OBLIGATIONS IMPLIED UNDER THE ACT
CONTENTS
1.0. Introduction.
2.0. Objective.
- Main Body
- The Hire Purchase Act, 1965
- Obligations of the Owner
- Exemption Clauses
- The Hirer’s Obligation
4.0. Conclusion
5.0. Summary
6.0. Tutor Marked Assignments (TMA)
- References/Further
INTRODUCTION
The first comprehensive legislation on Hire Purchase in Nigeria was the Hire Purchase Act, 1965 and was brought into operation in 1968. This Act has been reviewed severally with the present one as the Hire Purchase Act in the Laws of the Federation of Nigeria.
The main purpose of the Act is to regulate hire-purchase transactions, which have been operated in the past under the ordinary law of contract, and under which some owners have exploited the ignorance of the people to enforce oppressive agreements.
Before the advent of the Act, recovery of goods by the owner under a hire-purchase agreement could be effected with or without proceedings in court. Such act had serious pitfalls. One problem in this instance was that under common law, even after the owner had retaken possession of the goods from the hirer and invariably had sold it, it was common practice for the owner and the hirer to stipulate in the agreement that the termination did not relieve the hirer from the liability to make further payments to the owner under the notorious minimum payment clause.
OBJECTIVE
The main aim of this unit is to examine the gaps in the common law and the extent the Act seeks to correct it.
MAIN BODY
The Hire-Purchase Act, 1965
The Act seeks to absolve the hirer of the liabilities under common law. With a view to strictly following the rules contained therein. It also appears to remove the harsh conditions of the common law rule and while providing more friendly ways under the Act along with the obligations of the owner and that of the Hirer under the Act as against the ones under the Common law procedure.
Under the Act, Hire Purchase means the bailment of goods in pursuance of an agreement under which the bailee may buy the goods or under which the property in the goods will or may pass to the bailee Hire-purchase agreement is where, by virtue of two or more agreements, none of them by itself constitutes a hire-purchase agreement, there is a bailment of goods and either the bailee may buy the goods, or the property therein will or may pass to the bailee. The agreements shall be treated for the purposes of this Act as a single agreement made at the time when the last agreements was made.
The hire-purchase agreement, unlike the position under the common law, all hire- purchase agreements which are intended to operate or fall within the provisions of the Act must comply with certain provisions or procedural requirements as to form and content stipulated under the Act.
They are as follows:
Written Information on Cash Price of Goods
Before any hire-purchase agreement is concluded, the owner shall state in writing to the prospective hirer, otherwise than in the note or memorandum of the agreement, a price at which the goods may be purchased by him in cash.
The Note or Memorandum
Section 2 (2) (a) of the Act states that:
“there must be a note or memorandum of the agreement made and signed by the hirer and by or on behalf of all other parties to the agreement.”
In this instance, what is required is that a note or memorandum must be in writing evidencing the agreement, and that it is not necessary for the hire-purchase agreement to be in writing. In commercial practice, hire-purchase is usually evidenced by a standard form agreement which is required to be signed by the hirer, and any other party. Initially, the agreement may be made orally, but within 14days it must be followed by a signed memorandum.
Signature
The hirer must sign personally, The memorandum or note must be signed not only by the hirer but also by the other parties to the agreement while the other party may sign through their agents.
Obligations of the Owner
The implied terms have been described as warranty and condition. They bear the same meaning ascribed to them under the Sale of Goods Act. Distinction is however provided in the definition under Section 20(1) where –warranty is defined as a non-essential term, the breach of which entitles the hirerto sue for damages only. Condition is not given a statutory definition – but by implication, the difference lies in the breach – the hirer is entitled to reject the goods and treat the contract as repudiated.
Warranties
- Quiet Enjoyment: the act provides that in every hire-purchase agreement there must be:
- An implied warranty that the hirer shall have and enjoy quiet possession of the goods. The general rule is that the owner must ensure that he remains in peaceful and undisturbed possession, note that interference from an interested third party would constitute a disturbance.
- An implied warranty that the goods shall be free from any charge or encumbrance in favour of a third party at the time when the property is to pass. A charge or encumbrance in favour of a third party on goods which are subject of a hire-purchase agreement would remain perfectly good at the time of the hire because the ownership only passes when the hirer elects to exercise the option to
Conditions
There are three implied conditions under the Act.
- Title: An implied condition on the part of the owner that he shall have a right to sell the goods at the time when the property is to pass. This provision is aimed at assuring the buyer that the seller is an absolute owner of the goods. In addition, the right to sell arises at the time of the delivery of the hired goods and not when the agreement was signed. See Akoshile v. Ogidan (Supra).
- Merchantable Quality: In hire-purchase agreement there is an implied condition that the goods are of merchantable quality. However, no such condition will be implied where the hirer has examined the goods or a sample of them and the examination ought to have revealed the defects of which the owner could not reasonably have been aware at the time when the agreement was made.
- Fitness for Purpose: Where the hirer expressly or by implication makes known the particular purpose for which the goods are required, an implied condition that the goods shall be reasonably fit for that
Exemption Clauses
The implied conditions and warranties set out under the Act, all set out above shall be implied notwithstanding any agreement to the contrary. The Act also provides that the owner may rely on any provision in the hire-purchase agreement to modify or exclude any condition implied expressly under the Act.
The Hirer’s Obligation
This has been discussed extensively in previous units of the synopsis and so there is really no need to belabor ourselves with it.
The hirer’s right of termination is set out in section 8 of the Act. it provides that a hirer shall, at any time, before the final payment under a hire-purchase agreement, be entitled to determine the agreement by giving notice of termination in writing to any person entitled or authorized to recover any sum payable under the agreement.
CONCLUSION
The Hire-Purchase Act has played a prominent role in the agreement of hire-purchase. It implies that warranties and conditions of the owner of the goods are sacrosanct to the agreement and either party has a right to terminate the agreement before it is concluded.
SUMMARY
The Hire-purchase Act, 1965 has really brought succor to both the owner and the hirer under the agreement of a hire purchase. It states that there must be price of the goods of the contract and among other things for that a hire –purchase agreement to be valid then the hirer must sign the memorandum of contract.
TUTOR MARKED ASSIGNMENT (TMA)
- Critically examine the role of the Hire-Purchase Act, 1965 in hire- purchase
- How viable is the hirer’s right to terminate contract before the contract is concluded?
REFERENCES/FURTHER READING
- Sale of Goods
- Okany, Nigerian Commercial Law, Africana .FEP Publishers Limited, 1992.
- Hire Purchase Act, CAP 169, Laws of the Federation of
- Sofowora, General Principles of Business and Coop Law, Soft Associates, 1999.