By Amaka Ezeno, MCLArb, 

A hire purchase agreement has been described as a bailment of goods with an option to buy. It is a form of transaction where the hirer is allowed possession of goods while he pays for it in instalments. The property does not pass to the hirer until he exercises his option to buy by paying the contract sum. Until such right is exercised, he has the option to return the goods. In a Hire Purchase Contract, there are some implied terms.

  1. TITLE

There is always an implied condition on the part of the owner to the effect that he will have the right to sell the goods at the time the hirer expresses his option to buy. This has been interpreted to mean that he must have a good title from the time of delivery to the time of the exercise of the option to buy by the hirer.

Where the owner breaches this term, the hirer can terminate the contract and claim a refund of all instalments and deposits paid under the agreement. The owner will not be entitled to any set-off for the use of the property.


There is also an implied warranty that the hirer shall enjoy quiet possession of the goods. It entails that his quiet enjoyment of the goods shall not be disturbed by the owner either by wrongful re-possession or by a third party making adverse claims. This right of the hirer is enjoyed so far as he complies with the terms of the agreement. Once in breach, the owner exercises his right of repossession.


Every goods on hire purchase must not be encumbered. The issue of encumbrance arises when the property in the goods is about to pass to the hirer. The seller must have an unencumbered right to transfer property in the goods to the hirer.


In every hire purchase contract, there is an implied condition that goods let on Hire Purchase must be of merchantable quality. Merchantability means that the article sold shall be of the general kind described and reasonably fit for the general purpose for which it shall have been sold, and where the article sold is ordinarily used in but one way, its fitness for use in that particular way is impliedly warranted unless there is evidence to the contrary. However, there are two exceptions to this term; where goods are second-hand and evidenced by the memorandum of agreement, and where the owner could not have been aware of the defect at the time of entering the contract.


This condition applies where the hirer makes known to the owner, either expressly or impliedly, the purpose for which the goods are required to show that he relied on the latter’s skill. Fitness for purpose means that the hire purchase goods shall be fit for its usual purpose.

Fitness for purpose with respect to a motor vehicle means roadworthiness.  A breach of condition of fitness for purpose entitles the hirer to repudiate the contract.

In every hire purchase agreement, these terms exist. Any breach entitles the hirer to either repudiate or claim damages as the fact and circumstance may allow.