THE HIRE PURCHASE AGREEMENT

 CONTENTS

1.0. Introduction.

2.0. Objective.

• Main Body.
• Offer and Acceptance
• Capacity of the Parties
• Obligation of the Owner
• Obligation of the Hirer

3.5 Obligation of the Dealer

4.0. Conclusion

5.0. Summary

6.0. Tutor Marked Assignments (TMA)

7.0. References/Further Readings.

INTRODUCTION

A Hire Purchase agreement may either be oral or written under the common law rule. It is however pertinent to note that a detailed Hire Purchase agreement is usually in writing and indeed should be in writing.

The common law rule does not specify a prescribed pattern or form for hire-purchase agreements. Note that hire-purchase agreements are characterized by three main essentials which are:

• a clause by which the owner agrees to let, and the hirer agrees to hire the goods.
• a clause which empowers the hirer to determine the hiring and return the goods.
• a clause giving the hirer the right or option to purchase the goods for a nominal sum at the end of the hiring

Aside the above mentioned essentials, other terms may be included in the agreement, like period of hire, hire-purchase price, number of installments, insurance of goods and the right of the owner to retake.

OBJECTIVE

The main objective of this unit is to enable learners to be able to identify hire purchase agreement. Also, the learner in this unit, is also expected to understand the main rule under the common law, the doctrine of offer and acceptance, the capacity of the contracting party and the rudimental of the obligations of all the parties to the contract.

MAIN BODY

Offer and Acceptance

This is the first essential requirement of the hire-purchase agreement, which will give a party the right to enforce or sue for a breach of the agreement, in order to enforce a contract.

If the number of the parties in agreement is two then, the offer in respect of the hire- purchase in writing is constituted by the hirer signing the hire purchase agreement, while the owner signifies acceptance by executing the agreement already signed by the hirer. The acceptance must be communicated to the hirer in order for it to be valid.

An oral agreement between the hirer and the owner is also possible. If the hire-purchase agreement involves three parties, i.e the owner, the dealer and the hirer, then the offer is made by the hirer. Generally the dealer is not an agent of the owner, but for the purpose of receiving the offer, he may be construed as the agent of the owner for that particular moment.

Mere delivery of the goods is not sufficient as acceptance. It is important and compulsory to communicate such to the hirer.

Capacity of the Parties

The liability of infants under the general law of contract is the same under the hire- purchase agreements. Prima facie, infants are not liable under the hire-purchase agreement except those relating to necessaries and beneficial contract.

Obligation of the Owner

The first obligation of the owner under the common law is to deliver the goods which are the subject matter of the hire purchase agreement to the hirer.

It is therefore a fundamental duty and its breach will entitle the hirer to repudiate the contract. Delivery in this sense might not be physical transfer but voluntary transfer of possession from one person to another.

In addition to the above duty of the owner, there should be some conditions implied in the contract. The first is that the owner should possess a good title to the goods. If his title is impeached this will amount to a total failure of consideration as between the purported owner and the hirer.

Another implied condition is the fitness for the purpose for which the goods are hired.

In Stephen Anoka v. S.C.O.A Warri (1955/56) W.N.L.R 113, the plaintiff bought a lorry on hire-purchase from the defendant. The engine was defective and the plaintiff replaced it with another engine. When the plaintiff subsequently defaulted in the periodical installments, the defendant seized and sold the lorry. The plaintiff sued for conversion and in addition for breach of warranty. The court held that in the absence of an express term in the agreement excluding any warranty of fitness or limiting the defendant’s liability, the defendant was under a duty to ensure that the lorry was reasonably fit for the purpose for which the defendant must have known the lorry to be used for.

Exemption clauses will not avail an owner, where there is a fundamental breach of the terms of the contract.

If the owner fails to make delivery of the goods the hirer can sue for specific performance. 

Obligation of the Hirer

This is the fundamental obligation of the hirer namely; to accept delivery of the goods, the subject matter of the hire purchase. Such hirer will be liable in damages if he fails to take delivery within a reasonable time after he had been requested to do so.

It is also the primary duty of the hirer to pay promptly the various sums provided for in the agreement in accordance with the provisions of the agreement. The payment in installments as specified in the hire-purchase agreement is mandatory and must be strictly

complied with. There are certain circumstances where the installmental payment may be suspended or waived.

In Offodile and Sons Enterprises v. S.C.O.A (Nig.) Ltd (1969) CCHCJ 1333, there was a hire-purchase agreement between the parties in respect of a motor vehicle during the civil war, and understandably the rentals were not paid, but the hirer enjoyed the undisturbed use of the motor vehicle. After the civil war the owners sued for arrears of rentals. The court held that the owners were entitled to the rentals, and that the hirer’s strict liability to pay rentals during the war period was only waived or suspended during the civil unrest that should not be regarded as destroying the right to recover the rentals.

Obligation of the Dealer

In practice generally, the hirer is allowed to enforce certain rights under an independent contract entered into between them despite the fact that the finance company is the owner of the goods. However, the dealer is closer to the hirer as stated by the Supreme Court in Amusan and Thomas v. Bentworth Finance Co. Ltd (1966) N.M.L.R 276, that in law, the dealer (S.C.O.A) could be treated as agents of the finance company for the purpose of delivery of the vehicles but not for all purposes.

CONCLUSION

A hire-purchase agreement is an agreement that is precipitated on the general rule of contract of law of offer and acceptance on the part of the hirer and that of the owner. Sometimes with the dealer acting as the agent of the owner.

It pertinent to note that the obligation of the buyer and that of the owner are concurrent obligations and that must be done in line with each other’s obligation.

SUMMARY

In summary, the hire-purchase agreement is an agreement that is essential to the contract of hire-purchase and is precipitated on the premise of offer and acceptance and that mere delivery of the goods is not enough as the acceptance of the agreement and acceptance must be communicated to the hirer.

The obligation of the hirer should be concurrent with that of the owner, and where there is a dealer, its obligations should also be concurrent in that regard.

TUTOR MARKED ASSIGNMENT (TMA)

1. Is mere delivery of the goods to the hirer enough as means of acceptance of the hire-purchase agreement?
2. The payment of installments as specified in the hire-purchase agreement is mandatory and must be complied with strictly but however such may be waived or suspended due to circumstances. Discuss?

 REFERENCES/FURTHER READING

• Sale of Goods
• Okanny, Nigerian Commercial Law, Africana .FEP Publishers Limited, 1992.
• Hire Purchase Act, CAP 169, Laws of the
• Sofowora, General Principles of Business and Coop Law, Soft Associates, 1999.