UNIT 12

THE HIRE PURCHASE CONTRACT

A hire purchase contract is a system of acquiring goods where the buyer pays an initial deposit and gains possession of the goods while agreeing to pay the balance in installments. Ownership remains with the seller until all payments are made.

THE HIRE PURCHASE AGREEMENT

A hire purchase agreement in Nigeria is regulated by the Hire Purchase Act Cap H4, Laws of the Federation of Nigeria, 2004. The agreement must be in writing and signed by both parties. It typically includes:

1. Description of Goods: this is the detailed description of the goods being hired.
2. Price and Payment Terms: this is the total price, the initial deposit, installment amounts, and due dates.
3. Rights and Obligations: this is the rights and obligations of both the hirer and the owner.
4. Termination Clause: this is the conditions under which the agreement can be terminated.

OBLIGATIONS IMPLIED UNDER THE ACT

The Hire Purchase Act implies several obligations to ensure fairness and protection for both parties:

1. Right to Information: this is provided under Section 2 of the Act, where the owner must provide a copy of the agreement to the hirer.
2. Maintenance of Goods: this is where the hirer is responsible for maintaining the goods in good condition as provided under section 6 of the act.
3. Use of Goods: this is where the hirer must use the goods reasonably and not contrary to the agreement terms as provided under section 7 of the act.
4. Insurance: this is the owner may require the hirer to insure the goods against loss or damage.

RECOVERY UNDER THE HIRE PURCHASE ACT

When a hirer defaults on payment, the owner has the right to recover the goods. However, this recovery process is regulated to prevent unfair practices. Key points include:

1. Notice of Default: this is where the owner must issue a notice of default to the hirer.
2. Right to Terminate: this happens if the hirer fails to rectify the default within the stipulated time, the owner can terminate the agreement.
3. Repossession: Repossession of goods must follow due process. Provided under Section 9 where the owner cannot repossess the goods without a court order if more than two-thirds of the total hire purchase price has been paid.

OWNERS OBLIGATIONS UNDER SECTION 9(5)

See section 9(5) of the Hire Purchase Act which outlines specific obligations for the owner, particularly regarding repossession and the rights of the hirer:

1. Court Order Requirement: this happens if the hirer has paid more than two-thirds of the hire purchase price, the owner must obtain a court order to repossess the goods.
2. Refund of Excess Payment: this happens if the goods are repossessed, the owner must refund any excess payment made by the hirer after deducting the amount due.
3. Right to Re-sell: this is where the owner has the right to re-sell the goods after repossession but must account for the proceeds to the hirer.

ADVERSE POSSESSION AND CONVERSION

Adverse possession and conversion issues can arise in hire purchase agreements, particularly in the context of repossession.

1. Adverse Possession
   Adverse possession refers to the occupation of property or goods without the legal right to do so. In the context of hire purchase:
   
   1. Unauthorized Possession: this happens if a third party takes possession of the goods without authorization, the owner can claim adverse possession.
   2. Legal Action: this is where the owner may take legal action to reclaim the goods from the unauthorized possessor.
2. Conversion
   Conversion involves the wrongful possession or disposition of someone else’s property. In hire purchase agreements:
   
   1. Wrongful Act: this happens if the hirer sells or transfers the goods without the owner's consent, it constitutes conversion.
   2. Legal Remedies: this is where the owner can sue for conversion to recover the goods or seek damages.

CONCLUSION

Understanding the provisions of hire purchase agreements in Nigeria is crucial for both owners and hirers to ensure compliance with the law and to protect their rights. The Hire Purchase Act provides a comprehensive framework that balances the interests of both parties, and adherence to these regulations is essential for the smooth operation of hire purchase transactions.