COURSE TITLE: COMMERCIAL LAW

LECTURER: DR. D.O AKABUIRO.

DEPARTMENT: FACULTY OF LAW.

SCHOOL: LEAD CITY UNIVERSITY

• Sale and Hire-Purchase: Contracts of sale resemble contracts of
hire-purchase very closely, and indeed the real object of a
contract of hire-purchase is ultimately the possible sale of goods.
• Where goods are delivered to the hirer under the hire-purchase
agreement, he only takes possession of them as a bailee; it
follows that he cannot pass a valid title to any third party. All he
has is possession of goods plus an option to purchase.
• It is only when he exercises his option to purchase that he
becomes a person who has agreed to buy under Section 1 of the
Goods Act and can exercise the right of a buyer in possession
under Section 25 (2) of the Sale of Goods Act.
• In the case of a sale, however, it is a contract whereby
the seller transfers or agrees to transfer property in
the goods to the buyer for a monetary consideration
called the price.
• The above definition identifies two types of sales, an
outright sale or an agreement to sell which could be a
conditional sale.
• Where it is an outright sale, the property in the goods
passes immediately the contract is made by virtue of
Section 18 Rule 1 of the Sales of Goods Act.
• In the case of a conditional sale, the property in the goods will
not pass until certain conditions are fulfilled in consonance with
the agreement. The rules relating to passing of property in the
goods are reflected in Section 16 to 20 of the Sales of Goods
Act (SGA).
• If the conditions are fulfilled by the seller, there is an obligation
on the buyer to accept and retain the goods under Section 27 of
the Sales of Goods Act (SGA).
• Unlike hire-purchase, no formality or strict procedure is required
for entry into a contract of sale of goods; it may be entered into
orally or in writing or could be inferred from the conduct of the
parties and the surrounding circumstances.
• In JOE ALEEN & CO LTD v SARI ADEWALE & ANOR
the court emphasized this distinction as follows: the
test to be applied is whether or not the party
receiving the goods has the legal right to return
them at his own option and thereupon to cease
paying instalment. If he has, the agreement is an
agreement to hire with possibly an option to
purchase. If he has not, the agreement is an
agreement to sell. The owner is is bound to collect
the goods, if the hirer wishes to return them.
• Credit Sale and Hire-Purchase: A credit sale is an
agreement whereby a seller agrees to sell goods and
receive payments subsequently by way of instalments.
• A credit sale under common law simply implies sale on
credit. Thus, where instalmental payment is allowed,
although it has the resemblance of hire-purchase
agreements, it is a credit sale.
• A buyer in a credit sale can confer a valid title on a
third party who buys the goods before completing
payment of the purchase price.
• The buyer here is under an obligation to complete the full
purchase price since ownership was conferred on him at
the time of contract if he complied with the terms of the
contract.
• In hire-purchase, what is conferred at the time of contract
is the option to purchase which may be exercised one way
or the other.
• Section 20 (1) HPA defines a credit sale as an agreement
under which the whole or part of the purchase price is
payable by five or more instalments. See JAJIRA v.
NORTHERN BREWERY (1972) NCLR 313.
• What distinguishes a credit sale from the a hire-
purchase is that in a credit sale, the parties are
aware from the beginning of the contract that
the property has or will eventually pass to the
buyer upon the fulfillment of the agreed
condition, while in the case of hire-purchase,
there is no agreement to the effect that property
would pass. Whether property passes or not is
strictly dependent on the hirer’s exercise option.
• A seller under a credit sale is a person who has
transferred or agreed to transfer property in the goods
to the buyer, and the buyer is a person who has bought
or agreed to buy within the meaning of Factors Act 1889
and Sale of Goods Act 1893.
• Even if the buyer is in the default of payment, the seller
can enforce the rights to compel payment and will not
have automatic rights to recover the goods as in hire-
purchase transaction, where the title is reserved in the
owner until the hirer’s exercise of option.
• Bill of Sale and Hire-Purchase: A bill of sales is a document
evidencing the title of the seller to the goods in the buyer’s
possession. Here, the buyer who has become the owner of goods and
has taken delivery gives the seller a right to seize them upon his
default of payment of the unpaid purchase price.
• Under the bill of sale, the transferor, as in the case of sale of goods is
interested in having his entitlements all paid to him. To ensure this,
the goods are used as some part of security for payment.
• If the transferee defaults in the repayment of loan, the transferor can
recover the goods used as security for the loan. If it was a transaction
under the sale of goods, the seller could retain title under Section 19
of the Act until price is paid and if the buyer defaults, the seller can
recover his goods.
• A bill of sale merely evidences the fact that there is an actual sale
situation but that title does not pass until all the instalmental
payments have been made.
• In the case of hire-purchase, the agreement is for bailment and not
the sales of goods. The issue of sale can only arise when the hirer
exercises his option to purchase.
• Section 5 (4) of the Bill of Sales Act defines a bill of sale as including
a wide variety of instruments used in connection with dealing in
personal property. For example, assignments, transfers, assurances
on personal chattels, licenses to take possession of personal chattels
as security for any debt and any agreement by which a right in
equity to any personal charge or security thereon shall be conferred.
• The wide definition of a bill of sale made it applicable to a wide
range of transactions. Debtors and borrowers, however, began
to find the publicity given by registration uncomfortable and
cumbersome. This discomfort led to a search for another legal
form of sale which could enable the seller to retain ownership of
the goods while parting with possession and at the same time
giving protection against bona fide purchase from the buyer.
• They found their answer in the hire-purchase which places no
obligation on any hirer to purchase but gives him an option to
do so if he wishes to. If at the end of the period he intends to
purchase then he must communicate such interest by exercising
his option to purchase.
• Conditional Sale and Hire-Purchase: A conditional sale agreement is a
contract whereby the transfer of the property in the goods is subject
to some conditions to be fulfilled subsequently by the buyer. The
condition are usually in relation to the payment of the purchase price.
• Section 1 (3) SGA allows transfer of property in the goods to take
place at a future time to conditions to be fulfilled after.
• The buyer in a conditional sale holds the property as a buyer in
possession under S. 25 (2) SGA and can pass valid title as an exception
to the nemo dat quod rule.
• In a hire-purchase, the hirer only holds a bailee and not as a buyer. It
means he only has a right to take possession and use the goods during
the period of contract.
• In AMAO V. AJIBADE & ORS (1955-56) WRNLR
121, the buyer was allowed possession of goods
upon payment of a deposit of 400 pounds. The
agreement provided that the balance had to be
paid in three equal installments and that the
owner was to retain ownership until the full
purchase price of 11045 pounds. It was held
that the agreement was a conditional sale and
not a hire-purchase agreement.
• Lease and Hire-Purchase: A lease has been
defined by Black’s Dictionary as:
“A contract by which a rightful possessor of
real property conveys the right to use and
occupy the property in exchange for
consideration, usually rent. The lease term can
be life, for a fixed period terminate at will.”
• When the word ‘lease’ is used with reference to equipment, the word means
a contract by which one owning such property grants to another, the right to
possess, use and enjoy it for a specific period of time, in exchange for
periodic payment of a stipulated price referred to as rent.
• The hire purchase agreement is similar to lease in that the owner parts with
possession of goods in return for a rental but in addition to a mere right to
use, the hirer is given an option to purchase the goods at the end of the
contract period.
• In AKIBIYA V SAMBO (unreported), the plaintiff entered into an agreement
to lease a motor vehicle for 12 months. The agreement was renewable for a
further 12 months after which the lessee was to return the goods. The
parties described the agreement as a hire-purchase. It was held that the
transaction was a lease which only conferred on the lessee a right to use the
goods and return it after the expiration of the lease.
• Hire-purchase differs from lease in the following ways:
a. Hire-purchase contemplates eventual sale while lease
does not.
b. Hire-purchase is fully regulated while lease is not and
is subject to individual contract.
c. While goods involved in equipment leasing are
capital goods those in hire-purchase are consumable
not exceeding two thousand naira unless they are
vehicles.
• Hire and Hire-Purchase: A hire is a kind of
bailment under which a bailee called the hirer is
given possession of an article, for use only during
a particular period under a hiring agreement.
• A hire agreement can be defined as obtaining the
temporally use of a thing for a rental payment.
• The hirer is bound to return the goods after the
hire period and has no option as is the case with
hire-purchase agreement to purchase the goods.
• Loan and Hire-Purchase: Black’s Law Dictionary defines a loan as an
act of lending; a grant of something for temporary use. Mostly sums
of money are lent at an interest rate.
• Where the sum involved is large, the lender may require the
borrower to provide security for the loan. A borrower may therefore
charge or mortgage his goods to the lender as security for such loan.
• Unlike a hire-purchase, a borrower need not part with possession of
his goods during the period of the loan agreement. Unless he is in
default of the payment and the lender exercises his right to enforce
the security, the lender may not really have recourse to the
borrower’s goods. See JAJIRA V. NORTHERN BREWERY CO LTD
(1973) NMLR 29.