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HIRE PURCHASE

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Farihana Abdul Razak

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HIRE
PURCHASE
Madam Farihana Bt Abdul Razak
Department of Law
UiTM Perak Branch
Tapah Campus
Introduction
A hire purchase contract is an agreement wherein an owner agrees to hire
goods to the hirer with an option for the hirer to purchase the goods.

Section 2(1) of the HPA 1967 defines

A hirer is a person who takes or has taken goods from an owner a hire
purchase agreement and includes a person to whom the hirer’s rights or
liabilities under the agreement have passed by assignment or by operation
of law.
The owner is a person who lets or has lets goods to a hirer under a hire
purchase agreement and includes a person to whom the owner’s rights or
liabilities under the agreement have passed by assignment or by operation
of law.
– Section 2(1) of the HPA 1967 define a ‘hire purchase agreement’ includes a letting of goods with an option
to purchase an agreement for the purchase of goods by instalments (whether the agreement describe the
instalments as rent or hire or otherwise)

– First schedule of the HPA 1967 provide the list of goods which are
i. All consumer goods;
ii. Motor vehicles, namely: - Invalid carriages
- Motorcycles
- Motor cars including taxi cabs and hire cars
- Good vehicles ( where the maximum permissible
laden weight does not exceed to 540 KG.
- Busses, including stage busses.
Requirements of hire purchase
agreement
– Part II of the HPA 1967 contains essential
requirements as to the procedure, form and content of
hire purchase agreements. Breach of these provisions
renders an agreement void, and in several instances,
the commission of an offence.
– Section 4 (1)(a) of the HPA 1967 imposes an obligation
on an owner or its agent to serve on the prospective
hirer the Part I the documents whereas Section 4 (1)(b)
of the Act imposes on the dealer where there is an
additional obligation that at any time after the service
of the written statement to the prospective hirer but
before the hire purchase agreement is entered into, he
must serve on the prospective owner (a finance
company or lender).
 Formation of HPA
The form of the written statement is contained in Part II of the Second Schedule of the HPA 1967.
Part I of the Second Schedule of the HPA 1967 requires information relating to a description of goods and a
summary of the prospective hirer’s financial obligations under the agreement.

Section 4A of the HPA 1967 requires a hire purchase agreement to be in writing. An agreement is deemed
not to be in writing and thus void if a hand writing (other than a signature or initials) “is not clear and legible”
, and id the agreement is printed, the print is of a size smaller than the type known as ten-point Times.

Section 45 of the HPA 1967 provides a hire purchase agreement shall be in writing and printed in black.

Section 4A(1A) of the HPA 1967 provides that agreement shall be in the national language or English
language. If a hire purchase agreement is not in writing or which is not in national language or English
language, the agreement shall be void by virtue of Section 4A(2) of the HPA 1967.

Section 4B(1) of the HPA 1967 requires
a hire purchase agreement to be signed
by or on behalf of all parties to the
agreement.
Section 4G(1) of the HPA 1967 provides
that where goods to be comprised a
hire purchase agreement is second hand
motor vehicle, the person who intends
Section 4D(1) of the HPA 1967 requires
to enter into the hire purchase
separate hire purchase agreement in
agreement in respect of such second
respect of every item of goods
hand motor vehicle shall declare in
purchased.
writing any defects of the second hand
motor vehicle in accordance with the
inspection report by the relevant
authority determined by the Controller.

Section 39 of the HPA 1967 states that any alteration of matter

Section 5(1) of the HPA 1967 provides
added to, a hire purchase agreement, if the alteration is an alteration
that the owner must serve a copy of the
of any of the matters set out in the written statement or statements
hire purchase agreement on the hire
required to be served on the hirer pursuant to section 4(1)(a) and (b)
purchase agreement on the hirer and
before the hire purchase agreement was entered to, shall have no
the guarantors within twenty-one days
force or effect unless the hirer has consented thereto by signing or
(21) after making the agreement.
initialling in the margin opposite the alteration or addition.
Public Bank Berhad v. Abdul Rashid Abd Majid [2013] 2 MLRA 421

The plaintiff bank and the defendant had entered into a hire-purchase agreement (‘HP agreement’) for
the financing of the motor vehicle. The plaintiff sought to recover the sum and interest from the
defendant based on the defendant’s default under the HP agreement. The defendant had sold the vehicle
to a third party. The Sessions Court held that the HP agreement was void ab initio as the plaintiff had
failed to prove the existence of the summary of financial obligations under the HP agreement, thus being
in breach of Section 4(1) of the Hire-Purchase Act 1967. The decision was affirmed by the High Court.

The Court Appeal however held that Section 66 of the Contracts Act 1950 provides for a discretionary
remedy in the nature of restitution which the court may grant in line with the ambit of the section and
within the principles of the law of the contract.

With reference to the factual background of this case, section 66 of the CA 1950 imposed an obligation on
the part of the defendant who had received the pecuniary advantage of the hire-purchase facility either
to restore the vehicle or to make compensation for it to the plaintiff. Since the return of the vehicle was
now an impossibility because the defendant had sold it to a third party, an order that the defendant make
monetary compensation to the plaintiff should have been made.
 Section 9 Right to be supplied copy of statement relating

Statutory
to his financial position (documents and
information).
A hirer is entitled to request the owner for a

rights of hirer
written statement pertaining to the following
information:

a) The amount paid to the owner by the hirer

or his agent;
b) The amount which amount has become
due under the agreement but remains
unpaid;
c) The amount which is to become payable
under the agreement; and
d) The amount derived from the interest on
overdue instalments.

*This right can only be exercised not more than

once in three months. If the hirer makes such
requests more than once in three months, the
owner can refuse to comply.
Section 10 Right to require the owner to appropriation of payments made
in hire purchase agreement.

Alternatively, the hirer is entitled to appropriate payment

according to the sequence of the agreements

If the hirer fails to make such appropriation, the payment shall

be appropriated towards the satisfaction of the sums due under
the respective agreements in order in which the agreements
were entered into.
Section 11 Right to apply for an order from Magistrate for goods to be
remove to another place.

On the application of the Hirer, a Court of a magistrate may

make an order approving the removal of goods to some other
place.

Section 12 Right to assign hirer’s rights, title and interest under the hire
purchase agreement.
Section 13 Right by operation of law to have his right, title and
interest.

If the hirer is a company, the liquidator may exercise the

same right under the agreement as the company. In
effect, the liquidators succeeds to the hirer’s right and
liabilities under a hire purchase agreement.

Section 14 Right to early completion of agreement complete the

purchase of the goods earlier than due date.
Section 15 Right to terminate agreement by returning the goods to the owner.

Bridge v. Campbell Discount Co Ltd [1962] 1 All ER 385

Section 47 of the A consumer may recover for a failure of goods supplied under a hire-
Consumer Protection purchase agreement to comply with a guarantee under this Act shall
(Amendment) Act be assessed, in the absence of evidence to the contrary, on the basis
2010 that the consumer will complete the purchase of the goods or would
have completed the purchase if the goods had complied with the
guarantee.
Statutory Section 7 In every hire-purchase agreement there shall be—

rights and
(a) an implied warranty that the hirer shall have
and enjoy quiet possession of the goods;
(b) an implied condition on the part of the owner
obligations that he shall have a right to sell the goods at the
time when the property is to pass;

to the owner
(c) an implied warranty that the goods shall be
free from any charge or encumbrance in favour of
any third party at the time when the property is to
pass.

These implied conditions and warranties cannot

be excluded/modifies.
However, There are exception which second hand
goods (in respect of merchantable quality and
fitness for purpose).
Section 7(1)(a) Implies warranty as to quiet possession of the goods.

Jones v. Lavingston 1903 1 KB 253

Court held that, whether or not any contract for quiet
enjoyment may be implied from the word “let”, the use
of that word did not create an unrestricted covenant
for quiet enjoyment which covers lawful interruption
by a person claiming under title paramount. Therefore,
in this case, the plaintiff was not entitled to recover.

Section 7(1)(b) Owner shall have a right to sell the goods at the time
when the property is to pass (Implied condition as to
title).

Public Finance Bhd v. Ehwan B Saring 1996 1 MLJ 331

The hirer was entitled to rescind the contract and could
recover the amount of the money already paid.
Section 7(1)(c) Implies warranty as to encumbrance.
Section 7(2) The goods shall be of merchantable quality. However, no such
condition will be implied in the following circumstances:
a) Where the hirer has examined the goods or a sample thereof,
as regards defects which the examination ought to have
revealed – Section 7(2)(a)
b) If the goods are second hand and the agreement contains a
statement to the effect that
i. The goods are second hand; and
ii. All the conditions and warranties as to quality are expressly
negative, and the owner proves that the hirer acknowledged
in writing that the statement was brought to the notice –
Section 7(2)(b).
Section 7(3) The goods shall be reasonably fit for that purpose – the hirer makes
known to the owner the particular purpose for which the goods are
required, the goods must be reasonably fit for that purpose, except in the
following circumstances:
a) If the goods are second hand; and
b) The agreement contains a statement to the effect that:
i. the goods are second hand; and
ii. all conditions and warranties of fitness and suitability are expressly
negative, and the owner proves that the hirer has acknowledged in
writing that the statement was brought to his notice.

Lau Hee Teah v. Hargill Engineering Sdn Bhd & Anor (1980) 1 MLJ 145
The Court decided that “they were no defects sufficiently serious to
render the loader useless for any purpose which it would usually be used
and therefore it cannot be said that the loader was unmerchantable
quality or unfit for the Plaintiff’s purpose.”
Repossession
– Repossession is a term used to describe when the actual owner of
the item that have been rented, leased or borrowed by hirer takes
the item back, either with or without compensation based on
agreement that they made and agrees.
– Under common law, the owner has the right to recover
possession of the goods if the hirer commits a breach of his
obligations under the hire purchase agreement.
Procedure of Repossession
Upon repossession, the owner will send
Upon the expiry of 21 days stated in 4th
When hirer default in payment a notice in writing informing the hirer
Schedule notice, repossession is
according to Section 16 of the HPA that it has taken possession of the
allowed if the hirer fail to pay the
1967, owner can send to a hirer 21 days vehicle and 5th Schedule notice will
outstanding arrears. Section 17A and
notice in writing informing the intention send to hirer and his guarantor within
17B require any person who is engaged
to repossess the vehicle according to 21 days after the repossession has
in repossession activity to obtain a
4th Schedule. taken place by virtue of Section 16(3) of
permit from the Controller.
the HPA 1967.

If the amount due under the 5th
Schedule notice is not paid within 21
days after notice, owner can sell the
motor vehicle through a public auction
by giving hirer a notice 14 days before
the date of the auction as stated in
Section 17 of the HPA 1967.
Sale of the motor vehicle can take place
after the 14 days given in the notice. If
proceeds from the sale of the motor
vehicle are inadequate to pay the
outstanding amount due, owner will
recover the shortfall from hirer and
hirer need to bear the auction expenses.
 Cases for repossession

Pang Brothers Motors Sdn Bhd v. Lee

Aik Seng [1978] 1 MLJ 179.

Abdul Kashab Hj Hanafi v. Hong

Leong Bank Bhd [2016] 8 CLJ 487

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