Hire purchase is one of the many types of consumers credit transaction recognized in Nigeria Law. A Hire purchase agreement is an agreement by an owner of goods (i.e. the creditor) to hire the goods out to a hirer and to give the hirer an option to purchase the goods, conditional on his completing the necessary payment for the goods and complying with the terms of agreement.
In Samuel Arab v Joe Allen & Co.Ltd, Okugbe, Justice of the Court of Appeal, elucidated Hire Purchase as;
“Essentially, a Hire Purchase system is a system whereby the owner of the goods, let them on hire for periodic payment, by the hirer, upon Agreement that, when a certain number of payment has been completed, the absolute property in the goods, will pass to the hirer but so however, that the hirer may return the goods at any time without any obligation to pay further balance of rent accounting after return conditions have been fulfilled, the property remains in the owner possession”.
By the Hire Purchase Act, sec. 20(1), the hire Purchase states:
“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 pass to the bailee”.
Who then is a bailee?
The Black’sLaw dictionary 9th edition defines a bailee as ;
“a person who receives personal property from another and has possession of the goods, but not title of the property“.
The law governing the hire purchase agreements in Nigeria is the Hire Purchase Act, 1965, as well as the Common Law Rule. The general elements of a contract such as offer, acceptance, Consideration, Capacity to contract and intention to create Legal Relations are also applicable here.
Two parties are involved in a hire purchase agreement, they are;
1. Owner; hire vendor (seller)
2. The Hirer; hire purchaser( buyer)
Although, in some circumstances, there may be an additional party, known as Financier, either a bank or a company , which the seller uses to enforce agreement and payment.
The hire Purchase agreement includes Bailment and sale. The Hirer (hire purchaser) is a bailee until he pays the full price of the goods. The hire Purchase agreement comes to an end when the buyer pays his final installment to owner of the goods (sale), and in return receives property in the goods, not mere possession.
Obligations and Rights of the Parties in a Hire Purchase Agreement
Both parties in a hire purchase agreement have distinct rights and obligations.
Obligations of the Owner
Below are obligations of the owner in a hire purchase agreement.
1. Obligation to Deliver Goods
The owner is obliged to deliver goods to the hirer and such goods must be in good condition. This is a fundamental term in the Hire Purchase agreement and breach of which, the hirer may repudiate the contract or sue for an action of specific performances, or damages.
2. Obligation to Transfer good Title
The owner must possess a good title, as he cannot transfer what he does not have (Nemo dat quod non habet). Therefore, there’s is an implied condition that the owner must possess good title and transfer such to the hirer.
3. An Obligation That Goods must be Delivered according to Description
The owner is obliged to deliver the goods to the hirer, not just delivering the goods, but he must ensure the goods meet the description of the hirer, a breach of which the hirer may reject such goods.
4. Obligation to deliver Goods of quality and Goods that are fit for purpose
In situations where hirer notifies owner of the goods he needs, such goods delivered by the owner must be fit for such particular purpose. Also, the goods must be free from defect which the owner could foresee or notice.
Any defect which is not within this scope, the owner may not be liable. As in the case of Anoka v SCOA Warri, where hirer returned a vehicle due to defect in it’s engine. The court held that the implied term for fitness of purpose would not be applicable here due to the fact that the defect was something the owner could not easily discern.
5. Obligation that hirer must enjoy quiet possession
There’s an implied warranty, that the hirer must enjoy quiet possession of the goods and such goods must be free from encumbrances or charges which may hinder quiet possession of such goods.
6. Obligation to furnish Information
The owner is duty-bound to furnish necessary information regarding the hire Purchase agreement, the technique of using the goods, durability and any necessary or relevant information.
Obligations of the Hirer
Below are obligations of the hirer in a hire purchase arrangement.
1. Obligation to Accept Delivery
The hirer is obliged to accept or take delivery of the goods, refusal or negligence, he(hirer) would be liable for damages.
2. Punctual Payment of Installments
The hirer is obliged to pay installments punctually, as stated in the hire Purchase contract. This is a fundamental duty, as failure to do so amounts to non performance of the contract and goes to the root of the contract. Failure to pay installments punctually and complete such, property in goods would not pass to him( hirer), and he must return the goods back to the owner.
As in the case of Animashawun v CFAO, where the hirer defaulted in payment and the owner repossessed the goods. A similar case is that of Afere v Anad & anor, where the court held the owner was entitled to repossess the goods for failure on the part of the hirer to complete the payment, regardless of how little the fee was(£5).
3. Obligation of Care
The hirer must take custody of the goods, and handle such with care and diligence.
4. Obligation to redeliver the goods
In situation where the hire Purchase agreement fails, the hirer is obliged to redeliver the goods to the owner.
Rights of the Hirer
The hirer is entitled to enjoy the following rights:
1. Delivery of goods by the owner
2. Right to action for damages
He is entitled to bring an action for damages, where owner fails to deliver goods fit for purpose as stated in the Hire Purchase agreement.
3. Right to rejection and repudiation
Where owner fails to deliver goods of merchantable quality, quantity as stated, the hirer may reject the goods or repudiate the contract.
4. Action for a declaration of specific performance
Where installments has been made, and owner refuses to deliver goods, hirer has a right to bring an action for specific performance.
5. Right to enjoy quiet possession, Free from any encumbrances or charges
Rights of the Owner
Below are rights of the owner in a hire purchase agreement.
1. Right to sue for payment of installments, where such has not been paid by hirer.
2. Right of Action for Damages
Where goods has deteriorated in the possession of hirer, the owner may sue for damages. Or where hirer fails to accept goods, any defect, the owner is entitled to damages.
3. Right to action for specific performance
Where hire Purchase agreement fails, he may sue for redelivery of the goods in order to repossess such as in the case of Afere v Anad, stated above.
4. Right to Repudiation
Where hirer fails to perform his obligations.
The Sale of Goods transaction, Agency relationship and Hire Purchase Agreement are legal relationships, in which parties are under obligations to perform to the other party and rights resulting therein. Therefore, it is germane for parties to understand these rights and obligations, as that would help them perform better and make better decisions in their various agreements.
About the author:
Fortune Nkemakola Dikio
Fortune Dikio is an avid writer. A level 300 student of Rivers State University, who’s receptive to knowledge.