Hire Purchase Law
By the End of the Topic, students should be able to:
Understand the meaning and the Common Law Position on Hire Purchase
Agreement
Know the History of Hire Purchase
Explain the meaning of Hire Purchase with special reference to the Ghana’s
Statutory Provisions.
Know how Hire Purchase Agreements are entered into, and the nitty-gritty
therein.
Explain the Terms of the Hire Purchase Agreement
Meaning and the Common Law Position on Hire Purchase
A hire purchase agreement is one in which goods are given by the owner to a hirer who is
given an option to purchase the goods but is under no obligation to do so.
The exercise of this option takes one of two forms:
1. The hirer takes the goods on hire for a stated rent and exercises this option by paying an
additional sum, which is called the option fee usually nominal at the end of the hiring.
2. The hirer takes the goods on hire for a stated rent, which includes the option fee, so that
at the end of the hiring, no new payment is required. The property in the goods
automatically passes to the hirer as he sticks to the hiring to the end.
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Meaning of Conditional Sale Agreement
“Conditional sale agreement” means an agreement for the sale of goods
under which the purchase price or part of it is payable by installments,
the property in the goods to remain in the seller notwithstanding that the
buyer is to be in possession of the goods and under which certain
conditions specified in the agreement are to be fulfilled by the buyer.
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Meaning and the Common Law Position on Hire Purchase
From the foregoing, under the common law, the hirer was not under any
obligation to see to the conclusion of the agreement; he was free to exercise
his option to purchase.
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The History of Hire Purchase
Hire purchase is said to have been introduced in England by one Henry Moore around 1846. The
practice became common when a Singer Company hired sewing machines to hirers, which
included the option to purchase.
The sum paid by hirers as rent was allowed against the purchase price in the event of the hirer
exercising his option to purchase.
The hire purchase practice was later extended to other sphere of business such as furniture,
wagon and even false teeth.
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The History of Hire Purchase
The practice throughout those years, even though regulated by the common law, had
some inherent abuses:
1. Hirers suffering great damages with written hire purchase agreement they were
induced to enter into.
2. Some unscrupulous hire purchase dealers encouraged people to take on more high
purchase burdens than they could afford. The aim was to enable the dealer to repossess the goods
since the hirer would still have arrears at the end of the period.
3. Clauses drawn by dealers exclude in them all conditions and warranties as to the
fitness of the goods supplied.
4. Finance charges or interest element on instalment payment are not communicated
to hirers.
The History of Hire Purchase Agreement
In the quest to ameliorate the ramifications of the abuses just
enumerated, saw the adoption of the hire purchase act of 1938 in England.
The Ghana’s legal system as well addressed the abuses found under
various customary laws in various communities regarding the transaction,
by coming up with the Hire Purchase Decree (NRCD 292) of 1974 to
replace the Hire Purchase Act of 1958.
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Hire Purchased Defined
Section 24 of the NRCD 292 defines a hire purchase agreement as 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 definition above has pinpointed two ways in which hire purchase
agreement will be formed:
1. The agreement whereby the hirer takes the goods for a stated rent and is
given the option to purchase the goods by the payment of the option fee is
usually nominal.
2. The payment of installment fee which brings no need to exercise an option
to purchase.
Hire Purchase Explained.
So long as the hirer completes the installment payment the property in the goods
automatically becomes vested in him.
The hirer; is however, under no compulsion to complete the instalment payments.
Other points to note about the definition under the section 24 are:
There must be an agreement for the bailment of the goods
The subject matter of the bailment must be goods.
Property passes only upon the payment of the last installment
How Does One Enter into A Hire Purchase Agreement?
Step 1.
Under Section 1, prior to the agreement, the seller or owner should
state orally or in writing to the prospective buyer or hirer the cash price
or the total purchase price of the hire purchase. This is done to help the
buyer know the interest element of the transaction to enable him
advise himself.
Step 2.
Under Section 1, the agreement must be in writing and must be signed
by the hirer or buyer in person and by or on behalf of all the other
parties to the agreement.
How Does One Enter into A Hire Purchase Agreement?
Step 3.
Under Section 3, the written agreement must contain the following:
The cash price, the hire purchase price or the total purchase price of the
goods
The amount of each installment which is to paid
The date upon which each installment is payable
A description or list of the goods to which the agreement relates
Where the Hire Purchase Agreement Does Not Comply With Section 1,2,3 and 4 above
1st Effect
Where the agreement does not comply with Section 1, the owner or
seller shall not be entitled to enforce the agreement. But the buyer or
hirer is allowed to enforce the agreement under the same breach. Yayo v
Nyinase
2nd Effect
The owner or seller cannot enforce any contract of guarantee relating to
the agreement, and no security given in respect of the agreement is also
enforceable by the owner. Coutts and Co. v Browne-Lecky & others
Where the Hire Purchase Agreement Does Not Comply With Section 1,2,3 and 4 above
3rd Effect
The owner cannot enforce his right to recover the goods from the hirer. The
Section 4 of the decree provides that certain clauses, if included in the
agreement whether or not agreed by the hirer are to be disregarded by the
court and made unenforceable:
Any provision which entitles the owner or his agent to enter into private
premises of the hirer to take possession of goods or relieves him from
prosecution
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3rd Effect (Continuous)
A provision which relieves the owner from liability for acts or defaults of
persons acting on his behalf
A provision which entitles the hirer to a heavier liability for termination by
the owner than he would have been liable to if the termination had been
by him (the hirer).
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Where the Hirer Voluntarily Terminates a Hire Purchase Agreement before Final
Payment (S.5)
Section 5 of the NRCD 292 provides that at any time before the final payment, the hirer or
buyer shall, notwithstanding any contrary provision in the agreement be entitled to
terminate the agreement by given written notice of the termination to the person entitled
to receive payment under the agreement.
The only exception to this general rule is that the hirer cannot terminate the agreement
voluntarily where:
The property in the goods has become vested in him, or
The hirer has transferred the goods to a third party
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The Liability of a Hirer or Buyer in
Voluntary Termination (section 6)
The hirer after notice of termination shall pay the difference between the
total of sums paid and one half of the of the hire purchase price.
If the agreement specifies a lesser amount, he shall be liable to pay the
amount specified.
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Conversion of Hire Purchase Agreement
into an Outright Sale by The Hirer (section
7)
A hirer can convert a hire purchase agreement into an outright sale.
For a hirer to do this, he must give a written notice of his intention to
the owner.
He must then pay the owner on a specified date the net balance due.
Net balance due = hire purchase price - any amount already paid
Completion of a Hire Purchase Agreement
before the Agreement Expires.
When the hirer has returned the goods, and the owner has taken possession of the goods
lawfully, the owner’s right to dispose of the goods is restricted for a period of 28 days by
the court.
During this period, the buyer can decide to complete the purchase to claim ownership title.
If the buyer decides to complete the sale, then he shall in addition to paying the net
balance due to the owner, pay also:
A reasonable cost incurred by the owner in taking care of the goods
Cost of storage or maintenance of the goods
The Owner/Sellers Right to Repossession
Just as the hirer/buyer has the right to terminate the agreement, The
owner/ seller as well has the right to terminate the agreement.
He demonstrates his right of termination by repossessing the goods
from the hirer/ buyer.
This right of the owner/seller is only restricted when the goods are
protected.
Restriction on Protected Goods
Protected goods are goods in relation to which the following
condition are met:
That the goods have been let under the hire purchase agreement or
sold under a conditional sale agreement.
That one-half of the hire purchase price or total purchase price has
been paid
That the buyer has not terminated the agreement by virtue of any
right vested in him
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Restriction on Protected Goods
When goods become protected, the sellers right to repossession of the
goods cannot be enforced, except by court action.
The power of the court to intervene remains even if the agreement says
otherwise.
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Restriction on Protected Goods
If the seller/owner breaches this condition (repossesses the goods unlawfully)
or seller/owner breaches this provision under section 8, the following
consequences shall follow:
The agreement is terminated and the hirer/buyer and his guarantors are free
from all liabilities
The hirer/buyer is entitled to the money so far paid by way of installment or
security. UTC v Okoro
The hirer or buyer can apply to the court for the return of the goods to him,
subject to the rescheduling of the payment
Restriction on Protected Goods
We have seen earlier that it is only the court that can grant the owner/seller the right
to repossess protected goods .
Where the seller brings a court action for the repossession of the goods, the court
may under Section 9 make the following orders:
An order for the specific delivery of the goods to the seller/owner provided that the
seller or owner shall refund part of the sums paid by the hirer or seller
A postponed order for delivery where the goods are in control and the possession of
the of the hirer/ buyer, and in the custody of a third party
Make an order for the specific delivery of part of the good to the owner/seller, and
for the transfer to the hirer or buyer the owner’s title to the remainder of the goods.
Postponed Order
According to section 10, postponed order is an extension of time coupled
with the addition of new terms to the hire purchase agreement or
conditional sale agreement , to give the hirer or buyer another opportunity
to pay for any unpaid balance on terms specified by the court.
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The Effect of Postponed Order
1. During the pendency of the order, the hirer/buyer is deemed to be the bailee of the goods
in accordance with the terms of the contract
2. The hirer or buyer is to pay the unpaid balance in accordance with the terms of the
postponed order but under the original agreement
3. The granting of postponed order may also lead the court to alter some of the other terms
of the contract.
4. The failure of the hirer/buyer to fulfill the conditions of the postponed order will result in
the owner/seller taking an action against him in the same court in which the order was
made
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The Effect of Postponed Order
5.Where the unpaid balance on the hire purchase price has been paid in
accordance with the new terms, the ownership becomes vested in the
hirer
6.When the postponed order is in effect, any of the parties can apply to the
court which has the power to revoke, vary, or even make a fresh order
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Terms of the Hire Purchase Agreement
1. Representation by the parties: Section 12 provides that any representation
made by the parties to a hire purchase agreement shall bind them.
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Terms of a hire purchase agreement
2. Implied Terms:
According to section 13, the following terms are implied in a hire
purchase agreement:
a term that the hirer or buyer shall have and enjoy quiet possession of the
goods
a term that the goods shall be free from any charge or encumbrance in
favor of any third party at the time when the property is to pass
a term that the owner or seller will have a right to sell the goods at the
time when the property is to pass.
Implied Terms (Continues)
Where the hirer or buyer, whether expressly or by necessary
implication—
has made known to the owner or seller, or to a servant or agent of the
owner or seller, the particular purpose for which the goods are required; or
in the course of any antecedent negotiations has made that purpose
known to any person by whom those negotiations were conducted, or to a
servant or agent of such a person,
there shall, subject to the provisions of section 14, be implied a term that
the goods will be reasonably fit for that purpose.
Remedies for Breach of Any The Terms in
S.13 Above
A breach of any these four terms gives the buyer or hirer a right to damages
or such other damages which the court may give.
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Implied Term as to “Merchantability” S.14
Section 14 provides that, in every hire purchase agreement or conditional sale
agreement there is an implied term that the goods are of merchantable quality at
the time of delivery.
Merchantable quality means that a reasonable man acting reasonably after full
examination will accept the goods.
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Further Implied Term in Special Cases.
1. Where goods are let under a hire-purchase agreement, or are sold under a
conditional sale agreement, and the goods are so let or sold by reference
to a sample, there shall be implied in the agreement—
a term that the bulk will correspond exactly with the sample
a term that the hirer or buyer will have a reasonable opportunity of
comparing the bulk with the sample.
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Further Implied Term in Special Cases
2.Where goods are let under a hire-purchase agreement, or are sold
under a conditional sale agreement, and are so let or sold by
description, there shall be implied in the agreement a term that the
goods will correspond exactly with the description.
3.If the goods are let or sold under the agreement by reference to a
sample as well as by description, there shall be implied in the
agreement a term that the goods will correspond both with the
sample and the description.
Further Implied Term in Special Cases – Section 15
A breach of a term specified in this section 15 above by the owner or
seller shall give the hirer or buyer the right to rescind the agreement.
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Third Parties Right to Possession- section
16
Where a hirer or buyer under a hire-purchase or conditional sale agreement-
(a) resells, pledges or otherwise disposes of the goods for value to a third party under such
circumstances that the sale, pledge or other disposition would not, but for this section, transfer
any title to the goods to the third party, and
(b) does anything which gives the owner or seller a right to terminate the agreement and recover
the goods under sections 8 to 11 (protected goods).
the third party may retain possession of the goods for the period of sixty days specified in
subsection (6), or, if they have been repossessed by the owner or seller, the third party shall be
entitled to recover possession of the goods upon a request in writing to the owner or seller and
may thereafter retain the goods for the period of sixty days specified in subsection (6).
Third Parties Right – Section 16 … Cont’d
Subsection 6.
For the purposes of this section, the sixty-day period shall commence-
(a) when the third party recovers possession of goods from the owner or
seller, if the owner or seller has repossessed the goods; or
(b) when the seller or owner notifies the third party in writing of his right
to repossess the goods or of his right to bring an action to repossess the
goods pursuant to sections 8 to 11 of this Decree.
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Limitation on Enforcement of Agreement – Section 17
An owner or seller shall not be entitled by reason of the hirer or buyer's
failure to carry out any obligation under a hire-purchase agreement or
conditional sale agreement,
to enforce any provision in the agreement for the payment of an
amount of damages, or forfeiture or penalty, or for the acceleration of
the payment of an instalment, or for termination of the agreement, or
for repossession,
unless he has made written demand to the hirer or buyer to carry out
the obligation in question within a specified period of not less than
fourteen days beginning with the date of service of the demand, and
the hirer or buyer has failed to comply with the demand in the specified
period.
Duty of Buyer/Hirer to Give Information
to Seller – Section 18
(1) Where by virtue of a hire-purchase agreement or a conditional sale
agreement a hirer or buyer is under a duty to keep the goods
comprised in the agreement in his possession or control, the hirer or
buyer shall, on receipt of a request in writing from the owner or seller,
inform the owner or seller where the goods are at the time when the
information is given, or, if the information is sent by post, at the time
of posting.
(2) If a hirer or buyer fails without reasonable cause to give that
information within fourteen days of the receipt of notice, he shall be
guilty of an offence and liable on summary conviction to a fine
Removal of Goods from Ghana - Section 19
(1) The hirer or buyer of goods under a hire-purchase or conditional sale agreement
shall not remove the goods from Ghana without the written consent of the owner
or seller.
(2) If the hirer or buyer contravenes subsection (1) he shall, unless he satisfies the
court that he did not intend to deprive the owner or seller of his ownership or to
defeat the rights of the owner or seller to obtain any payment due to him, be guilty
of an offence and liable on conviction to a fine.
(3) If the owner or seller believes that the goods have been removed or are being
removed or are about to be removed from Ghana without his written consent, and
with intent to deprive him of his ownership or to defeat his rights to obtain any
payment due to him under the agreement, he may institute an action for the return
of the goods.
Removal of Goods from Ghana - Section 19
(4) Before instituting an action in pursuance of subsection (3) of this
section, or while the action is pending, the owner may apply to the court
for an order for the attachment of the goods.
(5) A court which makes an order for the attachment of goods under
subsection (4) of this section may require the applicant to give security
for damage resulting from the order.
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Removal of Goods from Ghana - Section 19
(6) An order for the attachment of goods under this section-
(a) may be discharged or varied by the court for good cause shown by
any person affected by the order and on such terms as to costs as the
court thinks fit; and
(b) shall be discharged upon the hirer or buyer giving security as the
court may think proper taking into account the value of the goods, the
amount due to the owner or seller under the agreement, and the costs
of the owner or seller.
Sellers/Owners Duty to Supply Documents and Information
(1) At any time before the final payment has been made under a hire-purchase or
conditional sale agreement, the owner or seller shall, within seven days after he has
received a request in writing from the hirer or buyer and the hirer or buyer has tendered
to him a prescribed amount for expenses, supply to the hirer or buyer a copy of the
agreement, together with a statement signed by the seller or owner or his agent showing-
(a) the amount paid by or on behalf of the hirer or buyer;
(b) the amount which is due under the contract but remains unpaid, and the date upon
which each unpaid instalment became due and the amount of each such instalment; and
(c) the amount which is payable under the agreement, and the date or the mode of
determining the date upon which each future instalment is to become payable, and the
amount of each such instalment.
Sellers/Owners Duty to Supply Documents and Information – Section 20
(2) In the event of a failure without reasonable cause to comply with subsection (1), then,
while the default continues-
(a) the owner or seller shall not be entitled to enforce the agreement against the buyer or
hirer or to enforce any contract of guarantee relating to the contract, or to enforce any
right to recover the goods from the buyer or hirer; and
(b) the security given by the buyer or hirer, in respect of money payable under the
contract or given by a guarantor in respect of money payable under such a contract of
guarantee shall not be enforceable against the buyer or hirer or the guarantor by any
holder thereof; and,
(c) if the default continues for a period of 30 days, the defaulter shall be guilty of an
offence under this section and shall be liable on conviction to a fine not exceeding a
prescribed fee.
Successive Agreements
Where goods have been let under a hire purchase agreement or are sold
under conditional sale agreement and –
• Any part of the hire purchase price or the total purchase price has been
paid or tendered, and
• The owner or seller makes a subsequent hire purchase agreement or
conditional sale agreement in respect of the same good,
The provisions of sections 8 to 11 (relates to protected goods) shall have
effect in relation to any further agreement as from the time when one half
of the hire purchase price specified in the first agreement has been paid or
tendered.
Successive Agreement - Section21
The aim of section 21 is to ensure that provisions relating to protected
goods will be effected.
Where for any reason, more than one agreement is made in respect of
the same goods, it is important to determine whether the goods have
become protected.
Once the paid goods are protected irrespective of the fact that in the
subsequent agreement in respect of the same good, the hire purchase
price or the total purchase price was altered, provisions of Sections 8 to
11 relating to protected goods shall prevail.
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