OBLIGATIONS OF PARTIES IN A HIRE-PURCHASE AGREEMENT

By Amaka Ezeno, MCLArb

In every contract of hire-purchase, the law is that the owner of the goods under consideration must state in writing, the cash price of such goods to the prospective hirer. This obligation is set aside where the hirer has inspected the goods and at the time of the said inspection, tickets or labels showing the cash price were attached to or displayed with the goods.

It is also dispensed with if the goods were selected by reference to a catalogue, price list or advertisement, which clearly states the cash price either of the goods as a whole or of all the different articles or sets of articles comprised in the goods.

The failure to comply with the above requirement renders the agreement unenforceable. This unenforceability has been interpreted to include action to recover the goods.

In Yusuf & Anor. v. Oyetunde & Anor., the owner did not state the cash price, and the court held that he was not entitled to recover the goods. However, the court is empowered to disregard the obligation if the owner’s failure to comply does not prejudice the hirer.

Similarly, the owner is required to deliver a note or memorandum to the hirer. The memo must contain a statement of the hire-purchase price, the cash price of the goods, the amount of each instalment by which the hire-purchase price is to be paid and the date on which the instalment is payable.

The failure of the owner to meet this obligation operates only against him from enforcing the agreement. In effect, the agreement is not void ab initio which means the right of the hirer to enforce it remains unimpaired. The hirer, though, rarely tries to enforce the agreement in such situation unless in an action for wrongful repossession.

In Yusuf & Anor. v. Oyetunde & Anor., the cash price and interest rate of the vehicle were not stated. The court refused to accept the argument that it would be inequitable to allow the hirer to keep the vehicle without paying for it. According to the court, equity does not apply to assist a party who is in breach of statutory duty.

IMPLIED TERMS IN A CONTRACT OF HIRE-PURCHASE

  1. There is an implied warranty that the hirer shall have and enjoy a quiet possession.
  2. It is an implied condition that the owner shall have a right to sell the goods when property is to pass.
  3. There is also an implied condition that the goods shall be of merchantable quality.
  4. There is an implied condition that the goods shall be fit for its purpose.

This provision does not apply in the case of second-hand goods where the note or memorandum makes a statement to that effect. It does not also apply where the owner could not reasonably have been aware of the defect at the time of the agreement.

In Anoka v. SCAO, the owner was held not liable for a defective engine of a motor vehicle since the defect was of a latent nature which no reasonable examination could have disclosed. However, where the goods or their samples have been examined and the defects are such that could be discovered by such examination, then the implied condition will not apply.

APPROPRIATION OF PAYMENT UNDER HIRE-PURCHASE

If there is more than one hire-purchase agreement between the same parties, the hirer has a right, in remitting the lump sum, to indicate how the amount should be appropriated to each agreement. If he fails to do so, the owner shall, if the lump sum is insufficient to discharge the sums due under the agreements, appropriate the sum towards the satisfaction of sums due in the proportions which those sums bear to one another.

For example, if N40,000 N80,000 and N120,000 are due; a lump sum of N120,000 is then sent by the hirer. The hirer is free to instruct the owner on how to appropriate this sum. If he fails to do so, the owner must appropriate thus: N20,000, N40,000, and N60,000 in that order. This provision prevents the owner from making an appropriation that might prejudice the interest of the hirer. This statutory mode of appropriation applies irrespective of any agreement to the contrary.