What Qualifies As A Hire-Purchase Transaction? | Independent Newspapers Limited
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What Qualifies As A Hire-Purchase Transaction?

Posted: Sep 17, 2015 at 12:04 am   /   by   /   comments (0)

Hire-purchase being a special system of purchase and sale of goods is regarded as a special contract. Hire-purchase may be define as an agreement for the delivery of goods by the owner to a person (usually referred to as the hirer) under which the latter is granted an option to purchase those goods. As the name suggests, it is a contract of hire coupled with an option to purchase. 

The fact that parties to an agreement expressly call it a hire-purchase does not necessarily make it one. It is important to examine the transaction as a whole to discover the intention of the parties. For an agreement to qualify as a hire-purchase transaction, it must have the following factors:

Lender’s rights over the goods

In a true hire-purchase agreement, the lender parts with possession of the goods to the borrower but retains title. He also gives the borrower a right to use the goods during the period of hire with an option to purchase the goods at the end of the contract.

Borrower’s rights over the goods

The borrower being the hirer obtains possession of goods along with a right to use the goods during the hire-purchase period. He is also given an option to purchase the goods at the end of the hire period or return same. He reserves the right to terminate the agreement at any time during the pendency of the agreement.

Obligations under the contract

In consideration for the right to use the goods, the borrower pays the hire-purchase price to the lender by way of instalment. He would first pay a deposit as stipulated by the Hire-Purchase Act (the “Act”). If the borrower defaults in payment, the lender may recover his goods by action and not by snatching back. The borrower owes a duty to return the goods if he no longer wants to continue with the agreement. He must exercise his option either to purchase or not after the hire period. If he purchases he would pay the option price. If he does not, he would return the goods. Upon such return, the borrower shall be liable to pay all arrears of instalments and comply with the minimum payment clause if any. The lender on his part must  prepare to accept the decision of the borrower in relation to the exercise of his option. The lender is not at liberty to reject the choice of the borrower as to whether to purchase or return the goods.

Contractual capacity of the parties

Although parties are at liberty to conduct their contract, certain parties are protected by the law as persons who do not have the requisite understanding to enable them contract. In this regard the capacity of infants, lunatics, drunkards, illiterates and married women in hire-purchase agreements and their limitation are worthy of consideration.

In the case of infants, lunatics and drunkards (as the case may be), any contract entered into by them are voidable unless the contract is for the purpose of necessities. In the case of a lunatic, any contract entered into during the lunatic’s lucid interval is valid. Also in the case of a drunkard, the contract may be valid if the person contracting with him can prove that he had no knowledge of his state and took no advantage of his drunkenness.

For an illiterate person, his capacity is limited by the facts that he does not understand the language of the contract and requires the service of an interpreter or writer, to write the documents on his behalf. The writer shall state his name, address, fee charge (if any), etc. He must in addition put a jurat to show that he read and interpreted to the illiterate who seemed to have understood it before appending his signature.

Hire-purchase agreements involving married women are governed by contract rules that govern contracts involving married women. A married woman’s contractual capacity depends on the part of Nigeria that the transaction is entered into. While women from western Nigeria may contract in respect of their properties under laws of western Nigeria, those from other parts of Nigeria are governed by another law and are restricted from dealing with their properties without the consent of their husbands.

It is essential that the parties entering into a hire purchase contract have requisites capacity to do so.

Accuracy of the Agreement

The accuracy of the document or agreement of the parties is essential for the purpose of construction or enforcement of the contract. The nature of a hire-purchase agreement allows the owner to offer the hirer a right to possess and use goods during the period of hire, as well as the hirer’s right to exercise an option either to purchase or return same at the end of the agreement. The hirer also has the right to exercise that option to purchase or determine the agreement.

In consideration for this right, the hirer pays the hire-purchase price by way of instalment. The hire-purchase is a special contact and must comply with certain laid down procedure for it to be enforceable.