HIRE PURCHASE ACTBusiness LawPREPARED BY :1. NUR SALWATI HANIM BINTI MOHAMAD AMRAN (MI42008613)2. NUR SYAKHIRAH BINTI AB RAHMAN (M142003713)

INTRODUCTION

WHAT IS HIRE PURCHASE (HP)?• HP is the hiring of goods with the option to buy the goods at

the end of the hire purchase term. If you take on HP financing, you are the hirer and financier is the owner. As a hirer, you will have to repay the financier based on the agreed duration while you have possession of the vehicle. When all the instalments are paid up, ownership is then transferred to you.

GOVERNING LEGISLATION – THE HIRE PURCHASE ACT 1967• HP transactions are governed by the Hire Purchase Act 1967

(HP Act). The HP Act sets out the forms and contents of HP agreements, the legal rights, duties, obligations of hirers and financiers. The HP Act is administered by the Ministry of Domestic Trade and Consumer Affairs.

DEFINITION OF HIRE PURCHASE

Section 2(1) of the Hire Purchase Act 1967

“ Hire Purchase agreement includes a letting of goods with an option to purchase and an agreement for the

purchase of goods by instalments (whether the agreement describes the instalments as rent or hire or

otherwise), but does not include any agreement –

a) Whereby the property in the goods comprised therein passes at the time before delivery of the goods,

b) Under which the person by whom the goods are being hired or purchased is a person who is engaged in the trade or business of selling goods of the same nature or description as the goods comprised in the agreement.”

Parties in a hire-purchase agreement

PARTIES CHARACTER

Hirer

a person who takes or has taken goods from an owner under a

hire-purchase agreement and includes a person whom the

hirer’s rights or liabilities under the agreement have passes

by assignment or by the operation of law 

 

 Owner

a person who lets or has let goods to a hirer under hire-

purchase agreement and includes a person to whom the

owner’s rights or liabilities under the agreement have passed

by assignment or by the operation of law. 

 

Guarantors

an owner may require a hirer to furnish a guarantor or such

number of guarantors acceptable to the owner to guarantee

the performance of the hirer’s obligations under the hire-

purchase agreement by virtue of section 20A of the Act.

FORMATION AND NATURE OF HIRE-PURCHASE AGREEMENT

THE HP AGREEMENTThe HP agreement must have the following information:

Description of motor vehicle; Computation of the total sum payable; Minimum deposit; Term charges and annual percentage rate for term

charges; Late payment charges; Date on which hiring commences; Number of instalment repayments; Amount of each instalment repayment; Person to whom repayments are to be made, time

and place of repayments; and Address where the motor vehicle is to be kept.

Case: Low Ping Ming v MBF Finance [2002] 2 CLJ 307

• Section 4(1), Hire-Purchase Act 1967 provides that before any hire-purchase agreement is entered into in respect of any goods:a) in a case where negotiations leading to the making of

the hire-purchase agreement are carried out by any person who would be the owner under the hire-purchase agreement to be entered into, or by any person, other than the dealer, acting on his behalf, such a person shall serve on the intending hirer a written statement duly completed and signed by him in accordance with the form set out in Part I of the Second Schedule

b) in a case where negotiations leading to the making of the hire-purchase agreement is carried out by a dealer, such dealer shall:

Part I of the Second Schedule- it is provides for a short description of the goods comprised in the hire-purchase

agreement and a summary of the hirer’s financial obligation under the proposed

hire-purchase agreement.

Part II of the Second Schedule- is a form to be filled in by the prospective owner agreeing to be a party as owner in

the proposed hire-purchase agreement.

Section 4A (1) - A hire-purchase agreement shall be in writing Section 4A (2) - A hire-purchase agreement which is not in writing shall be void. Section 4A (3) -the owner shall be guilty of an offence under the Act.

Section 4B (2)-The hire-purchase agreement or other forms or documents must be duly

completed before the intending hirer of his agent is required to sign thereon Section 4B (1) – Every hire-purchase agreement shall be signed by or on behalf of all

parties to agreement Section 4B (3)- that provides a hire-purchase agreement that is not properly signed or

completed shall be void. Section 4C of the Hire-purchases Act 1967 provides for the contents of a hire-purchase

agreement.

Requirements:

• Section 4D (1), hire-purchase act 1967 requires a separate hire-purchase

agreement in respect of every item of goods purchased. Section 4D (2) and

(3) respectively provide that a hire-purchase agreement that does not

comply to this requirement shall be void and the owner shall be guilty of an

offence under this Act. However, goods which are essentially similar to

each other and sold as a set shall be regarded as an item in Section 4D (4).

• Section 5(1) of the said Act provides that the owner must serve a copy of

hire purchase agreement on the hirer and guarantors within fourteen days

after the making of the agreement. Failure to do so will render the hire-

purchase agreement unenforceable by the owner in Section 5(1A).

• Section 5(3) in Hire-Purchase Act 1967, provides that where any part of the

total amount payable consists of an amount paid or to be paid under a

policy of insurance in respect of the goods, the owner shall serve or cause

to be served on the hirer forthwith a copy of the insurance payment receipt.

WARRANTIES AND CONDITIONS

• On the other hand, a breach of warranty is a less serious breach and it does not entitle the party not in breach to repudiate the contract but to sue for damages only. In part III of the Hire-Purchase Act 1967 list down the several of warranties and conditions which is to protect hirer and guarantors. The implied conditions are:

i. Rights to sell– The owner should have the right to sell the goods at

the time when the property is to pass (section 7(1)(b), Hire-Purchase Act 1967) .

ii. Merchantable quality- the goods shall be of merchantable quality (section

7(2), Hire-Purchase Act 1967)- However no such condition will be implied in the

following circumstances :• when the hirer has examined the goods as

regards defects which the examination ought to have revealed ( section 7 (2)(a), Hire-Purchase Act 1967)

• if the goods are second-hand and the agreement contains a statement to the effect that :

i. the good are second-handii. all the conditions and warranties as to

quality are expressly negative, and the owner proves that the hirer has acknowledged in writing that the statement was brought to his notice (section 7 (2)(b), Hire-Purchase Act 1967).

STATUTORY RIGHTS OF HIRERS

Section 9 to 15 of the Hire-Purchase Act 1967 provide for the rights of hirers. The hirer has the following rights:1. To be supplied documents and information in section 9, Hire-Purchase Act

1967. A hirer is entitled to request the owner for a written statement pertaining to following information:

a) The amount paid to the owner by hirer or his agentb) The amount which has become due under the agreement but remains

unpaidc) The amount which is to become payable under the agreementd) The amount derived from interest on overdue instalments

2. To require the owner to appropriate payments made in hire-purchase agreement in Section10.

3. Section 11, to apply to the Magistrate’s Court for an order approving the removal of the goods to another place

4. To assign his right, title and interest under the hire-purchase agreement in Section 12

5. To have his right, title and interest passed on by operation of law in Section 13

6. Section 14, it is to complete the purchase of the goods earlier than due date

7. To terminate the hiring in Section 15.

The Hire-Purchase Act lays down various restrictions on the power of the owner when recovering possession:

1. Notices must be given to the hirer when goods are to be repossessed in Section 16.

2. After repossession the owner must not sell or dispose of the goods for 21days in Section 17.

3. Hirers rights and immunities when the goods are repossessed in Section 18

4. Hirer can regain possession of the goods in certain circumstances in Section 19

If a hirer defaults in two successive payments or if he defaults in the final payment, the owner can only repossess the goods after following certain procedures which as follows:

a) He must serve on the hirer a notice in writing of his intention to retake possession

b) The period fixed by notices must have expired and this must not be less than 21 days

c) The owner must serve on the hirer and guarantors, if any, a notice in writing in the form set out in the Fifth Schedule of the said Act, within 21 days after he has taken possession of the goods. The owner cannot sell or dispose of the goods without the written consents of the hirer until the expiration of twenty-one days after the date of service of the said notice in section 16

REPOSSESSION BY OWNERS

The Hire-Purchase Act lays down various restrictions on the power of the owner when recovering possession:

1. Notices must be given to the hirer when goods are to be repossessed in Section 16.

2. After repossession the owner must not sell or dispose of the goods for 21days in Section 17.

3. Hirers rights and immunities when the goods are repossessed in Section 18.

4. Hirer can regain possession of the goods in certain circumstances in Section 19.

• Facts: A car was taken by the respondent on hire-purchase with the appellant. The respondent failed to pay the instalments due and the appellant issued a notice under section 16 (1) was in fact served.

• Held : Section 16 clearly specifies that the period before which the seizure can take place shall be not less than twenty-one days after the service of the notice. However, the date specified in the notice was two days short of the statutory minimum and the notice was therefore bad in law even if served and its effect was therefore null and void.

• Section 16A provide that a hirer who returns goods comprised in a hire-purchase agreement within 21 days after the service on him of the notice in the form set out in the Fourth Schedule shall not be liable to pay:a) The cost of repossessionb) The cost incidental to taking possession andc) he cost storage.

CASE : PANG BROTHERS MOTORS SDN BHD V LEE AIK SENG [1978] 1 MLJ 179

INSURANCE

• An owner shall cause to be insured in the name of the hirer against any risk he thinks fit in respect of the following:a) motor vehicles comprised in a hire- purchase agreement, for

the first year only, andb) all others goods comprised in a hire-purchase agreement, for

the duration of time that the goods remain under hire purchase-section 26 (1)

• Then in section 26 (2), it requires the hirer to insure the vehicle in respect of the second and all subsequent years that the vehicles remains under hire-purchases.

• Next is section 26 (3) of the same Act provides that an owner shall not require a hirer to insure any risks with any particular registered insurer. Further, section 26 (4), Hire-Purchase Act 1967 states that an owner who fails to comply with section 26 (1) of the said Act and a hirer who fails to comply with section 26 (2) of the same Act shall be guilty of an offence under this Act.

FRAUDULENT SALE OF GOODS BY HIRER

• For information, when the hirer fraudulently disposes of or sells any goods comprised in a hire-purchase agreement or attempt to defraud the owner by such means, he will be guilty of an offence punishable on conviction to a fine up to RM10,000 or imprisonment for a term not more 3 years or both fine and imprisonment.

CONSUMER PROTECTION ACT 1999

• The Consumer Protection Act 1999 provides specially for consumer protection in relation to supply of goods and services and by establishing the National Consumer Advisory Council and the Tribunal for Consumer Claims.

• It also by providing in Section 6 that notwithstanding anything to the contrary in any agreement, the provisions of this Act shall have effect.

• The underlying objective is to prevent or reduce losses and injuries that consumers might suffer from unfair trade practice and unsafe products.

• The consumer protection act 1999 is divided into 14 parts and consists of 150 sections.

Scope of Application of the Act• Application of this Act is supplemental, this Act does not affect the

liability arising under any other law such as the Sale of Good Act 1957 or the Contract Act 1950. By an amendment in 2007, transactions effected by electronics means are now also covered by the Consumer Protection Act 1999.

Application of Hire-purchase Agreement in Malaysia

In the case of Tractors Malaysia Bhd v. Kumpulan Pembinaan Malaysia SdnBhd (1979) 1 M.L.J 129, the issue before the court is wether there has been a hire-

purchase agreement. It was held by the court that on the construction of the agreement between the parties, it is argument that the property in the vehicles was not to pass to the respondent until full payment had been made. Thus, the agreement was a hire-purchase agreement. Therefore, the appellant has the right to repossess the vehicle on breach of its term by the respondent.

The case of Ka Yin Credit & Leasing Sdn Bhd v. Peng Kim Cha Bros (1982) 2 M.L.J. 61 the court held that the specific clause in the hire-

purchases agreement stipulating liability to pay rental despite damage or destruction is effective.

THE END