In continuation of our discussion on the issues to consider in the efforts towards the reform of the Hire-Purchase Act, Cap H4, Laws of the Federation of Nigeria 2004 (HPA) [see here], in this article we shall review the monetary limit imposed by the HPA on the hire-purchase price in respect of certain category of items in hire-purchase transactions in Nigeria.
By section 1 of the HPA, there are two categories of goods that can be the subject matter of hire-purchase transactions in Nigeria. These are motor vehicles, on the one hand, and other goods other than motor vehicles, on the other. In the case of motor vehicles, there is no limit on the hire-purchase price of the motor vehicles which are the subject matter of hire-purchase agreements. However, in respect of other goods (other than motor vehicles) which are the subject matter of hire-purchase transactions, it is stipulated that the hire-purchase price should not exceed two thousand naira! It is noteworthy that the term hire-purchase price is made up of the cash price of the goods, assuming they were to be bought outright, and the interest charge for the credit provided, but “exclusive of any sum payable as penalty or as compensation or damages for breach of the agreement”. In reality, it is pointless entering into a hire-purchase agreement in respect of other goods in view of the ridiculously low monetary value limit stipulated in the HPA. Little wonder, therefore, that, as is evident from numerous decided cases, most of the hire-purchase transactions in Nigeria are in respect of motor vehicles only.
The ridiculous monetary limit imposed on hire-purchase transactions in respect of other goods other than motor vehicles has hampered the development of hire-purchase transactions in Nigeria. There is, therefore, a real and present need to reconsider the monetary limit with a view to removing it so as to promote commercial transactions. There are three possible approaches that could be adopted in solving the monetary limit conundrum. First, the monetary limit in respect of other goods could be referenced to an agreed price index. That way, the monetary limit will not be static; it would adjust in line with inflationary trends. The major drawback of referencing the monetary limit to a price index is the fact that the price index is neither stable nor predictable. Such uncertainty is bad for business. Besides, the price index approach to solving this problem introduces some undue complication into hire-purchase transactions which ordinarily are simple in nature.
Second, a fixed sum could be stipulated as the minimum hire-purchase price for other goods other than motor vehicles. Since the fixed amount is a minimum amount, it implies that even if the currency is devalued or re-denominated or suffers loss in value for whatever reasons, hire-purchase transactions would not be fettered. This would be the case because the values of the items would naturally exceed the minimum value and would be permissible under the law. This option does not prevent a situation where the monetary limit stipulated becomes ridiculously low at a future date on account of currency devaluation, re-denomination or conversion. Though the situation would not prevent hire-purchase transactions from being successfully entered into, the low monetary value could be embarrassing and ridiculously low.
Third, this entails the removal of any kind of limit for whatever kind of items that the parties to the hire-purchase agreement desire to make the subject matter of their agreement. In this case, the inexplicable and irrelevant distinction made between motor vehicles and other goods would be discarded. This would engender freedom of transaction between the parties as they would be free to include whatever items they desire into their hire-purchase agreement. This option additionally has the potential of promoting commercial activities with its consequent beneficial impact on the economy. It also eliminates any complication the monetary threshold imposes. This option, it is respectfully submitted, is the way to go. It is imperative that parties to a commercial transaction, of which hire-purchase is a key example of, should be allowed to exercise their freedom to contract without undue impediments. What should be paramount is the meeting of the minds of the parties. The law should encourage this instead of planting unhelpful bottlenecks against the realisation of worthy and genuine commercial transactions.
The monetary limit on the hire-purchase price in respect of other goods other than motor vehicles is a carryover from the Hire-Purchase Act 1938 of the United Kingdom on which our current HPA is based. It is about time this archaic relics of Nigeria’s colonial past is discarded; more so, since the country where it emanated has since moved away from such unnecessary impediments to commercial transactions. Findings indicated that some other countries too with similar colonial antecedents as Nigeria have eliminated such provisions from their Hire-Purchase Acts. What is Nigeria waiting for before doing the needful?
It is, therefore, strongly suggested that any reform of the HPA should discard the distinction made between motor vehicles and other goods in the HPA. Much more importantly, the monetary limit imposed in respect of the hire-purchase price of other goods other than motor vehicles should be discarded too.
Next week, we shall discuss another issue than deserves to be reviewed in the present efforts towards reforming the HPA. Nonetheless, do let us know whether you agree with the suggestion that the existing monetary limit imposed by the HPA on the hire-purchase price in respect of other goods other than motor vehicles should be discarded and that the present distinction made between motor vehicles and other goods in the HPA be also removed. Feel free to share your views on the issues discussed. You may do so by using the comments area of this post below. If you are already a registered user, you will be required to log in to comment on this post; otherwise, you will have to register before posting your comment. Registration is simple and FREE.