goods shall be of merchantable quality, so however that no such condition shall be implied by virtue of this paragraph as regards defects of which the owner could not reasonably have been aware at the time when the agreement was made or, if the hirer has examined the goods or a sample of them, as regards defects which the examination ought to have revealed."
(5) Implied Condition that the Goods are Fit for the Purposes Required Section 4 (2) of the Act provides that: "Where the hirer expressly or by implication makes known the particular purpose for which the goods are required there shall be an implied condition that the goods shall be reasonably fit for that purpose."
Under the common law, it is required that, unless expressly excluded, the goods, whether new or second hand, shall be fit for the purpose for which they are hired except in cases where the defect was apparent to the hirer and he did not rely on the skill and judgment of the owner. Anoka v. S.C.O.A., Warri The defendant would have had to dismantle the lorry in pieces to discover the defects in the engine. Held not liable.
E. A. Amusan and Thomas v. Bentworth Finance Nig. Ltd The plaintiff had seen and inspected the goods.
The question then arises whether notice of the particular purpose for which the hired goods are required to the dealer constitutes notice contemplated under Section 4 (2) of the Act to the owner.
According to Igweike, unless the dealer was acting as agent of the finance company at the material time, the notice must be to the finance company.
(6) Implied Condition that Hired Goods Correspond with their Description There is no express provision for this implied condition under the Act.
However, by Section 4 (4) of the Act, the operation of any other enactment or rule of law whereby any condition or warranty is to be implied in a hire purchase agreement is not prejudiced.
By Section 4 (4) of the Act, therefore, any implied warranty or condition under the common law is not extinguished, rather, it is saved.
Under the common law, where the goods are let by description, there is an implied condition that they must correspond with their description. Karsales Ltd. v. Wallis
Treatment of Exclusion Clauses The general rule is that a party may rely on any exemption clause in an agreement provided that he is neither guilty of fraud or misrepresentationIt has equally been held that a party cannot rely on exemption clause where he is in breach of a fundamental term in the agreement. Karsales v. Wallis
The Hire-Purchase Act has modified the position under the common to a very large extent. This is in line with the underlying philosophy behind the Act to protect the hirer to a very large degree from the superior bargaining power of the owner of goods.
For this reason, therefore, Section 4 (3) of the Act provides that while the implied warranties and conditions set out under Section 4 (1) shall be implied notwithstanding any agreement between the parties to the contrary, the implied condition as to fitness for the particular purpose may be excluded or modified by agreement, provided that before the agreement was made, the provision was brought to the notice of the hirer and its effect made clear to him.
Lowe v. Lombank Ltd. a similar provision under the English Hire - Purchase Act was given effect to in a case where the implied condition as to the fitness of the hired goods was excluded by the agreement.The relevant clause in the agreement was never brought to the notice of the hirer but the owner sought to rely on it. The court rightly held that the clause was invalid.
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OWNERSHIP AND TITLE |
Transfer of Property:
By Section 20 of the Hire - Purchase Act, it is clear that a hire purchase is an agreement for the bailment of goods where the property in the goods will or may pass to the hirer. The transfer of property is therefore an expectation of a hire purchase agreement.
Transfer of Title: The hirer has no title in the hired goods by reason of the hire-purchase agreement. Because he has no such title, he is not in a position to transfer a valid title to a 3rd party. This principle finds expression in the Latin maxim "nemo dat quod non habet" i.e. you cannot give what you do not have.
Helby v. Matthew The fact that the hirer is in possession of the hired goods does not make him an apparent owner.
Central Newbury Car Auctions Ltd. v. Unity Finance Ltd. the court held that merely handing over the goods to the hirer does not stop the owner from denying the hirer's authority to sell.
In the United Kingdom, under Part III (Sections 27-29) of the Hire - Purchase Act of 1964. the hirer of a motor vehicle could dispose of it and transfer valid title to an innocent purchaser who had no notice of the hirer's defect in title.
There is no corresponding provision in the Nigerian Hire - Purchase Act, even when it was amended in 1970 by the Amendment Decree.In any event, a person who is not just in possession of goods, but is actually using the goods is in a very good position to deceive an innocent third party that he actually owns the goods. In view of this reality, the law recognizes certain exceptions to the "nemo dat quod non habet" rule. They are as follows:
(1) Sale in a Market Overt: The courts have held that where the hired goods are sold in a market overt, the hirer may transfer valid title to a subsequent purchaser for value without notice.
Bishopgate Motor Finance Corporation v. Transport Brokers Ltd. where a car obtained under a hire purchase agreement was taken to Maidstone market where it was sold by auction at a reserve price, the Court of Appeal (England) held that Maidstone market was a market overt within the meaning of Section 22(1) of the Sale of Goods Act, 1893.Consequently, the title transferred by the sale was valid.
It was on this ground that in Owoyemi Motors & Finance Ltd. v. Haruna & Anor. the High Court In Kaduna held that a sale, which was conducted at the defendant's premises was not one done in a market overt, even though the defendant's premises was opposite an established market.
(2) Release by the Owner This arises where a hirer purports to dispose of the hired goods to a third party, and the owner upon becoming aware of this fact permits the disposition on the condition that the his purchase price is paid.
Butterworth v. Kingsway Motors & Others the hirer sold the hired vehicle to the first purchaser, who in turn sold to a subsequent purchaser, but she continued to make payments under her contract of hire-purchase and later on exercised her option of purchase.It was contended on behalf of the owner that the sales took place while the vehicle was theirs, and as such they were invalid. But the court held that having exercised her option to purchase which offer was accepted by the owner, it extinguished any defect in her title when she sold the vehicle to the first purchaser.
(3) Assignment of Option to Purchase Even though the hirer has no title over the goods, it has been held that a sale may operate as an assignment of the hirer's option to purchase.
Belsize Motor Supply Co. v. Cox contrary to the agreement the hirer pledged the hired vehicle without the consent of the owner.In an action by the owner against the pledge for the return of the vehicle, it was held that, the pledgee had an interest in the car as a result of which the owner was only entitled to the amount of the hire purchase price remaining unpaid.
This decision was given approval in Whitley Ltd. v. Hilt where the English Court of Appeal held that the hirer's interest under a hire-purchase agreement is assignable.
On the contrary, in U.D.T. Ltd. v. Parkway Motors Ltd. the court distinguished the two earlier cases from the one before him and held that there could be no assignment of the goods or the benefits of the agreement.
In Wickham Holdings Ltd. v. Brook House Motors Ltd., however, Lord Denning criticized this decision and held that in hire purchase transactions there are two proprietary interests, the owner's interest and the hirer's interest. According to Lord Denning, where there is a wrongful sale, the owner is only entitled to recover what he has lost, i.e. the balance outstanding on the purchase price.
(4) Sale by Mercantile AgentBy Section 2 of the Factor's Act 1889 where a mercantile agent is in possession of goods with the consent of the owner, any sale, pledge or other disposition made by him when acting in the ordinary course of his business as a mercantile agent shall be valid as though he were expressly authorized to make the sale, pledge or disposition by the owner. However, this section is inapplicable where the goods are let to the mercantile agent, rather than he being in possession of the goods as a mercantile agent.But where the hire-purchase agreement is part of a stocking agreement under which the mercantile agent keeps the goods for display and sale with implied authority of the own 1964) may transfer a valid title to a third party. St. Margaret's Trust Ltd. v. Castle
Belvior Finance Co. Ltd. v. Harold G. Cole & Co. Ltd. the hirer was engaged in the car hire business and acquired its fleet of cars on hire - purchase.The company usually sold off its cars after a while of using them. In this case, it sold off one of the cars that it had not exercised its option to purchase. It was held that it was not a mercantile agent within the meaning of Section 2 of the Factor's Act, neither did it obtain possession of the car in that capacity.
(5) Estoppel Against the Hirer If a person who owns goods enters into an arrangement with a dealer to deceive a finance company, and signs and delivers to the dealer hire-purchase forms which either represent that the goods are the property of the dealer or that the dealer has the owner's authority to sell the goods to the company, the company will acquire a good title to the goods by estoppel.This title will prevail, not only against the owner of the goods, but also against his privies and assigns.
Eastern Distributors Ltd. v. Goldring Consequently, where the finance company enters into a hire purchase agreement with another person the supposed hirer cannot challenge that action. Eastern Distributors Ltd. v. Goldring The court held in that case that the common law principles of estoppel embodied in Section 21 (1) of the Sale of Goods Act would be applicable in hire-purchase and thus confer upon the subsequent purchaser without notice of the defect good title.Even if the owner, who is supposedly a hirer, is not privy to the representation of title made by the dealer, but merely provides the means for the dealer's fraud, for instance by signing the hire-purchase agreements in blank without examining them, he may still be bound unless he can rely on a plea of non est factum. United Dominions Trust Ltd v. Western Eastern Distributors Ltd. v. Goldring the owner of a van wanted to purchase a car from a dealer but he had no money such is to even pay a deposit for the car under a hire- purchase agreement The dealer suggested a plan whereby he represented to the plaintiff that the owner of the van was interested in both the van and the car on hire purchase, and that he was willing to sell both the van and the car to the plaintiffs in financing the hire-purchase transaction
The essence of the arrangement was for the dealer to collect the price on the vehicles, which would serve as deposit for the hire-purchase.The owner of the van executed the necessary forms in respect of both the van and the car but the plaintiff only accepted the proposal in respect of the van and refused the proposal in respect of the car.
While, the agreement between the dealer and the owner of the van was that the arrangement would only go ahead if the finance company accepts the offer on both the van and the car, the dealer accepted the offer by the finance company on the van alone. |
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Hirers' Right of Termination |
Under the Hire-Purchase Act, this right is given more protection.
Section 2 (2) of the Hire-Purchase Act requires the note or memorandum of the agreement to contain a notice, at least as prominent as other aspects thereof, stating the hirer's right in this respect.
Under Section 3 (b) of the Hire-Purchase Act, any term excluding or restricting the hirer's right to determine the hire-purchase agreement is void.
Section 8 of the Hire-Purchase Act goes on to make provision for the way and manner in which the hirer may exercise his right to terminate the agreement.
Section 8 (1) of the Act provides that the h.irer shall be entitled to determine the agreement by giving notice in writing to any person entitled or authorized to receive any sums payable under the agreement.
Section 8 (4) of the Act provides that nothing shall prejudice the right of the hirer to determine the agreement otherwise than as provided under subsection (1) of the section.
Minimum Payment under the Common Law Under the common law, it was generally accepted that the owner was entitled to rely on a minimum payment clause in a hire purchase agreement, either a proportion of the outstanding installments or a further fixed sum by way of depreciation or otherwise.And this was so irrespective of whether the agreement was terminated by the owner or by the hirer.
For instance in Associated Distributors Ltd. v. Hall the hirer having paid only one installment returned the hired bicycle to the owners.The agreement between the owners and the hirer contained a clause to the effect that in the event that the hirer terminated the agreement, he was required to pay a sum equivalent to not less than half of the total hire purchase price, including the consideration of the option to purchase.
Campbell Discount Co. Ltd. v. Bridge where the hirer also returned the hired vehicle to the owners after making a single installment.It was agreed that if for any reason the agreement was terminated anytime before the van became the hirer's property, he would pay to the respondents "by way of compensation for depreciation of the vehicle such further sums as would, with those already paid or be payable be equal to two-thirds of the hire-purchase price.The respondent wrote to the appellant stating that he was no longer capable of making further instalmental payments and asked to be informed when and where to return the van.
The Court of Appeal (England) construed the letter written by the appellant as a voluntary termination of the agreement and came to the conclusion that the question whether the sum was a penalty or liquidated damages did not arise where the hirer voluntarily terminated the agreement.
According to Sellers, L.J., this case where the agreement was terminated by the hirer could be distinguished from those cases where the agreement was determined by the owner, and that cases regard the minimum payment payable by the hirer under the circumstances as liquidated damages.
On further appeal the House of Lords however reversed this decision and held that the letter written to the owner of the van did not amount to a termination of the agreement but a breach of the agreement, and that the clause in the agreement imposed a penalty, which did not represent a genuine estimate of the respondent's loss through depreciation of the goods.
These cases can, however, be contrasted with the decision of Court of Appeal (England) in Cooden Engineering Co. Ltd. v. Stanford where it held that the issue whether the sum was a penalty or liquidated damages ought to be considered if a breach of the contract was proved. In that case, the hirer fell into arrears in payment of agreed installments and the owner of the goods terminated the agreement and repossessed the car, which was subject of the agreement.
By the agreement, the hirer was under obligation to make a payment in the sum of 100% of the hire purchase price as compensation for depreciation.It was held by majority decision that the amount was a penalty and was not recoverable.
Minimum Payment under the Hire - Purchase Act Under the Hire Purchase Act, the second limb of Section 8 (1) provides for the extent of the hirer's liability where he elects to exercise his right to determine. The section provides thus: A hirer shall, at any time before final payment under a hire - purchase agreement falls due, be entitled or authorized to receive any sums payable under the agreement and shall, on determining the agreement under this section, be liable, without prejudice any liability which has accrued before the termination, to pay the amount, if any, by which one-half of the hire purchase price exceeds the total of the sums paid and the sums due in respect of the hire-purchase price immediately before the termination, or such less amount as may be specified in the agreement.By Section 8 (1) of the Act, if there is any sum that is prescribed by the agreement that is lower than the sum payable as one-half of the hire - purchase price, then it is that sum that is payable by the hirer.Under the Act, it is immaterial whether the agreement is terminated by the owner.This is because by the provisions of Section 3 (c) of the Act, the agreement is required not to contain any clause that would impose a liability over and above that which is prescribed by the Act in the event that the agreement is terminated otherwise than by the hirer. |
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Recovery of Goods by the Owner |
Recovery of goods includes doing an act that is symbolic, such as removing the keys of a vehicle from the ignition, or taking out a part of a machine, without which it cannot work. Newcity Press Ltd. v. R.T. Briscoe
The owner's right to seize the goods is not affected by an unsatisfied judgment for the installments due. This is because for as long as the agreement is not performed and the hirer does not exercise his option to purchase, the ownership of the goods remain with the owner. Lawrence v. Bentworth Finance (Nig.) Ltd.
Under common law, the owner's right to repossess is dependent on the terms of the agreement. More often than not the terms of the agreement make the owner's right to recover the goods absolute.
An owner who is entitled to immediate repossession of the goods may exercise his right either peaceably or by reasonable force from anyone who is wrongfully detaining them. Blades v. Higgs Devoe v. Long
More often than not, however, the strict application of common law rules on repossession work injustice on the hirer. For instance in Atere V Amao & Anor. the hirer had paid €995 out of a hire purchase price of €1000.The court nevertheless held that the owner had a right to repossess.
United Dominion Corporation (Nig.) Ltd. v. Ladipo the hirer's guarantor paid the full balance of the amount outstanding on the agreement, after the owner had repossessed the goods.The Supreme Court nevertheless held that the hirer's interest in the goods was limited, which interest terminated upon the termination of the agreement and that gave the owner the right to repossess the goods.
The hirer has a duty to promptly pay agreed instalmental payments, which he may do in advance but never in arrears.
Consequently, an agreement to pay installments promptly means to pay on the date agreed. and failure to pay installments promptly constitutes a breach of the agreement. Bentworth Finance (Nig.) Ltd. v. M. De Bank Transport Ltd.
Consequently, Section 9 (1) of the Hire-Purchase Act provides to the effect that where the relevant proportion of the hire-purchase price has been either paid or tendered by the hirer or a guarantor or any person on their behalf, the owner shall not enforce any right to repossess the goods otherwise than by action.
The question that comes to mind at this juncture is: "What is the relevant proportion?"
The answer to his question is supplied by Section (4) of the Hire-Purchase Which provides that in respect of goods other than motor vehicles. It is one-half of the hire purchase price, while for motor vehicles it is three-filth of the hire-purchase priceOnce this sum bas either been paid or tendered by or on behalf of the hirer or guarantor, the owner cannot exercise his right to recover possession extrajudicially.
Consequences for Wrongful Repossession
In the event that an owner repossesses goods in contravention of the provisions of Section (1) of the Hire-Purchase Act, Section 9 (2) provides that the agreement, if it had not been previously determined, shall then be determined.
It goes on to provide that the hirer shall be released from further obligations thereof. The decisions in Adesanya v. Balogun & 3 Others and Tabanel Agencies Ltd. v. Ince (Nig) Motors Ltd, were arrived at on the basis of Section 9 (1) and (2) of the Act.
The provisions of Section 9 (1) and (2) are inapplicable where the hirer has determined the agreement or the hiring as a result of any right vested in him - Section 9 (3) the Hire Purchase Act.
Interim Right of Repossession
With the enactment of the Hire-Purchase Act, there was some measure of abuse by hire who unduly took advantage of the protective provisions of Section 9 of the Act.
The Hire-Purchase (Amendment) Decree of 1970 amended Section 9 of the principal Act by including sub-section (5) to Section 9.
The sub-section 5 provides that where 3 or more installments of the hire-purchase price of motor vehicle are due and unpaid, the owner may remove the motor vehicle to any premises under his control for the purpose of protecting it against damage or depreciation, pending the determination of the action for repossession.
The issue whether the the owner had to have filed an action before he could exercise his right under Section 9 (5) was subject of conflicting decisions until the Supreine Court settled the matter in Ebohlmi v. Nigeria Technical Co. Ltd.
Earlier on Tabansl Agencies Ltd. V Incar (Nig) Motors Ltd. a High Court of Lagos State had held that it was unlawful to remove the hired vehicle before action was instituted for the recovery of the vehicle.
The argument was that had the legislature intended it to be otherwise, it would have made, the provision giving the owner the right to recover possession panding the institution of an action,
In Ebohimi V Nigeria Technical Co. Ltd. a High Court in Benin took a different view and held that the amendment was made to remedy a situation, whereby considerable hardship was worked on owners of goods where the hirer would frustrate them by making very irregular payments.
On further appeal to the Supreme Court in Ebohimi V Nigeria Technical Co. Ltd. the court agreed with the reasoning of the trial court and held that action need not be filed before the right in Section 9 (5) of the Act is exercised. It was held that provided 3 installments are due and payable the owner can remove the in the Interim not that deal with it in any manner that is prejudicial to the hirer.
Section 9 (5) of the Hire-Purchase Act is only applicable to agreement where motor vehicles are the goods hired.
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APPROPRIATION OF PAYMENTS |
Section 7 of the Hire-Purchase Act "Payment shall be appropriated towards satisfaction of the sum due under the respective hire-purchase agreements in the proportion which those sums bear to one another. Notwithstanding any agreement to the contrary."
The provisions of this section cannot be excluded by the agreement of the parties. |
