All You Need To Know About Hire Purchase Act Kenya

Steve Oke Chapchap Market April 21, 2021 No Comments

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Introduction..
The Hire Purchase Act of 1968 (the Act or HPA), defines hire purchase as an agreement for the bailment of goods under which the bailee may buy the goods or under which the property in the goods will or may pass to the bailee: sees. .
Section 3 of the Act, applies to transactions involving up to Kshs.
The Act seeks to protect the interests of the hirer against exploitation by unscrupulous hire purchase companies.
Purchase by Rautta
Ath•ambø 201 i Introduction …cont.
Exclusions:
—Any scheme controlled, managed or guaranteed by the governtnent for the purposes of providing loans to any person for the purchase of motor vehicles.
FA body corporate as a hirer. See s. 3(2).
Purchase b’ Rautta Ath.ambo.

REQUIREMENTS AND CONTENTS OF AGREEMT
A. Agreement to be in writing , sec. 6
A hire purchase agreement must be MTitten, signed by the hirer and by all the parties to rhe agreement. It will otherwise be unenforceable by the ovvner.
Hire purchase Law by Aautta Ath.ambo. Requiretnents Contents ot agreenu•nt… contd.
B. Registration.
Every hire purchase agreement must be delivered to the Registrar of Hire-Purchase Agreements within thirty days of its execution.
This period may be extended by the Registrar if the delay vcas due to an accident, an inadvertence or sotne sufficient cause.
To be registered, the agreement must be in English language: see s. 5.
Hire Purchase Law by Rautta

Ath•arnbo 2018
Require:nents Contents of agreenu•nt…

CERTIFICATE OF REGISTRATION OF AGREEMENT
I hereby certify that Hire-Purchase Agreement No. …….was registered this . . day of . at o’clock.
Signed:
Registrar of Hire-Purchase Agreements
Fee paid: Sh….

Hite Purchase Caw by Rautta

Requirenu•nts Contents of agreetnent…
REGISTER OF HIRE PURCHASE AGREEMENTS -FORM
(Section 5)
Serial No. of Agreement
HIRER: Address
Name OWNER: Address
Name
Date of Agreement
Date of Registration of Agreement
Amount of Agreement
Nature of Goods
Final Inst. Due
Completion or Termination
Hire Purchase Law by Rautta Ath•arnbo.
Ath•ambo. 201 3
Requirernents Contents of agreenu•nt… contd.
Consequences of non registration:
—No one can enforce the agreement against the hirer or take action against any guarantor of the agreement.
F Owner cannot recover the goods from the hirer.
>The holder of any security given by the hirer or guarantor to the agreement cannot enforce aoainst any of them.
Purchase Law by Rautta D
Ath.ambo. 201 Requirejnents Contents of agreenu•nt… contd.
C. Statement of Cash Price
The owner must state in writing in the prescribed form to the prospective hirer, a price at which the goods may be purchased by him for cash. The agreement must show:
e amount of each installment,
F e period of repayment,
—Description of goods,
> Notice of the hirer’s rights displayed in a prominent form.
Non-compliance makes the agreement unenforceable -t the hirer and guarantor.
Hi’e Purchase Law by Rautta

Ath.arnbo_ 20 1 3
Requiretnents Contents of agreement… contd.
Form H.P. 4
THE HIRE-PI JRCÆASE ACT
(Section O (l))
Statement ot- Cash Price ot- Goods
I,/We the undersigned herebv declare that cash price inclusive of accessories, etc., but net of anv discounts of the undermentioned goods is Sh.
The goods
Signature oi owner: Address . .

Dated………..
Noted bv . Prospective Hirer
Hite Purchase Law by Rautta
Ath•ambo, 201 Requirements Contents of agreement… contd.
D. Statutory Notice
The agreement must have a statutory notice setting out the rights of the hirer.
The notice must be at least as prominent as the rest of the contents of the agreement.
It should contain appropriate warnings or notices to the hirer in prominent bold letters regarding his basic rights and obligations.
For example, the hirer’s right to terminate the agreement should be boldly drawn: see part of form HP 5, below.

Hire Purchase Law by Rautta
Ath.ambo.
Requirenu•nts Contents of agreement… contd.
THE HIRE-PURCHASE ACT
(Section 6 (2) (c))
Notice to be Included in Every Hire-Purchase Agreement Right ofhirer to terminate agreement
I. The hirer may put an end to this agreement by returning the goods to the owner and giving him written notice ot termination of the agreement.
2. He must then pay any instalments which are in arrear at the time he gives notice. If’.vhen he has paid the instalments, the total amount which he has paid under the agreement is less than Sh. * he must also pay enough to make up that sum. Here insert one-half of the hire-purchase price.)

Hoe Purchase Law by Rautta Requirements Contents of agreernent…
Right to terminate…
3. If the goods have been damaged owing to the hirer having tåiled to take reasonable care of thetn, the 0M’ner may sue hilli for the amount of the darnage unless that amount can be agreed between the hirer and the ovvner.
4. The hirer must return the goods at his own expense to the prenüses from which they were originally supplied to him or to such other place as the ox,vner may direct. The 0’vvner must reimburse the hirer tar any additional expense incurred in returning the goods to pretnises other than those from they •were originally
5. The hirer should see whether this agreetnent contains provisions allowing him to put an end to the agreement on tertns more fhvourable to him than those just mentioned. If it may put an end to the agreetnent on those tertns.
Hire Purchase Law by Rautta

Ath•ambo, 201 3 Ath.arnbo, 20 1 3
Requirements Contents of agreement… contd.
(Section 12)
Notice by Hirer to Terminate Agreement
From: [Here insert name and address of hirer]
To : [Here insert name and address of owner]
No. and Date of Hire-Purchase Agreement
Particulars of goods
I hereby give you notice to terminate forthwith the agreement made between us dated as above and comprising the abovementioned goods. I confirm that I have returned the goods to you, and that the agreement is at an end.
Contd next page
Hite Purchase Law by Rautta
Ath•ambo. 201 3 Requirements S. Contents ot agreement… contd.
Notice to terminate….contd.
I understand that in consequence of giving this notice I am no longer entitled to the goods and Iny liabilities under the hire purchase agreetnent and the Hire-purchase Act, are as follows: (I) I must pay any instalments in arrear at the date of this notice.
(2) If, when I have paid the above mentioned instalments the total amount which I have paid under the agreement is less than one-half of the hire-purchase price specified in the agreement, then I must also pay enough to make up that sum. (3) If the goods have been damaged because I have fåiled to take reasonable care of them, you are entitled to sue me f?jr the amount of the damage unless that amount can be agreed beti,veen us.
Contd next page…
Hire Law by Rautta
Ath•ambo. 20 1 3

Requirements S. Contents of agreement… contd.
I also understand that if at your request I have returned the goods to premises other than those from which they were originally supplied by you to me, I am entitled to be reimbursed for any additional expense so incurred.
Please sign and return the duplicate copy of this notice.
Dated…………………………..
(Signature of Hirer)
Endorsement on Duplicate
Received a notice of which the above is a copy.
Dated . ……(Signature of Owner)

Law by Rautta
Ath•ambty 201 Requirements Contents of agreement… contd.
Other notices relate to the following:
Right of hirer to complete agreement and
Restriction of owners’ right to recover goods .

Hire purchase Law by Rautta

3 Ath•arnbo. 20 1 3 1 8
Putchase Law bv Rautta
Ath•ambo. 201 3 19 Requirernents Contents of agreenu•nt… contd..
E. Delivery of copy of agreement to hirer
The ovcner must deliver or send by registered post to the hirer, a copy of the agreement, ‘Within 21 days of the date of the agreement.
In case of failure to adhere to this requirement, the owner will not be entitled to enforce the hire purchase agreement or any contract of guarantee relating to it.
purchase by Rautta
Ath.arnbo. 20
IMPLIED CONDITIONS, s. S
A condition that the ovvner has or will have a right to sell the goods at the time ‘When the property is to pass. A condition that the goods are of a merchantable quality unless they are second-hand and the agreement says so.
If the hirer expressly or by implication makes known to the owner for what purpose he wants the goods, then there is an implied condition that the goods will be reasonably fit for that purpose.
A condition that the legal ownership of, and title to, the goods shall automatically be vested in the hirer upon payment of the hire-purchase price in full.
purchase Law by Rautta
Ath•ambo. 201 3 21 IMPLIED WARRANTIES
zA warranty that the hirer shall enjoy quiet possession.
z A warranty that goods are free from any charge or encumbrance.
FA warranty that goods will be of a merchantable quality. However, the principle of Caveat emptor excludes this warranty.
—An implied warranty that the goods will be reasonably fit for the purpose.
Hire purchase Law by Rautta
Athlarnbo, 201 3 22

Conditions Warranties Not to Be Excluded
The conditions and warranties set out must not be excluded and will be implied notwithstanding any agreement to the contrary.
The ovcner shall not be entitled to rely on any provision in the agreement excluding or modifying the condition regarding fitness for the purpose unless he proves that before the agreement was made the provision was brought to the notice of the hirer and its effect made clear to him: s. 8(3).
Hire Purchase Law by Rautta Conditions Warranties… contd.
Fundamental breach
In Karsales (Harrow) Ltd., v. Wallis (1956) 2 All E.R. 866 the defendant inspected a Buick car and found it in excellent condition. The parties then executed an agreement containing a clause with the following words: “No condition or warranty that the vehicle is roadworthy, or as to its age, condition or fitness for any purpose is given by the owner or implied herein.
Hire Purchase Law by Rautta
Atmambo_ 201 Ath•ambo. 20 1 3 24
Conditions Warranties… contd.
When the car ta•as delivered outside the hirer’s hotne it u•as in a deplorable state. It u•ould not go. It needed 150 pounds to restore it to its original condition. The defendant refused to accept it. The Plaintitls (who veere assignees of the tinance co.
under a recourse agreement ( sued tor instalments. The Court of Appeal held that the defendant had validly rejected the car because the ovvners veere guilty of a fillidamental breach of contract which prevented them irotn relying on the exemption clause.lllt was pointed out (Parker L.J.) that not every defect in a car rendering it temporarily unusable on a road amounted to a fundamental breach. Hovcever, the 0′,vners in this case, vvere in breach of their primary obligation which was to supply a car. In the words of Birkett LJ “a car which vvill not go is not a car at all”
Purchase Law by Rautta Conditions IVarranties… contd.
pu«hase Law by Rautt.a

Ath.ambo. 20 1 3 Ath.ambo. 26
Conditions SVarranties… contd.
But in Swisse Atlantique Societe’ D’Armement Maritime S.A. vs. N.V. Rotterdamsche Kolen Centrale (1967) IAC 361; (1966 2 All ER. 61 the House of Lords, after examining a number of earlier cases, held , among other things, that there ‘vvas no rule of law that an exemption clause could not cover a fundamental breach and that the scope of an exemption clause veas a question ot construction of the clause and of the contract as a whole.
This is a clear demonstration that the provisions of the Act which appear to ban exclusion clauses, cannot provide the type of protection which probably intended.

pu”hase by Rautta
Ath.ambo. 201 Conditions Warranties… contd.
In practice through it is unlikely that the courts vvill allow a seller to undertake to deliver “coffee” and at the satne time say that he is not liable if he delivers something else. It is Inost likely that the courts would strike out such exemption as being repugnant to the main purpose ot the contract. The courts could also declare the whole contract void for •want of consideration. The seller cannot be allovved to “give and then take avcay”; but he tnay be permitted to qualify what he is giving.

Hire Purchase Law by Rautta

Athiambo. 201 i 28
THE TRIANGULAR TRANSACTION
Parties:
F Finance company-puts tnoney for hire purchase.
‘Seller/dealer -sells goods to the finance company.
F Hirer – gets the goods from the finance cornpany. F Guarantor.
Contracts established:
z Contract of sale of goods between the seller and the finance company.
—Contract of hire-purchase exists benveen the finance cornpany and the hirer.
Law by The triangular transaction…contd.
Dealer’s liability to the hirer:
Usually, the first sale is by the dealer to the finance cotnpany, even when custody seems to be with the dealer.
“No contract of sale exists between the dealer and the hirer: see Dnn•y vs. Victor Buckland Ltd (1941) I All E. R.
269, CA.
—If, however, the dealer gives express warranty to the hirer, the courts will infer a collateral contract between the dealer and the hirer: see Andrew vs. Hopkins (1957) IQB 229, where the dealer warranted that a saloon car was “a good little bus, I’d stake tuy lifé on it”.

Hite Law by Rautta

Ath•amb. 2013 Ath.ambo so
The triangular transaction…contd.
In this case the dealer is deemed to be an agent of the finance company.
As was stated by Lord Denning in Financing Ltd v. Stimson (1962)3 ALL ER 386 at p. 388 ” if we take, as ‘vve should, a realistic vievv of the position, the dealer is in Inany respects and for many purposes the agent of the finance company’ .
Purchase Law bw Rautta
Ath•ambo, 2013 The triangular transaction…contd.
Finance company’s liability:
Pearson LJ. in Mercantile Credit Co Ltd vs. Hamblin (1965) 2 QB 205, stated that there is no rule of law that in a hire purchase transaction the dealer never is or always is acting as agent of the finance company.
—Dealer is a party on his 0’vvn but may act as an intermediary or agent at certain but limited Instances.
purchase Law by Rautta
Athlambo. 201 3 32
GUARANTOR
Owners in hire purchase arrangements will often wish to ensure due performance of a hirer is guaranteed by another person.
This may be via a separate owner-guarantor agreement or by the making of the guarantor to be part of the hire purchase agreement itself.
The guarantor must sign a note or memorandum by himself or by agent.
His liability is secondary only; i.e. his liability depends on the validity of the main agreement and on whether the hirer defaults or not.
Hite Purchase Law by Rautta
Ath•ambo. 201 33 Guarantor… contd.
If the existing contract is varied without his consent, he will be discharged.
Ct: Contract of indemnity in which the giver of indemnity assumes primary liability.
The name given by the party to the contract collateral to another agreement may not always matter. If the liability under the collateral contract is substantially different from the liability under the main contract this would suggest that the collateral contract is not a guarantee.
Hoe Law by Rautta
Athaambo, 201 3 34

Guarantor… contd.
In Yeoman Credit Ltd. v. Latter [1961] I W. L R. 828; [1961] 2 All E. R. 294, ‘Where a father gave a special guarantee form “Hire-Purchase Indemnity and
Undertaking” for his son in a hire purchase of a car he was held to have signed a contract of indemnity. A guarantor may insist on due performance of the hirer’s obligations.
He may claim an indemnity against the hirer if he is compelled to pay.
If he pays outstanding balance, he takes over by subrogation as against the owner.
He tnay also take over any securities such as cheques or promissory notes which the owner took.
Hire pu”hase Law by Rautta Ath.arnbo. Guarantor… contd.
Usually the agreements do provide for his consent to such variations; for example it is usually provided that extension of time does not affect the guarantor s liability.
If the hirer or a co-guarantor is released the guarantor
•will be discharged, unless otherwise provided.
H•re Purchase Law by Rautta
Atmambo. 20 1 3
VOID PROVISIONS
By section 7 of the Act, any provision in the agreement shall be void if it:
Allows the ovvner or his agent to enter premises to take possession of the goods;
F Attempts to prevent the hirer from terminating the agreement as provided for in s. 12; or
Adds extra liabilities should he so terminate; or
F Attempts to relieve the ou•ner from liability for the default of his agents.
Purchase by Rautta
J Void prousions…contd.
Agent imposed on hirer
A person acting on behalt of the ox.vner cannot be treated as or deemed to be the agent for the hirer under a hire-purchase agreement as is often the case with insurance agreetnents. Any provision purporting to itnpose such a person on the hirer as his agent will be void.
A provision which relieves the owner from liability for acts or defaults of any person acting on his behalf in connection ‘Kith the tarmation or conclusion of the agreement is equally void.

Purchase Law by Aautta Ath•ambou

Atmambo 201
Limitations against Owner
Section 29 prevents the owner, in the event of the hirer’s breach, from enforcing any kind of accelerated payment, unless more than one-tenth of the hire-purchase price is due in one installment or more than one-twentieth in two installments.
Similarly prohibited is a proxision calling tar damages, forfeiture, penalty or accelerated payments, unless the hirer is given notice in writing and allowed 14 days within which to carry out the obligation.
This section the hirer some time to put his house in order and avoid the results of what might merely be inadvertence in regard to some small detail on his part.

Purchase Law by Rautt_a
39 LOCATION OF HIRER GOODS
Location of Hirer
If the 0’vvner requires him to do so in the agreement, the hirer must inform the 0’vvner of any changes in his location, including his postal, residential and business addresses as per the agreement.
Failure of hirer to cornply means he may be fined up to Shs.

Purchase Law by Rautta Athiarnbo.

Ath.ambo. 2013
Location of hirer and goods… contd.
Location of goods
The owner of goods may also stipulate that the hirer shall not remove or permit the removal of the goods from Kenya without his vvritten consent of the ou•ner•.
Before he removes or allows the goods or part thereof to be removed from any premises for keeping at other premises, the hirer must notify the owner or his agent in writing

purchase by Location of goods… contd.
The hirer will be liable to a fine of up to KShs. 10,000/= and for one year’s imprisonment if he contravenes this and, further, if the reason for removal was to deprive the owner of his otvvnership.
NB: The court may, on the application of the hirer and after hearing any representations made by or on behalf of the owner, make an order approving the removal of the goods to some other place within Kenya.
That place shall thereafter, for the purposes of the agreement, be substituted for the first-mentioned )lace: s. l l.
Hire pu’chase Law by Rautta
42
Ath•ambo Ath.ambo.
RECOVERY OF POSSESSION
Recovery of Possession by Suit
Once two-thirds of the hire-purchase price has been paid or tendered, then any right to repossess the goods can only be exercised through court action
If the c»wner institutes a suit to enforce a right to recover possession of the goods from the hirer and he proves that before the institution and after the right to recover accrued he had made a request in writing to surrender the goods, then the hirer’s possession shall be deemed to be adverse possession: Section 14.
Hare Pu’chase Law by Rautta
Ath.ambo. 201 3 Recoverv of Possession bv Suit… contd.
S. 16(3)(b) allows the oxvvner to remove the goods if two or more installments are owing. This is not repossession but merely an action protecting the owner’s interests.
S. 16(4) provides that at a hearing, a court can make the follotwing orders:
—Deliver of all the goods to the owner.
—Delivery of a part of the goods to the owner
—Condition that the hirer pays the unpaid balance in order to repossess the goods.

Hire purchase by Rautta Athiambo.

Recoverv of Possession bv Suit… contd.
Under s. 25, if the owner legally retakes the goods otherwise than by suit, there is a duty placed on him or her to resell at the best possible price.
The hirer shall not be liable to the owner for conversion if he refuses to give up possession to the owner by reason only of such refusal: s. 26.
Hite Purchase Law by Rautta
Athiambo. 2013 LICENSING OF THE HIRE PURCHASE
Any person who carries on a hire-purchase business tuay only do so under and in accordance with the tertns of a current licence authorizing him to do so. The Minister shall appoint a public officer to be the licensing officer for the purposes of this Act.
Such officer is currently known as Registrar of HirePurchase Agreements in the Office of the Attorney General.
Law by Rautta
Athaarnbo, 201 3

Licensing… contd.
The Registrar may grant a licence without conditions or subject to such conditions as he may think fit, or refuse to grant a licence: s. 20(1).
Every person carrying on hire purchase business must have an annual license failing which he is liable to a fine not exceeding ksh.20,000 or imprisonment not exceeding 1 year.
The license must be displayed in a conspicuous place in the business premise.
Hare Purchase Law by Rautta

purchase Law by Rautta
Athlarnbo. 2013

Ath.ambo. 2013
Purchase by Rautla Ath•ambo
COMPLETION
The hirer Inay give notice in writing to the owner of his intention to complete the purchase of the goods and pay to the owner on a specific day the net balance.
The hirer tnay exercise this option at any time during the continuance of the agreement or within 28 days after the owner has repossessed the goods for whatever reason.
Purchase by Rautta
Ath•ambo 20 1 i

SERVICE OF NOTICES
“Section 32 states that notices to be served on either the owner or hirer should:
—Be delivered to him personally
‘Delivered to a person over 16years resident or employed at his place of resident or business.
‘Posting it to their last knoml residence or place of business.
F Section 32A allows the Minister in consultation with the Central Bank to determine matters to be taken into account in the computation of the hire purchase price, installments, interest rates, penalties and forfeitures that may be imposed on the hirer.
Purhase Law by Rautta
Ath•ambo. 2013

Hire purchase Law by Rautta Athaambo, 201

Infortnation
A hirer can seek any information for example on the outstanding balance, in and paying ksh.10.
The ovcner is to give the information within 14 days. If the ovvner defaults to supply the information within 30 days, he will be committing an offence and would be liable to a fine not exceeding Ksh. 500/=
Under S.34, a person ‘Who gives any false information in a proposal form or document will be guilty of an offence and liable to a fine not exceeding ksh.5,000 or 6 months imprisonment, or both.
Hue Pu”hase Law by Rautta
Ath.ambo, 201 3 TERMINATION
l. Exercise of hirer’s option to determine by returning goods and giving notice.
‘If he takes this option, the hirer must deliver the goods, meet depreciation costs and pay not less than 1/2 of the purchase price.
2. Breach or repudiation by hirer;
3. Death of hirer;
4. Bankruptcy of hirer;
5. Distress or execution.
H.re purchase Law by Rautta
Athlarnbo, 2013

CONCLUSION
The two-thirds payment rule contained in section 15 reflects recognition of the dangers posed by aggressive door-to-door salesmen.
Firms should fully inform the hirers about the kind of transaction they are about to get into perhaps through proper adverts.
Finally it is quite obvious that with respect to its financial scope the Act no•vv requires an urgent review. Kshs. 300,000/= is nowhere near what a small or medium trader requires today to start a useful or sustainable business.
purchase Law by Rautta Ath•ambo. THAT SHOULD DO
THE END
Nairobi
September, 2013
FOR NOW
purchase Law by Nautta
Ath.ambo. 20 1 3

201 S


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