Hire-Purchase Act Reform: Rights and obligations of parties

[easyazon_block add_to_cart=”yes” align=”left” asin=”1112044760″ cloaking=”default” layout=”left” localization=”default” locale=”US” nofollow=”default” new_window=”default” tag=”thecorpro-20″]The Law Relating to the Hire-Purchase System : With An Appendix of Forms[/easyazon_block]In reality, a typical hire-purchase agreement confers a bundle of rights and obligations on the parties to the transaction. A major failing of the Hire-Purchase Act, Cap H4, Laws of the Federation of Nigeria 2004 (HPA) is that it did not identify these rights in an ordered and aggregated manner. It is a herculean task trying to ascertain the rights and obligations of the parties to hire-purchase transactions. In the reform of the HPA, the present chaotic provisions regarding the rights and obligations of the parties to hire-purchase arrangement should be aggregated and put in a Part of the statute that should deal with such matters.

To facilitate the process, we shall identify the typical rights and obligations of parties to a hire-purchase agreement which should be provided for in any future HPA to be enacted in Nigeria.

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Rights of the hirer

Right of hirer to purchase at any time with rebate:

The hirer should have a right to, at any time during the course of the hire-purchase, purchase the goods without having to wait for the expiration of the hire-purchase agreement. When this occurs, he should get some rebate because the interest element of the hire-purchase price would have been reduced.

Right of the hirer to terminate agreement at any time:

The hirer has a right to terminate the hire-purchase agreement at anytime. This should be provided for.

Right of the hirer to appropriate payments in respect of two or more agreements:

Where a hirer has more than one hire-purchase agreement with the same owner, he has a right to appropriate his payment in respect of the hire-purchase agreements. Where he fails to appropriate his payment, the HPA normal provides for how his payment should be appropriated.

Assignment and transmission of hirer’s right or interest:

A hirer should have the right to assign his interests in a hire-purchase agreement. This matter is not presently provided for in the HPA. It shall be discussed in greater details next week. In addition to the right of assignment, there should be clear and fair provisions regarding the transmission of the rights of the hirer upon his death, but before the hire-purchase transaction has come to an end. This is another issue that will be treated in full some other time.

Right of hirer in case of seizure of goods by owner:

The HPA gives the owner the right to repossess the goods the subject matter of a hire-purchase agreement under certain circumstances. In spite of this, the hirer still has some rights during this period which the HPA should provide for adequately. The issues concerning repossession have been considered in an earlier article [see here].

Obligations of the hirer

Obligations of hirer to comply with agreement:

This is a primary obligation of the hirer which should be clearly spelt out. The consequences of any breach should also be stated.

Obligation of hirer to take care of the goods:

It is imperative that this obligation is specifically provided for in the HPA and stated in the hire-purchase agreement so as to obviate any disagreements over it in future.

Obligation of hirer in respect of use of goods:

If there are special situation governing the use of the hire-purchase goods, this should be stated also.

Obligation of the hirer to give information as to the whereabouts of goods:

The disclosure of the whereabouts of the goods is consistent with the right of the owner to receive information regarding the whereabouts of the goods.

Rights of the owner

Rights of owner when there is default by the hirer:

Where a hirer defaults, the owner has certain rights under such circumstances. The HPA should expressly provide for them.

Rights of owner of in case of termination:

When the hirer terminates a hire-purchase agreement, the owner still has some rights under the agreement. These should be stated.

Obligations of the owner

Restriction on owner’s right to recover possession of goods:

There are circumstances under which the owner can repossess the goods. In some cases, there are procedures stipulated which limit the right of the owner to repossess. These should be expressly indicated

Relief against termination for non-payment of hire:

There may be cases where the court may decide that the relief that is fair in the matter, in the case of termination for default in the payment of the periodic instalments, may not be to grant possession of the goods to the owner.

Obligation to serve notice:

The obligation of the owner to ensure that the hirer is given adequate notice before the enforcement of certain rights is important and should be provide for.

Obligation of owner to supply copies of the agreement and other information:

The hirer is entitled to a copy of the hire-purchase agreement. Also, the owner is obliged to furnish the hirer with some information regarding the transaction at the request of the hirer or his agent. If payment would be necessary before the information is provided, that should be stated.

Other considerations

Apart from the parties to the hire-purchase agreement (that is, the owner and the hirer), there are cases where guarantors may be required before the hire-purchase agreement may be concluded. The HPA should also contain provisions regarding such matters. The issues that should be dealt with by the HPA in relation to guarantor include: the circumstances under which the owner may require guarantors; the role of the guarantor in the hire-purchase arrangement; the rights of the guarantor against owner; the rights of the guarantor against hirer; and circumstances under which the guarantor may be liable.

If the above rights and obligations of the parties are clearly provided for in the HPA, perhaps under a specific Part of the statute, it would facilitate referencing and obviate the waste of time in searching for and trying to determine the nature and extent of rights and obligations of parties to hire-purchase agreements and the role of guarantors in the scheme of things.

Next week, we shall consider the assignment of the hirer’s rights under a hire-purchase agreement. The present position of the HPA on this matter is inadequate and therefore deserves to be reviewed with a view to securing its amendment. Nevertheless, should you have any comments on the aggregation and express provision of the rights and obligations of the parties, kindly share such views 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.

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8 comments on “Hire-Purchase Act Reform: Rights and obligations of parties
  1. Jerry says:

    Question: for a contract of hire purchase, can there be joint-hirers and can one person (co-hirer) sign the agreement on behalf of the other hirer/hirers in such a situation ?

    • Ebenezer Orumwense says:

      First question on whether they can be joint hirers, yes, but if I am correct the HP Act does not provide for such and the closest we can come to saying that there are joint hirers in HP agreement is that of a guarantor stepping in as a trustee for the hirer to the owner, it will be good if the HP Act is amended to accomodate joint hirers. And secondly that of co-hirer, in my opinion a co-hirer is just the same thing as saying a joint hirer and if there is any difference, then from what Jerry has asked I will say the co-hirer is more of an agent to the hirer and the general notion is that an agent is free from liability once he has done his work and to accrue on a person who signs on behalf of the hirer a “co-hirer” is affixing liability on such a person.

  2. anthony says:

    If a party agrees to act as a guarantor for someone under a hire purchase agreement(HPA), you may find that he’s a joint hirer or co-hirer and not just a mere guarantor. Any missed repayments on the agreement may show up on his credit record, as well as the person he agreed to act as guarantor for. The guarantor can take legal action against the hirer for breach of obligation but he doesn’t have that legal obligation to sign the agreement on behalf of the other hirer. He can only sign the HPA as a guarantor or a witness to the agreement.

  3. collins says:

    I undoubtedly believe with regard to the hire purchase law or doctrine that stipulates the method by which any hire-purchase transaction goes. I strongly stand on the view that a HPA doesn’t bind more than two individuals, except a situation were a third party to the HPA whom isn’t still a party to the agreement, who might be acting as the hirer’s guarantor, in case of any breach. At this instance, it can’t be said that the guarantor is a co- hirer, but rather a guarantor whose issue only comes to play where there is a breach of trust on the part of the hirer. Therefore, there is no room under the hire purchase law or Act where there is a co-hirer who has an equal obligation and duties under Hire Purchase Agreement as the main hirer. Conclusively,it would be a prudent step if the reformation of the Hire Purchase Act incorporates a situation where the hirer and a co-hirer exercising same and equal obligations and duties on a particular property under the same Hire Purchase Agreement.

  4. PRAISE EKPO says:

    Regarding to the question if there could be co-hirers in a hire-purchase agreement, the answer is yes. A guarantor becomes a joint hirer as well as a witness to the contract, in the sense that in case of breach or no payments from the hirer the owner can as well approach the guarantor for his money.

    • Jerry says:

      I appreciate the effort of everyone who has responded but it seems to me, from the comments made so far, that my question is not properly understood, and in the right context. And so I would like to rearticulate and expatiate on the question.

      The HPA by virtue of section 2(2)(a) provides that “a note or memorandum of the agreement is made and signed by the hirer, and by or on behalf of all other parties to the agreement”. In other words, it must be personally signed by the hirer. The requirement of personal signing, ostensibly is very strict, such that, it is not within the proviso to section 2 of the HPA which empowers the courts to dispense with the requirement of section 2 if the court is satisfied that a failure to comply with any formality mentioned in section 2 did not prejudice the hirer, and that it would be just and equitable to dispense with the requirement, subject to any condition the court deems fit to impose in the circumstances of the case.

      As regards this rule, in his exclusive article titled ‘Hire-Purchase Legislation: Making a Case for Reform’, Dr. Nat Ofo opines that this regulation is out of tune with modern business practice and inconsistent with growing usage of agents in concluding business deals, coupled with the fact that other parties to the agreement are permitted to sign personally, or have some other person sign on their behalf as in the case of C.D.C. (Nigeria) Ltd. v. SCOA (Nigeria) Plc (2007) 6 NWLR (Pt. 1030) 300 S.C.

      Rephrasing my question thus, for instance, Tom and Jerry are best of friends or perhaps twin brothers leaving together in the same room in same school. Having done some savings over time, they have decided to buy a Benz 190 by HP for their joint use. They approached IUO Motors Limited for this purpose; both of them are named in the HP agreement as joint, fellow or co-hirers. When it was time to sign the HP agreement, Tom signed alone and/or on behalf of Jerry, because Jerry was busy doing something else at that point in time. Chief Makapolo, the MD of IUO Motor Ltd did not object to this, since the vehicle would be used by the two of them. While reviewing his HP transactions in the last six months, Chief Makapolo is concerned about the validity of the HP agreement in respect of the Benz 190 in the possession of Tom and Jerry.

      Assuming there is default in payment of the periodic instalments, and Chief Makapolo (MD of IUO Motors Ltd) has come to you for advice, will there be any possibility of enforcing the HP agreement against Tom and Jerry jointly and severally.

      Moreso, with due reference to the definition of a hirer as provided for by virtue of section 20(1) of the HPA, can two or more persons go into a HP transaction, as a hirer (whether jointly or as fellow/co-hirer) with full/equal rights and obligations of a hirer? If yes, then can one among the hirers in this case, personally sign the HP agreement on behalf of the other hirer/hirers, without undermining the requirement of personal signing as I earlier noted, or will all the individuals involved as hirers be required to sign personally one after the other?

  5. Ananum says:

    In answering whether there can be joint hirer and if a co-hirer can sign on behalf of the other hirer, I will say: Yes, there can be joint hirer. According to the Interpretation Act, anything that is singular can be plural. So, in a situation where there are more than one hirer, each of the hirers can sign personally, no hirer can sign on behalf of another. But someone can sign for the owner since the owner is allowed to have an agent. He, the owner, can sign himself or his agent can sign on his behalf as stipulated in section 2(2)(a) of the Hire Purchase Act, which provides that “a note of memorandum of the agreement is made and signed by the hirer and by or on behalf of all other parties to the agreement.”

    • Jerry says:

      Thank you Ananum. So there can be two, three, four or more joint hirer, or even a business corporation… and each hirer must sign personally.
      Is there any limit to the number of hirer allowed in this case? Also, can a co-operative society for instance take goods on HP?

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