Rafi started working at Uitm Sabah six months ago. He has rented a house near his office.

The
house is fully furnished except for a television. Feeling bored, he decided to purchase a smart
television. Unfortunately, Rafi cannot afford to pay for the television in cash and decided to buy it
under hire purchase agreement. He seeks your advice on the requirements of a valid hire purchase
agreement.

Advise Rafi accordingly.

The issue is whether Rafi has followed the requirements of a valid hire purchase agreement?

The issue in this question is how Rafi wants to be advised on the requirements of a valid hire
purchase agreement.

Hire purchase is another type of contract to acquire goods whereby the seller of the goods is
regarded as the owner and the buyer is regarded as the hirer. The main statute governing HP
transactions in Malaysia is the Hire Purchase ACT 1967 (HP Act), which came into force on 11 April
1968 after HP became an increasingly popular method of acquiring goods. The HP Act sets out the
formation and contents of HP agreement, the legal rights, duties, obligations of hirers and owners or
financiers. The HP Act is administered by the Ministry of Domestic Trade, Cooperative and
Consumerism. The HP Act 1967 provides for the procedures that must be compiled with for a valid
formation of a hire-purchase agreement. Failure to comply with the requirements of the Act would
render the agreement void or in some circumstances, the commission of an offence. In order to get a
valid hire purchase agreement there are some procedures that Rafi has to follow. Firstly, is the duty
to give notice of the 2nd schedule before entering the HP agreement. In section 4(4) states that if a
HP contract is made without serving the notice as required by section 4 (1), the agreement shall be
void. The relevant case is Affin Credit (M) v Yap Yuen Fui. Second is the HP agreement must be in
writing as stated in Section 4 A (1). But according to section 45, an agreement is not considered to be
in writing if the handwriting is not clear and legible or if the print size of the font is smaller than ten-
point Times. Third is the HP must be signed. In Section 4 B (1) provides that every hire-purchase
agreement shall be signed by or on behalf of all parties to the agreement. Fourth, the HP agreement
must contain certain the details. As stated in Section 4C (1)(a) requires the hire-purchase agreement
to state the following contents; date, number of instalments, amount of each instalment, time for
each payment, description of the goods, the address where the goods are to be kept. Fifth, separate
agreement for every item of goods. One of the section is Section 4D (1) provides that, if there are
more than one goods being hired at one time from the same owner by the same hirer, there must be
separate agreements for each goods. Sixth is no alterations or additions can be made to the
agreement. After the agreement is signed by the parties, there should not be any alterations,
additions or amendments made to the HP agreement. Seventh, copies of the agreement must be
served on the hirer and guarantor. As provided under section 5(1), within 21 days after the making
of the HP agreement, the owner must serve or cause to be served on the hirer and the guarantors
each with a copy of the agreement.
 Eighth, the booking fee. Under the new law of Section 30A, the owner cannot collect or
accept a booking fee from an intending hirer before the receipt of the completed form set out the
2nd schedule by the hirer. Lastly is deposit to be paid by the hirer. According to Section 31(1)
provides that if there is no prescribed minimum deposit required on a hirer, an owner entering into
a hire-purchase agreement must first obtain from the hirer a deposit in cash.

In conclusion, Hire-purchase is a contractual agreement whereby the owner lets the goods
out on hire and agrees that the hirer may either return the goods and terminate the contract or
elect to buy the goods on the completion of the required period of payment.