UNIT 13

CONTROLS OF HIRE PURCHASE AGREEMENT

The hire purchase agreement is a contractual arrangement wherein the owner of goods leases them to a hirer, who has the option to purchase the goods at the end of the lease term. In Nigeria, hire purchase transactions are primarily governed by the Hire Purchase Act, which provides a regulatory framework to protect the interests of both parties and ensure fair dealing. See the case of John Holt Leasing Ltd v. Karami (2004) 15 NWLR (Pt. 896) 278 where the court highlighted the importance of adhering to the statutory requirements for hire purchase agreements. The court held that non-compliance with the provisions of the Hire Purchase Act rendered the agreement unenforceable and the case of Ekwunife v. Wayne (West Africa) Ltd (1989) 5 NWLR (Pt. 122) 422 where the court emphasized the hirer’s right to a cooling-off period and the requirement for transparency in hire purchase agreements. The court ruled in favor of the hirer, who had not been provided with the necessary information before signing the agreement. Key Provisions of the Hire Purchase Act includes:

1. Form and Content of Hire Purchase Agreements: See section 2 of the Hire Purchase Act which requires that all hire purchase agreements must be in writing and signed by both parties. This provision ensures clarity and prevents disputes over the terms of the agreement.
2. Right to Information: provided under Section 3, where the owner must provide the hirer with a written statement containing key information, including the cash price of the goods, the hire purchase price, and the details of each installment. This provision ensures transparency and helps the hirer make an informed decision.
3. Cooling-off Period: See section 4 which provides a cooling-off period during which the hirer can terminate the agreement without penalty. This period is typically three days from the date of the agreement, giving the hirer time to reconsider their decision.
4. Protection against Repossession: See sections 5 and 6 of the Act which provide protections for the hirer against arbitrary repossession. The owner cannot repossess the goods without a court order if the hirer has paid at least one-third of the hire purchase price. This provision protects the hirer from unfair practices.
5. Termination of Agreement: See section 7 which allows the hirer to terminate the agreement at any time before the final payment, subject to certain conditions, such as paying all due installments and returning the goods in good condition.
6. Restrictions on the Owner’s Rights: See section 8 which restricts the owner’s right to recover the goods if the hirer has made substantial payments. If the hirer has paid two-thirds of the hire purchase price, the owner must obtain a court order before repossessing the goods.

THE MINIMUM PAYMENT CLAUSE UNDER THE HIRE PURCHASE ACT

A minimum payment clause in a hire purchase agreement stipulates that the hirer must make a minimum number of payments before they can exercise certain rights or before the owner can take specific actions. Key Provisions Related to Minimum Payment Clause includes;

1. Section 9 of the Hire Purchase Act: This section deals with the minimum payment required before the owner can repossess the goods without a court order. It stipulates that if the hirer has paid at least one-third of the hire purchase price, the owner must obtain a court order to repossess the goods.
2. Section 10: Section 10 provides that the hirer can terminate the agreement by returning the goods and paying all outstanding installments. However, if a minimum payment clause is included, the hirer must have paid the minimum specified amount before they can terminate the agreement without additional penalties.

EFFECT OF MINIMUM PAYMENT CLAUSE STIPULATIONS AGREEMENTS GOVERNED BY THE ACT

1. Protection for the Hirer: this is where the minimum payment clause ensures that the hirer has a reasonable period to make payments without the threat of repossession. This provision prevents the owner from repossessing the goods arbitrarily and provides the hirer with a sense of security.
2. Encouragement for Regular Payments: this happens by requiring a minimum payment before certain rights can be exercised, the clause encourages the hirer to make regular payments. This provision benefits both parties by ensuring a steady flow of payments and reducing the likelihood of default.
3. Legal Enforceability: this happens if a hire purchase agreement includes a minimum payment clause that complies with the provisions of the Hire Purchase Act, it is legally enforceable. This enforceability protects the rights of both parties and provides a clear legal framework for resolving disputes. See the case of Yusuf v. Cooperative Bank Ltd (1994) 7 NWLR (Pt. 359) 676 where the court discussed the enforceability of minimum payment clauses in hire purchase agreements. The court upheld the validity of such clauses, provided they were consistent with the provisions of the Hire Purchase Act and the case of Universal Trust Bank of Nigeria Ltd v. Soares (2012) 17 NWLR (Pt. 1329) 126 where the court ruled that minimum payment clauses must be clearly stated in the agreement and must comply with statutory requirements. The decision reinforced the need for transparency and adherence to legal standards in hire purchase transactions.

CONCLUSION

The controls of hire purchase agreements and the minimum payment clause under the Hire Purchase Act provide a robust framework for protecting the interests of both the owner and the hirer. These provisions ensure transparency, fairness, and legal enforceability, which are essential for the smooth operation of hire purchase transactions in Nigeria. The relevant cases illustrate the importance of adhering to statutory requirements and the legal consequences of non-compliance.