FEATURES OF A HIRE PURCHASE AGREEMENT

Hire Purchase

A hire purchase agreement has three basic features:

1. It is a form of bailment: A bailment has been defined by the Black’s Law Dictionary 9th Edition as:

A delivery of personal property by one
person (the bailor) to another (the bailee) who holds the
property for a certain purpose…

A contract of hire purchase also has this element. The owner delivers the goods to the hirer to make use of for a certain period. However, what differentiates a contract of hire purchase from a bailment is the fact that at the end of a contract of hire purchase, the hirer has an option to buy the goods in question.

However before the hirer exercises his right of purchase, the goods belong to the owner. In the case of Incar Motors Nigeria Ltd vs. Elias Bus Transport Ltd[1]. The court held that the unfulfilled instalments before the termination of the agreement would accrue as a debt which the hirer owes the owner. The hirer has to pay this debt regardless of the fact that the hire purchase agreement has come to an end.

2. The property in the goods remain with the owner: Till the complete payment of all instalments, the owner of the goods still has property rights in the goods. A hire purchase agreement only grants the right of possession to the hirer. Thus, the hirer cannot transfer the goods to third parties without consent from the owner.

If the hirer doesn’t fulfil the payment of his instalments, the owner can reclaim the property. Whatever the owner does with the property is of no concern to the hirer. In the case of Williams vs. UAC Ltd[2] the court held that if the owner recovers, from the sale of the goods, an amount more than the debt owed by the hirer, he is not bound to return the balance to the hirer.

Conversely, in the case of Incar Motors Nigeria Ltd vs. Elias Bus Transport ltd[3] the court held that if the amount which the owner recovers from the sale is lesser than the debt, he still cannot recover the balance from the hirer.

3. It confers on the hirer an option, not an obligation, to purchase the goods.

References

[1] (1970) NCLR

[2] (1937) 13 NLR 134

[3] (1970) NCLR

Author: Olanrewaju Olamide

Olamide is an avid reader who believes that no knowledge is wasted. If he is not surfing the internet, he would be doing something else to get more information, whatever that is.

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