By Amaka Ezeno, MCLArb

Hire purchase is 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 (buyer). Apart from the basic requirements for a valid contract which include offer, acceptance, consideration, and the capacity to contract, the Hire Purchase Act made other stipulations which would render a hire purchase transaction unenforceable if not adhered to; they include:

  1. Disclosure of cash price

Section 2(1) provides that before any hire purchase agreement is entered into in a hire purchase transaction, the owner shall state to the hirer in writing otherwise than in the note or memorandum, a price at which the goods, the subject matter of the hire purchase transaction may be purchased by the prospective hirer for cash. The above requirement would be deemed to have been satisfied in two instances:

  1. Where the hirer has inspected the goods or like goods and at the time of inspection, tickets or labels showing the cash price were attached to or displayed with the goods.
  2. If goods were selected by reference to a catalogue, price list or advertisement, which clearly stated the cash price either of the goods as a whole or of all the different parts or sets comprised in the goods. Non-compliance with the above requirement renders the hire purchase agreement or any contract of guarantee thereto or any right to recover the goods from the hirer unenforceable. Thus, in Yusuf & Anor. v Oyetunde & Anor. (1975) NNLR 166, where the owner did not state the cash price, it was held that he was not entitled to recover the goods.
  3. Contract to be in writing

A hire purchase agreement governed by the Act is required to be incorporated in a written document embracing all the requirements stipulated by the Act. Section 2(2)(a) provides that an owner shall not be entitled to enforce a hire purchase agreement, or any guarantee or security made thereunder unless a note or memorandum of the agreement is made and signed by the hirer and by or on behalf of all other parties to the agreement.

Contents of a note or memorandum

Section 2(2)(b) provides that the following must be in the note or memorandum

  1. a statement of the hire purchase price and of the cash price of the goods to which the agreement relates; amount of each of the instalments by which the hire purchase is to be paid; the date or the mode of determining the date upon which each instalment is payable.
  2. a statement of the deposit paid.

iii.            a statement of the true rate of interest calculated in such a manner as the Minister may by regulations published in the federal gazette prescribe.

  1. a description of the goods to which the agreement relates sufficient to identify them.

According to section 2(2)(c), the note or memorandum should also contain a notice, which is at least as prominent as the rest of the contents of the note or memorandum, stipulating the rights and liabilities of the hirer.

  1. The hirer may put an end to the agreement by giving notice of termination in writing to any person who is entitled to collect instalments.
  2. He must pay any instalments in arears at the time when he gives such notice. If the total amount is less than the minimum amount required to pay according to section 8 & 20(3), he must pay enough to make up the sum. That is, three-fifth of the hire purchase price in cases of motor vehicles or one half of the hire purchase price with respect to other goods other than motor vehicle.
  3. If the goods have been damaged owing to negligence, the owner may sue him for the amount of the damage unless there is agreement on amount between the parties.
  4. The hirer should see whether this agreement contains provisions allowing him to put an end to the agreement on terms more favourabe to him and end the agreement on those terms.
  5. After the relevant proportion of the hire purchase price has been paid, unless the hirer himself puts an end to the agreement, the owner cannot take the goods back from the hirer without the hirer’s consent unless the owner obtains an order of the court.

However, where the court is satisfied in any action that a failure to comply with the foregoing requirements is shown not to have prejudiced the hirer, the court has the discretion to dispense with that requirement for the purposes of the action.