Definition: Hire Purchase Agreement
Hire purchase agreements are agreements whereby an owner of goods allows a person, the hirer, to hire goods from him for a period of time by paying installments. The hirer has an option to buy the goods at the end of the agreement if all installments are being paid. This is not a contract of sale but contract of bailment as the hirer merely has an option to buy the goods. Although the hirer has the right of using the goods, he is not the legal owner during the term of the agreement.
Regulated agreement
Jasmine entered into a three-year hire purchase contract (“the HPA”) with Dodgy Finance Limited (“DF”) to acquire a new Mazda car (“the Car”) from Kwan’s Garage. Given that Jasmine is an individual and DF is a creditor which provides Jasmine with a credit of Rs 25,000, the HPA is considered as a consumer credit agreement under section 8(1) which provides a fixed-sum credit under section 10(1)(b) . It is also a restricted-use credit agreement which falls under section 11(1)(a) . A consumer credit agreement is a regulated agreement within the meaning of section 189(1). (Hire Purchase Agreement)
As the HPA falls within section 11(1)(a), it is a Debtor-creditor-supplier agreement under Section 12(a) . It can be further categorized as a two-party debtor-creditor-supplier agreement. DF bought the Car then hired it to Jasmine under the HPA. DF acts both as the suppliers of the credit and Car. Therefore, there are in reality only two parties, namely, Jasmine being the debtor and DF being the suppliers of the credit and Car. (Hire Purchase Agreement)
Improper execution (Hire Purchase Agreement)
We will look into the scenario and elaborate the relevant issues which may lead to any potential improper execution of the HPA.
DF shall give Jasmine a copy of the HPA in accordance to section 77(1) , together with a statement signed by or on behalf of him, showing the payment details under the agreement, whether paid or unpaid. Jasmine requested for a settlement figure and a copy of the original HPA and DF refused to do so.
DF is in breach of section 77(1) which would not be entitled to enforce the HPA while the default in payment continues according to section 77(4)(a). In Mc Guffick, Mr Justice Flaux held that the bank’s rights and the debtor’s liability continue to exist but would become unenforceable during the period of non-compliance with section 77(1). Jasmine should be noted that DF is entitled to inform the credit reference agencies of the breach of such provision and the HPA would become enforceable again once DF complies with such provision.
A failure to comply with the requirements abovementioned would make the HPA an improperly-executed regulated agreement, which would only be enforceable against the hirer on an order of the court (section 65(1)). It is important to note that section 127(1)(a) stipulates that an application for an enforcement order under section 65(1) shall be dismissed unless the court considers it just to do so.
Time Order (Hire Purchase Agreement)
The alternative way would be for Jasmine to apply for a time order from the court under section 129. With a time order, the court may allow more time for Jasmine to make payments to DF under section 129(2)(a) or to remedy any breach of the HPA under section 129(2)(b). One must be served with an enforcement order, default notice or notice of arrears before she can apply for a time order. If the default notice sent to Jasmine from DF is considered to be ineffective, and there are no enforcement order or other notices of arrears applied by DF, Jasmine cannot apply for a time order.
Termination of Hire Purchase Agreement
Jasmine may terminate the HPA according to section 99 which governs the right to terminate hire-purchase etc. agreements. This can be done at anytime before the last installment is made (section 99(1)) given that half of the total price of the Car has been paid (section 100(1)).
Jasmine would be allowed to terminate the HPA as she had already paid for two-third of the Car price. The advantage of Jasmine terminating the HPA is to limit the amount she owes. If DF terminates the HPA at a later time, Jasmine may end up owing more. However, it is advised that Jasmine should only terminate the HPA shall she be no longer available to afford the payment of the Car as Jasmine would be unable to get refund for the excess of one-half of the payment which she had already made.
Breach of implied terms
The HPA contains implied terms as to the quality or fitness of goods under section 10 Sale of Goods (Implied Terms) Act 1973. Given that the Car had never run properly which requires engine repairs regularly, Jasmine may rely on the implied term to sue DF for the breach of condition of the HPA. Should the claim be successful, Jasmine would have the right to reject and claim damages from DF.
Unfair relationship/misrepresentation
Section 140A(1) Consumer Credit Act 2006 provides that an unfair relationship may arise by virtue of the terms of an agreement, the ways in which enforcement is being carried out, or anything else. When an unfair relationship exists between a creditor and debtor arising out of an agreement, the court may make an order under section 140B Consumer Credit Act 2006.
In Nine Regions (t/a LogBook Loans) v Sadeer , the court decided that an APR of 384.4% was not unfair due to various reasons, including the debtor’s poor credit record which made the loan as the debtor’s last resort. In the present case, the cash price of the Car was at an APR of 53%.
If it is true that Jasmine had a poor credit record, the court might not consider the APR at our present case to be unfair to her. However, if what DF claimed (a high APR rate was given to Jasmine due to her poor credit record) was for the purpose of inducing Jasmine to enter into the HPA, it may amount to misrepresentation ( Horsfall v Thomas ) if it is a false statement of fact made by DF.
A statement of opinion by someone in a position to know the facts is regarded as a statement of fact. The fact that DF is a finance company which requires knowledge about the industry APR may indicate that it is making a misrepresentation when it said “the best deal in town” to Jasmine if such statement is found to be untrue rather than a mere puff. Jasmine may be able to claim damages as a consequence of a fraudulent misrepresentation made
In relation to the non-compliance of section 78, it is unlikely that Jasmine can make a claim for an unfair relationship within the meaning of s.140A.
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