Revised HIRE PURCHASE LAW & CARRIAGE OF GOODS
Steve Oke Chapchap Market No Comments
& CARRIAGE OF GOODS
A party who wants to buy goods but does not have the ‘money
consideration’ which is legally payable under the Sale of Goods Act as their
price may enter into an agreement with their owner where s/he will hire the
goods with a view to ultimately purchasing them. Such agreement is legally
referred to as a ‘hire-purchase’ contract. As a contract, the agreement is
governed by the rules of common law, which however, are found to be unfair
in certain respects. To provide a fair mechanism for forming the contract and
to give greater protection to the parties to the transaction, the Hire
Purchase Act (Cap 507) was passed in 1968. The preamble to the Act
declares that it is “an Act of parliament to make provision for the regulation
of certain hire-purchase agreements and for the licensing of hire-purchase
concerns, and for the purposes connected herewith”. It is noteworthy that
the Act applies only to “certain hire-purchase agreements”. These are
mentioned in section 3 and are:
(a)Hire-purchase agreements entered into after the commencement of
the Act under which the hire-purchase price does not exceed the sum
of sh. 80,000. This provision was amended by the statute law
(Miscellaneous Amendments) Act 1992 which provided, with e2ect
October1992,a new maximumlimit of sh.300,000“or such
other higher or lower sum as the Minister may, after taking into
account market forces from time to time prevailing, prescribe”.
(b)Where the hirer is not a body corporate, wherever incorporated.
(c) An agreement which is not a scheme controlled, managed or
guaranteed by the government for the purpose of providing loans to
any persons for the purpose of motor vehicles.
Section 2 de5nes a hire-purchase agreement 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.” This
de5nition re6ects the two forms which a hire-purchase agreement may
(a)Hire and the ‘option to purchase’
The owner of the goods may agree to hire them to the prospective
buyer for a certain period of time, say 26 months. The prospective
buyer in turn promises to pay the agreed amount every month, say
sh.1,000. S/he legally becomes the ‘hirer’.
At the end of the 36 months, the hirer will have paid a total of sh.
36,000. As far as the owner of the goods is concerned, this amount
constitutes what s/he would have considered as the fair price of the
goods if the hirer had paid him/her that amount (or less) under a
contract for the sale of goods. S/he is therefore prepared to let the
hirer have ownership of the goods.
In order to e(ect the transfer of ownership to the hirer, the
owner of the goods has to sell the goods to him/her. S/he does this by
making an ‘o2er’ to sell them to the hirer at a nominal consideration,
of say sh. 20. The hirer is not bound to accept the o2er and, in the
event of him/her not doing so, no purchase takes place. If s/he
accepts the o2er, a sale takes place and s/he purchases the goods.
In practice, the o2er to sell is usually made at the time the hire
agreement is concluded. In such case, the o2er would legally
constitute an option to purchase the goods. Such an o2er is
irrevocable provided that the hirer performs his/her obligations under
the hire agreement. This type of agreement is covered by the 5rst part
of the statutory de5nition, namely, an agreement “under which the
bailee may buy the goods.”
The owner of the goods may agree that the goods will become the
property of the hirer on payment of the “nal or last instalment. In
such case, the option clause would not be incorporated into the
agreement. This sort of transaction is covered by the second part of
the statutory de5nition and is an agreement “under which the property
in the goods will or may pass to the bailee”.
Hire-Purchase and Sale
The hire-purchase transaction is not a sale because, according to the
(i) There is no seller or buyer. The parties are the ‘owner’ of the goods
and the ‘hirer’.
(ii) The hirer may buy the goods but s/he is not bound to buy
them. It is this aspect of the transaction which constitutes the legal
distinction between a hire-purchase agreement and a sale of goods,
as was explained in Helby v Mathews (90). In a sale of goods, the
buyer is bound to buy the goods and, as explained, can be sued for
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