HIRE PURCHASE

AGREEMENTSconcentrat
e on slides 25-32;33-34

TOPIC SEVEN

1
 INTRODUCTION

 The law of hire purchase is contained in the Hire
Purchase Act 1967 (HPA 1967) amended by the Hire
Purchase (Amendment) Act 2010.

 The Act regulates the form and contents of hire-

purchase agreements, the rights and duties of parties to
such agreements and makes provisions for other matters
connected therewith.

2
 List of goods

 The Act applies to all hire purchase agreements relating
to goods specified in the First Schedule – s. 1(2)

1. All consumer goods

2. Motor vehicles

 S. 2(1) define ‘consumer goods’ as goods purchased for

personal, family or household purposes.

 The Act would apply only to the hire purchase of the

abovementioned goods.
3
 Cont

 Motor vehicles cover the following:
 (a) Invalid carriages;
 (b) Motorcycles;
 (c) Motor Cars including taxi cabs and hire cars;
 (d) Goods Vehicles (where the maximum permissible
laden weight does not exceed 2540 kilograms);
 (e) Buses, including stage buses.

4
 Cont.

 However, a hire purchase agreement relating to the
goods not listed in the First Schedule is still valid.

 The HPA may still be applicable if the parties to the

agreement agreed to this effect (for HPA to apply).

 Kesang Leasing Sdn Bhd v Mohd Yusof bin Ismail &

Anor [1990] 1 MLJ 291
 Held: The Act does not exclude the application of the hire
purchase agreements in respect of goods not specified in
the First Schedule if the parties have agreed to be bound
by the Act.
5
 cont

 What happen if the hire-purchase agreement is for
goods which do not fall under the First Schedule and
the parties have not agreed for HPA to apply?
 HPA will not apply. However, the agreement
remains valid under contract law. The Contracts Act
1950 will apply and the contracting parties would be
bound by the terms stated in the contract.
 MBf Finance Bhd v. Ting Kah Kuong (1993) – it was
held that a forklift was not a motor vehicle and
therefore the hire-purchase agreement was not
subject to the HPA 1967.
6
 DEFINITION

 s. 2 – A ‘hire purchase agreement’ includes a letting of
goods with an option to purchase, and an agreement for
the purchase of goods by instalments.

 In every hire purchase agreement, the hirer cannot sell

the goods under hire.

 The property in the goods does not pass at the time of

the agreement or at any time before delivery.

 The hirer is not the owner of the goods and thus, he

cannot pass a good title to third party.
7
 Cont.

 Hirer: A person who takes goods from an owner under
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.

 Owner: A person who 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.
8
 FORMATION OF A HIRE
PURCHASE AGREEMENT

 Before a HP agreement is entered into, the owner must
give to the prospective hirer a written statement duly
completed and signed in accordance with the form set
out in Part 1 of the Second Schedule – s.4(1)

 This statement provides for a short description of the

goods and a summary of the hirer’s financial obligations
under the proposed hire purchase agreement.

 Failure to comply, the HP agreement is void – s. 4(5)

9
 Requirements

 A HP agreement must be in writing and printed in black
– s. 4A(1)

 A HP agreement must be in the national language or

English language – s. 4A(1A)

 The HP agreement must be duly completed before the

hirer or his agent is required to sign – s. 4B(2)

 HP agreement must be signed by or on behalf of all

parties to the agreement – s. 4B(1) 10
 Requirements

 S. 4C – Provides for the contents of a HP agreement.

 There must be a separate HP agreement in respect of

every item of goods purchased under the Act - s. 4D

 Where the good is a motor vehicle, the hirer may

request in writing to the owner to keep the registration
certificate of the motor vehicle and the owner must
furnish the same – s. 4E
11
 Requirements

 A hire-purchase agreement relating to a motor vehicle
is void if the motor vehicle has been altered or
modified in its construction and structure - s. 4F

 Where the good is a second-hand motor vehicle, the

owner/dealer must declare in writing any defects of
the second-hand motor vehicle in accordance with the
inspection report by the relevant authority determined
by the Controller of Hire-Purchase - s. 4G

12
 Requirements

 If there is any alteration or addition in the hire-purchase
agreement, the hirer must sign or initial the margin
opposite to the alteration or addition to show his consent
thereto. If not, the alteration or addition will have no
effect - s. 39

 The owner must serve on the hirer and the guarantors a

copy of the HP agreement within 21 days after it has
been made – s. 5(1)

13
 IMPLIED CONDITIONS
AND WARRANTIES
Implied conditions

1. Right to sell
 The owner must have the right to sell the goods at
the time when the property is to pass – s. 7(1)(b)

14
 Cont

 Public Finance Bhd v Ehwan bin Saring [1996] 1 MLJ
331
 Held: As the vehicle was seized by the customs soon
after the agreement was executed and had not been
returned to either party, it had become impossible
for the Appellant (Public Bank) to pass a good title to
Respondent. As such, s.7(1)(b) was breached.

15
 Implied conditions


2. Merchantable quality

 The goods must be of merchantable quality – s. 7(2)

Meaning of merchantable quality

 If goods have only one purpose, they are
unmerchantable if they have defects which render
them unfit for that purpose.
 If the goods are used for several purposes, then the
goods are merchantable if they are fit for any one of
the purposes.
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 Implied conditions

 However, no such condition will be implied:


a) where the hirer has examined the goods or a sample
thereof, as regards defects which the examination
ought to have revealed –s.7(2)(a)

b) if the goods are second-hand goods and the

agreement contains a statement to the effect that –
i. the goods are second-hand; and
ii. all conditions and warranties as to quality are
negative;
iii. the hirer has acknowledged in writing that he had
been notified of (i) and (ii) - s. 7(2)(b)
17
 Implied conditions

3. Fitness

 Where the hirer


makes known to the owner the
particular purpose for which the goods are required, the
goods must reasonably fit for that purpose – s. 7(3)

 Exception: If the goods are second-hand goods and the

agreement contains a statement to the effect that –
 the goods are second-hand; and
 all conditions and warranties as to quality are
negative;
 the hirer has acknowledged in writing that he had
been notified
18
 cont

 Question: Does implied condition on quality and
fitness of goods apply to second-hand goods under
the HPA?

19
Implied warranties


1. The hirer must have and enjoy quiet possession of
the goods – s. 7(1)(a)

2. The goods shall be free from any charge or

encumbrance when the property in the goods is to
pass – s. 7(1)(c)

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 MISREPRESENTATION – s. 8

 If the owner made a misrepresentation in the course of
negotiations leading to the hire purchase agreement,
the hirer has the right to rescind the agreement and
sue for damages.

 Where the dealer has made a misrepresentation, the

hirer cannot repudiate the agreement. He can only sue
for damages.

21
 Lau Hee Teah v Hargill Engineering Sdn Bhd
& Anor [1980] 1 MLJ 145

 The App had entered into a HP agreement of a loader. he
was given written guarantee by the dealer for 6 months
against faulty parts and for the supply of spare parts.
The dealer did not inform the hirer of the year of
manufacture of the machine and the fact that it had
previously been involved in an accident. The machine
was defected once used.

 Held: There was no duty on the dealer to inform the

hirer of these matters. The breach of warranty did not
give rise to a right to rescind the agreement but to claim
for damages. 22
 STATUTORY RIGHTS OF
HIRER

 Right to request the owner to supply a statement and
information, at any time before the final payment – s. 9

 If a hirer has to pay for 2 or more hire purchase

agreements, he is entitled to require the owner to
appropriate the payments – s. 10

 Right to apply to court for an Order for goods to be

removed to some other place – s. 11

 Right to assign right, title and interest with consent of

owner – s. 12 23
 Statutory rights of hirer

 Right to pass the right, title and interest to his personal
representative or liquidator (if hirer is a company) by
operation of law– s.13

 Right to complete the purchase of the goods earlier than

the due date – s. 14

 Right to terminate the Agreement by returning the goods

to the owner – s. 15
24
 REPOSSESSION

 The owner has the right to recover possession of the
goods if the hirer commits a breach of his obligations
under the HP agreement.

 Provided – s.16:
 The payment of instalment by the hirer must not
exceed 75% of the total cash price of the goods;
 The hirer has defaulted in 2 successive payment of
instalment;
 The owner has served on the hirer a notice in writing
in the form set out in the Fourth Schedule.
25
 Cont.

 If the payment of instalment by the hirer amounts to
more than 75% of the total cash price of the goods and
there has been 2 successive defaults of payment, the
owner is required to obtain an order of the court before
taking possession of the goods – s. 16(1A)

 Where the owner has obtained an order of the court and

he has served on the hirer the Fourth Schedule Notice
and after the expiry of twenty-one days from the service
of the notice, the owner may exercise the power of taking
possession of goods - s. 16(1B) 26
 Procedures on repossession

 He must serve on the hirer a notice in writing (Fourth
Schedule Notice) of his intention to retake possession.

 The period fixed by the notice must have expired and

this must not be less than 21 days.

 The owner must personally deliver to the hirer a

document acknowledging receipts of the goods.

 If hirer was not present at that time, the owner must

send to him, immediately after the repossession.
27
 Koh Siak Poo v Med-Bumikar Mara Sdn
Bhd [1994] 3 MLJ 610

 The P hired a tractor under HP agreement with CCM.
CCM served notice of intention to repossess in the Fourth
Schedule to P, 8 days after the tractor was seized by the D
(CCM’s agent).

 Held: The notice was not complied with s. 16 i.e. the

requisite 21 days’ notice was not given. Thus, the P was
entitled for damages.

28
 Procedures on repossession

 Where the hirer is deceased, there has to be 4 successive
defaults of payment of instalment before the owner
takes possession of the goods – s.16(1C)

 A hirer who returns goods within 21 days after the

service of the notice (Fourth Schedule), is not liable to
pay – s. 16A:
 The cost of repossession;
 The cost of incidental to taking repossession; and
 The cost of storage.
29
 Procedures on repossession

 The owner must serve on the hirer and guarantors a
notice in writing (Fifth Schedule Notice) within 21 days
after repossession.

 The owner cannot sell or dispose of the goods until the

expiration of 21 days after the date of service of the
notice – s. 17

 However, the owner may do so with the written consent

of the hirer.

30
 Abdul Kashab Hj Hanafi v. Hong Leong Bank
Bhd [2016] 8 CLJ 487

 HIGH COURT MALAYA, KUALA LUMPUR

Although the Fifth Schedule Notice dated 7 May 2014

estimated the market value of the car to be RM198,400, the
lower actual sale price of RM141,000 was not improper or
unreasonable. The sale was done at a public auction where
demand is generally not strong and prices usually fall in
subsequent auctions. The estimate in the Fifth Schedule
Notice is plainly an estimate
31
 Pang Brothers Motors Sdn Bhd v Lee Aik Seng
[1978] 1 MLJ 179

 A car was taken by the R on hire purchase with the App.
The R failed to pay the instalments due, and the App
issued a notice under s. 16(1).

 Held: The date specified in the notice was 2 days short

of the statutory minimum and the notice was bad in law
even if served and its effect was null and void.

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 Hirer’s Rights and Immunities when
Goods are Repossessed – s. 18

 Upon receipt of the Fifth Schedule Notice, the hirer may
within 21 days, give notice to the owner requiring the
owner to:-
 Redeliver to him the goods that have been
repossessed (subject to compliance by the hirer of the
provisions of s. 19); or

 Sell the goods to any person introduced by the hirer

who is prepared to buy for cash at a price not less
than the estimated value of the goods set out in the
notice
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 Hirer to Regain Possession of the Goods
– s. 19

 Hirer can regain possession of the goods within 21 days
after giving notice under s. 18(1)(a), if the hirer does the
following:
a) pays to the owner any amount due in respect of the
period of hiring up to the date of the payment;

b) remedies any breach of the agreement; and

c) pays to the owner the reasonable costs and expenses

incurred by the owner in taking possession and of
returning them to the hirer.
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