COMPILED BY: DAMILARE DE-ICON

COMMERCIAL LAW II

HIRE-PURCHASE COURSE OUTLINE:

1. INTRODUCTION
i. Definition
ii. Hire purchase under the common law
iii. Hire purchase under both the 1965 and 2004 Act
iv. Reasons for the adoption of the Hire purchase system in Nigeria
v. Nature and obligations of the parties

2. NATURE OF HIRE-PURCHASE AGREEMENT

i. Characteristic features of Hire-purchase agreement

3. FORMALITIES
i. Under the common law
ii. Under the hire purchase Act
iii. Treatment of illiterate hirers.

4. HIRE PURCHASE & OTHER TYPES OF TRANSACTIONS

i. Hire purchase and contract of sale
ii. Hire purchase and credit sale
iii. Hire purchase and conditional sale
iv. Hire purchase and loan on security
v. Hire purchase and agency
vi. Hire purchase and sale of goods etc

5. THE CONTENT OF HIRE PURCHASE AGREEMENT

6. OWNERSHIP AND RECOVERY OF GOODS BY OWNERS

i. Recovery at common law
ii. Recovery under the hire purchase Act
iii. The power of the court
iv. Adverse possession and conversion
v. Minimum payment clause
7. MISCELLANEOUS STATUTORY PROVISIONS
i. Power of the Minister to regulate terms, power to regulate hire purchase business and
power of exclusion
ii. Duty to furnish information by the hirer
iii. Appropriation of payments
iv. Control of advertisements

8. TERMINATION OF HIRE PURCHASE AGREEMENT

i. Termination of agreement or hiring
ii. Termination of agreement

INTRODUCTION

History of Hire Purchase Law in Nigeria

The Hire-Purchase Law that applied in Nigeria before 1965 was English Common Law
and Equity.
The Nigerian Hire-purchase act was promulgated in line with English Hire-purchase act
of 1938 in 1965.
The Nigerian Hire-purchase Act was introduced 1965. When the Act was enacted in
1965, it applied only to the Federal Territory of Lagos, but by the Hire-Purchase:
(Application) Act 1966, it was made applicable to the whole country, and it become
operative on October 1, 1968 by virtue of the Hire-Purchase (Appointed Day) Order
1968.
It was amended in 1990, the current one is the hire purchase act of 2004.

DEFINITION: The hire purchase Agreement defines the form hire purchase in S.20(1)
as the bailment of goods in pursuance of an agreement under which the bailee may buy
the goods or under which the property in the goods will or may pass to the bailee.

Classes of Goods Covered Under the Hire Purchase Act

According to the provision of S.1 of the Hire Purchase Act, the following are the classes
of goods that are covered by the provisions of the Hire Purchase Act:
• All hire purchase agreements where the price of the goods in question does not
exceed two thousand naira.
• All agreements that concern motor vehicles and other automobiles.
A motor vehicle has been aptly defined by s. 20 of the Hire Purchase Act as “a
mechanically propelled vehicle intended for or adapted for use on road or for agricultural
purposes”.
In respect of other goods that aren’t covered by the above provision, the English
Common Law and Equity would apply.

Definition under The Common Law

A hire purchase agreement is defined at Common Law as an agreement whereby the
owner of goods transfers possession of them to another person called the 'hirer' for an
agreed periodical payment and or condition that the hirer may at his option to return or
buy the goods.
In other words, a Hire-Purchase agreement is a bailment of goods with an option to the
hirer to buy or return them.
The hire-purchase has received its first judicial approval in the House of Lords in
HELBY V. MATHEWS (1985) AC 71. In that case, the owner of a piano agreed to let it
on hire to Hat at a monthly rent of ten shilling sand six pence. The agreement gave
possession of the piano to H. and permitted him to return it to the owner at any time
subject to payment by him of all installments due to the date of return.
It further provided that if and when the instalments paid by H. totalled eighteen guineas
the piano will become his property but that until such payment, it remained the property
of the owner, who will be entitled to resume possession of it, if I defaulted in his
instalmental payments or failed to keep the piano at his address. Having taken possession
of the piano and paying some instalments, H pledged it with a pawnbroker, as security for
a loan. The owner took this action against the pawnbroker to recover the piano. The
House of Lords unanimously held that the action succeeded.
Lord Herschell pointed out that:
“All that he undertook was to make the monthly payments of ten shillings and sixpence so
long as he kept the piano. He had an option no doubt to buy it by continuing the
stipulated payments for a sufficient length of time. If he had exercised that option he
would have become the purchaser. I cannot see under these circumstances how he can be
said either to have bought or agreed to buy the piano. The terms of the contract did not
upon its execution bind him to buy, but left him free to do so or not as he pleased.”
The case thus gave rise to the modern hire-purchase system that operated in Nigeria
before the Hire-Purchase Act, 1965 but which as we have earlier mentioned, remains
applicable to transactions not governed by that Act.

Hire Purchase under the Common Law

Hire-purchase under the Common Law caused considerable hardship to hirers because it
afforded them little protection and therefore led to injustices against hirers of goods,
these injustices include:-
1.The hirer had no right to redeem the hired goods after default in his installments
payments. This was so even if he had punctually paid all previous instalments but became
a day late in paying the last instalment. BENTWORTH FINANCE (NIG) LTD. V. DE
BANK TRANSPORT LTD. (1968 3 ALR COMM. 52 the Lagos High Court held that a
provision for punctual payment means payment on the date stipulated and that if the
payment is made only one day late, the hirer will be regarded as in default and the owner
may determine the agreement, resume possession of the goods and equity will not assist
the hirer even though he defaults only in the last instalment

2.If the hirer wrongfully returns the goods to the owner before the expiration of the
period of hire, he may remain liabie to pay substantially the rent for the entire hired
period. In J.O. LAWRENCE V. BENTWORTH FIN. (NIG) LTD. (1966) NMLR 87
(1965) 1 ALL NLR 378, the Supreme Court held inter alia, that in a hire-purchase
agreement there are two principal rights of the owner of goods, upon breach of a term of
the hire-agreement which exists until the hire, (a) after payment of all hire rentals due to
the owner under the agreement purchases the same by exercising his right under the
option clause, and (b) the owner's right to the hire rentals due under the hire-purchase
agreement for any period which the hirer in fact made use of the goods

3.The hire-purchase agreement transfers no property or any proprietary interest in the

goods to the hirer until he has exercised his option to purchase the goods, even though he
may have made substantial sums of payment towards the agreement.

4.The hirer has no legal interest in the goods repossessed by the owner despite the fact
that their subsequent sale by him may yield substantial surplus over and above the
hire-purchase price.

5.The hirer may become liable to pay an excessive amount under the "minimum payment
clause" on termination of the agreement. In AMUSA & ANR. V. BENTWORTH FIN.
(NIG) LTD. (1966) NWLR 276 the Supreme Court held, inter alia, that where a hirer
exercises his right of option to which he is entitled by the hire-purchase agreement, he
cannot complain that the "minimum payment clause" is a penalty.

THE INJUSTICES CAN BE SUMMARIZED AS FOLLOW:

1.​ No redemption right if a payment is missed

2.​ Owner repossession on any payment default
3.​ No property rights for hirer until all payments are complete
4.​ Excessive payments due to minimum payment clauses
5.​ Owner not accountable for resale of repossessed goods
6.​ Exorbitant interest rates due to lack of regulation
7.​ Signed documents often withheld from hirer
8.​ Hire purchase price not clearly stated in writing
9.​ Inaccurate records of instalments provided to hirer
10.​No obligation for owner to sell goods after final payment
11.​Owner can enter hirer's premises for repossession
12.​Undefined maintenance responsibilities

The Hire Purchase Act of 1965 And 2004 Act.

The Hire-purchase Act, 1965 apart from controlling hire-purchase transactions
generally, afforded protection to the hirer as follows:
1.​ It ensures that the hirer is properly informed not only in regard to the goods but
also the hire-purchase agreement itself.
2.​ It restricts the owner's contractual freedom by providing for inclusion of certain
terms in the agreement and prevents the owner or his agent from imposing certain
onerous terms on the hirer.
3.​ The Act implies certain conditions and warranties in the agreement and makes
ineffective any attempt by the owner to exclude some of them.
4.​ The act grants statutory right to terminate the agreement by the hirer while also
limiting his liability.
5.​ The Act restricts and regulates the right of the owner to repossess the hired goods
from the hirer when he is in default of payment or otherwise in breach of the
agreement.
Summary of the Hire-Purchase Act, 1965 and 2004 Act

1.​ Information Provision

2.​ Restriction on Owner's Contractual Freedom
3.​ Implied Conditions and Warranties
4.​ Statutory Right to Terminate
5.​ Regulation of Repossession Rights

REASONS FOR THE ADOPTION OF HIRE-PURCHASE SYSTEM

Under the common law, there are three reasons for the adoption of the
hire-Purchase system.

1. Access to Credit: The first reason is to allow credit to someone who is unable to pay
cash for the goods he wants and he would be glad to pay some deposit and thereafter pay
the balance instalmentally at a stipulated rate of interest. This has encouraged people to
demand for more goods and the system has become an instrument of economic policy by
the government.

2. Support for Dealers and Manufacturers:The second reason for the hire purchase
device is that a dealer in particular goods or the manufacturer cannot always provide
credits and yet the goods must be bought to enable the dealer or the manufacturer to stay
in business. The third party involved in this transaction is the finance company with its
objects of buying the goods from the dealer and then hiring it out to any interested party.
What happens in practice is that the finance company agrees to enter into a hire purchase
agreement with the dealer's customer.

3.Evasion of the Money Lenders Act:The third reason is the possible evasion of the
money lenders Act. It has been decided in the case of OLDS DISCOUNT LTD. V.
PLAY FAIR LTD(1938) 3 ALL E.R. 285 that a sale by the dealer to a finance company
and a hire purchase agreement between the finance company and a customer is not a
money lending transaction. Therefore, a finance company need not obtain a licence under
the Act. A money lender has been defined by the Act as excluding any person bonafide
carrying on any business not having for its primary object the lending of money, in the
course of which and for the purposes whereof he lends money. See Cap. 124 of the Laws
of the Federation.
NATURE OF HIRE PURCHASE AGREEMENT
The general conception of a hire purchase agreement is that it is an agreement under
which an owner of goods (that is personal property) of any description lets them out on
hire in consideration of periodic or instalmental payments called hire-rents and on the
condition that the hirer is at liberty to terminate the hiring and return the goods or to
continue the hiring until the hire rent reaches a stated sum in which event the property in
the goods automatically passes to him.

Like all other commercial agreements, before a hire purchase agreement can come
into fruition, there must be the following:
●​ Offer and Acceptance: the hirer offers to hire the goods and the owner accepts.
The mere signing of the hire purchase agreement is enough to constitute
acceptance of the agreement.
●​ Consideration: The consideration in a hire purchase agreement is usually in the
form of periodical payment.
●​ Capacity: The general rule of capacity in the law of contract also applies to a hire
purchase agreement. Thus, an infant cannot be bound in a contract of hire purchase
unless it is a contract for necessaries.
A hire purchase agreement can be terminated by the parties and by statutory provisions.
If there is a breach of the agreement by either party, it gives the other party the right to
terminate the hire purchase agreement.

Note that the offer in respect of a hire-purchase in writing is constituted by the hirer
signing the hire-purchase agreement, while the acceptance is signified by the owner
executing the agreement already signed by the hirer.

The acceptance must be communicated to the hirer in order to be valid, otherwise there
will be no binding contract.

If the acceptance is communicated by post, the acceptance takes effect from the time of
posting. See Adams v Lindsell (1818) 1 B & Ald 681

An offer and acceptance on the part of the owner and hirer by word of mouth is also
possible in hire-purchase transactions.
OBLIGATIONS OF THE PARTIES
The contract of hire purchase is solely determined by the terms of agreements between
the parties. In Nigeria, it is possible for the owner who is also the dealer, to give out his
goods on hire purchase to the hirer in which case there will be only two parties to the
transaction. However, the establishment of
finance companies in this country in recent times brings the practice in Nigeria which is
generally called “a triangular transaction", i.e. the dealer sells to a finance company
who gives the goods on hire purchase to the hirer. Thus in Nigeria, we can safely make
out three parties to the transaction and we will examine their obligations one after the
other.

Obligations/Duties of the Owner

1. Delivery of the Goods: It is the duty of the owner to deliver the goods to the hirer
when due. The goods must also be delivered in good condition.
2. Title: Before goods can successfully be assigned to a contract for hire purchase, the
owner must have a title to the goods.
3. Description of the Goods: The owner of the goods must ensure that the goods are
delivered according to the buyer's description. Also, the goods must fit their description.
4. Fitness and Quality of the Goods: The goods must be of merchantable quality and
they must fit the purpose for which they were hired. However, if there is any defect in the
property, it should be something that the owner can easily discern. For example, in the
case of Anoka vs. SCOA Warri the hirer returned a vehicle due to a defect in its engine.
The court held that the implied term of fitness for purpose would not be applicable here
due to the fact that the defect was something which the owner couldn’t easily discern. He
couldn’t have ordinarily known of a fault in the engine unless he took the engine apart.
5. Quiet Possession: The hirer has a right to quiet possession of the goods. The owner is
obligated to abstain from unnecessarily disturbing the buyer.
6. Furnishing Information: There is a general obligation on both parties to always
furnish information regarding the hire purchase contract. These information includes
things like arrears paid, date of payment, balance remaining etc.
See section 4 of HPA generally for the implied duties of the owner.
Duties/Obligations of the Hirer
1. Acceptance of Delivery: It is an obligation on the hirer to accept the goods when they
are delivered by the owner. If doesn't he can be sued for non-acceptance.
2. Duty of care: The hirer has a duty to use the goods in ways that would not occasion
damage to the goods.
3. Payment of instalments: This is one of the main functions of the hirer. He has to pay
instalments for the hire purchase as and when due. There is a plethora of cases to help
support this assertion. In the case of Animashawun vs. CFAO the hirer defaulted in
payment and the owner repossessed the goods. The court held that since the hirer had
failed to pay his instalments at the required time, the owner had the right to repossess the
goods.
4. Redelivery of the Goods: If the hire purchase agreement falls through, it is the duty of
the hirer to redeliver the goods to the owner.
5. Duty not to sell the Goods: The hirer has a duty not to sell the goods until the last
instalment has been paid.
6. Duty not to act Inconsistent to Owner’s Right: The hirer also has a duty not to act in
relation with the goods in a manner that is inconsistent with the right of the owner. He
can only do this, when the goods have been completely purchased.

C. THE DEALER: Most times, a dealer is not directly involved in the hire - purchase
agreement between the owner and hirer. However. where the dealer makes an express
promise or gives a warranty in relation to the hired item and this eventually proves to be
false, the dealer will be held liable. This in the English case of ANDREWS V.
HOPKINSON (1956) 3 ALL E.R. 442 the dealer said to the hirer, "it is a good little
bus. I would stake my life for it, you will have no trouble with it."
The car broke down a week later and the dealer was held liable. But in a situation where
the dealer sells to a finance company who lets it out on hire purchase.
Ordinarily there can be no obligation placed on him since he is not a party to the contract.
However, where it shows that a collateral contract can be implied between the dealer and
the hirer on the basis of which the dealer could be held liable. For instance, if at the time
the finance company i.e. the owner is negotiating for the goods, the dealer makes an
express warranty about the goods he may be liable if the warranty is broken as in the
above-cited case.

CHARACTERISTIC FEATURES OF HIRE-PURCHASE AGREEMENTS.

There are three essential characteristics of a hire purchase agreement, which may be
identified from its definition and they are:

1.It is a form of bailment.

2.Property in the goods remains with the owner.
3. It confers on the hirer an option and no obligation to purchase the goods.

We will examine each characteristic one after the other.

1. A form of Bailment:
A bailment has been defined by the Black’s Law Dictionary 9th Edition as: “A delivery of
personal property by one person (the bailor) to another (the bailee) who holds the
property for a certain purpose…”
The term 'bailment' describes a situation in which an owner of the goods (the bailor)
delivers possession or custody (but not ownership) of the goods to another person (the
bailee) for the accomplishment of some particular purpose, after which the goods are to
be returned to the bailor or his nominee. In a hire purchase agreement, the hirer receives
both possession of the goods and the right to use them, in return for the payment of a
periodic rent to the owner of the goods. In UNITED DOMINIONS CORPORATION
(NIG) LTD. V. LADIPO (1971) ALL N.L.R. 102 if the bailment constituted by the hire
purchase agreement comes to an end by some act on the part of the owner or hirer, other
than the due performance of the contract by the hirer, the right of possession of the goods
immediately reverts to the owner, and the hirer is under an obligation to deliver them up
to the owner.
Also, during the continuance of the hiring, the hirer must pay the installments of hire
-rent stipulated in the hire-purchase agreement. In INCAR MOTORS (NIG) LTD V.
ELIAS BUS TRANSPORT LTD (1970) NCLR 553 it was held that when these
instalments become due, they represent an accrued debt to the owner, so that the
subsequent repossession of the gods by the owner in no way relieves the hirer from his
obligation to pay this debt. It is important to note however, that a hire-purchase
agreement is not an ordinary bailment due to the hirer's option to purchase, which is
foreign to bailment. Accordingly, unless the agreement expressly forbids it, the hirer
unlike other bailees can deal with the goods in a manner inconsistent with the bailment
without causing the bailment to automatically cease. According to Halsbury's Laws of
England Vol. 19 3rd Ed P. 542, Paragraph 877 which states... which cannot be
regarded simply as a contract of bailment but is a contract of a complex nature containing
an option to purchase which introduces the element of sale and confers an interest of a
proprietary kind.

2. Property in the goods remains in the owner.

One important result of the element of bailment in a hire-purchase contract is that
throughout the period of the hire-purchase, the property (that is, the title of ownership) in
the goods remains in the owner and does not pass to the hirer until he pays the final
instalment of the hire-purchase price. A hire-purchase agreement clothes a person with all
the apparent indication of ownership but that person does not in fact become the owner
until all instalments have been paid.

The continued vesting of ownership in the owner is the most significant security
advantage of a hire-purchase contract; the hirer acquires only possession and the right to
use the goods. Accordingly, he cannot, except in very special circumstances lawfully
dispose of the absolute property in the goods to a third party. Once an owner lawfully
repossess the goods from a hirer he can sell or dispose of them as he pleases and in the
case of WILLIAMS V. U.A.C. Ltd (1937) 13 NLR 134 is not liable to account to the
hirer for the proceeds even if they exceed the amount outstanding on the hire-purchase
price.
Similarly, it was held in Incar Motors (Nig) Lid V. Elias Bus Transport ltd (supra)
It was held that if the proceeds of sale fall short of the outstanding amount, the owner
may not properly claim the short fall from the hirer.

3. Hirer's option to purchase the goods.

The most distinctive characteristic of a hire-purchase contract is the option, which it
confers on the hirer to return or purchase the goods as he wishes. This means that the
hirer's option to purchase is not to be enforced on him but he must make up his mind
whether or not to exercise that option. A hire-purchase contract is thus more than a
simple contract of hire and less than a contract of sale. The hirer does not bind himself to
pay the full hire-purchase price nor is he under an obligation to purchase the goods unless
he opts to do so.
 FORMALITIES
A.​ Under the Common Law
At common law, no special form is required for the entry into a hire-purchase agreement.
It may be made orally or in writing with or without seal.
With regard to agreements not coming under the control of the hire-purchase Act of 1965
or 2004, this position is the same. However, for obvious difficulties hire-purchase
agreements entered into orally are not encountered in practice.

B.​ Under the Hire-Purchase Act 1965 and 2004..

The 2004 Act grants maximum protection to prospective hirers and this forms its
underlying policy. This has been achieved in so many ways.

first, it has ensured that the terms of each transaction are made clear to the prospective
hirer before or at the time of entering into the transaction.

Second, certain statutory formalities are prescribed with attendant penalties for their
non-compliance.

Third, certain terms are made ineffective if included in a hire-purchase agreement.

There are certain requirement stipulated by the Act in respect of the above:

(1)Notice of cash price: S. 2(1) of the Act requires that before the hire-purchase
agreement is entered into, the owner shall notify the prospective hirer in writing the cash
price of the goods.
The cash price in relation to any goods means the price at which the goods may be
purchased by the hirer for cash.
It is a trite law that this notice should be given any time before the financial company
accepts the prospective hirer's offer by signing the hire-purchase agreement.
Another point to note here is that this notice should be given by the owner of the goods
and the question may arise as to who is the owner for this purpose, whether it is the
dealer or the finance company. S. 20 (1) of the Act (Also see LFN 2004 S. 20(1) defines
"owner" as the person who lets or has let goods to a hirer under a hire-purchase
agreement. Thus the true owner for this purpose is the finance company.
As a matter of practice, this notice is usually given by the dealer as the agent of the
finance company.
S. 2(1) does not only provide for the giving of written notice of the cash price of the
goods to the hirer, but also stipulate the ways in which the requirement will be complied
with.
These are:
(a)​By stating this in a separate document other than the note or memorandum of
agreement. This should precede the hire-purchase agreement and any later
document will be ineffective.

(b)​By the prospective hirer inspecting the goods.

(c)​By the prospective hirer selecting the goods by reference to a catalogue, price list
or advertisement, which dearly stated the cash price either of the goods as a whole
or all the different articles or sets of articles comprise in the goods.

2. Note or Memorandum in writing: S.2 (2) of the Act requires that a note or
memorandum of the hire-purchase agreement should be made and signed by the hirer and
by or on behalf of all other parties to the agreement. It is important to note that the hirer
should sign personally and not by an agent while the finance company can sign by an
agent. Where the hirer is a partnership all the parties must sign.
Section 2 (2) also prescribes that the note or memorandum should contain certain
information,

these are:
(a)​A statement of hire-purchase price of the goods.
(b)​A statement of the cash price of the goods
(c)​A statement of the amount of each instalment payable.
(d)​A statement of the date or the mode of determining the date of payment of each
instalment
(e)​A statement of the deposit payable or paid.
(f)​ A statement of the true rate of interest calculated in the manner prescribed from
time to time by the Minister.
(g)​ list of the goods to which the agreement relates sufficient to identify them; and
(h)​A notice in the terms provided in the schedule to the Act which informs the hirer
of his right to terminate the agreement, the manner of such termination and of the
restriction on the owners right to recover possession of the goods.
Delivery of Note or Memorandum
However, S.2 (2) (d) regutes a copy of the note or memorandum to be delivered or sent
to the hirer or deposited with a third party common carrier e.g. the post office for onward
transmission to the hirer within the fourteen days of making the agreement. Also, the time
begins to run not from the date of the note or memorandum itself but from the date the
hire-purchase agreement is completed.

Effect of Non-compliance by Owner

Under S. 2(2) failure to comply with the above formalities disentitles the owner from
enforcing the hire-purchase agreement or any contract of guarantee relating to the
agreement or any right to recover the goods from the hirer. It is further provided that no
security given by the hirer in respect of money payable under the agreement or given by a
guarantor in respect of money payable under a contract of guarantee relating to the
agreement shall be enforceable against the hirer or guarantor.

It should be pointed out that generally the effect of non - compliance operates only in
regard to hire-purchase agreements regulated by the Act and not those governed by the
Common Law.
In ADELABARI V. NIGER MOTORS LTD. (1974) 5 SC 1, the purported agreement
was not signed by the owners. The Supreme Court held that S.2(2) of the Act was
inapplicable since the transaction took place before the hire-purchase Act, 1965 came
into force.

Enforcement of Guarantee
The owner is barred from enforcing his rights against the guarantor under a contract of
guarantee. Since the liability of the guarantor depends upon the continued liability of the
hirer. In YOUNIS V. CHIDIAK and ANOR (1970) 1 ALL L.R. 188 it was held that a
contract of guarantee to pay the debt of another must be under seal or otherwise
supported by valuable consideration.

Courts Discretion
The effects of non-compliance of the statutory formalities must take their course unless
the dispensing power of the court under the proviso to the section is available and can
properly be exercised. The proviso gives a court discretion to dispense with some
formalities if it is satisfied that:
(a)​The non-compliance has not prejudiced the hirer.
(b)​It will be just and equitable to do so.
(c)​The court also has power to impose any condition it thinks fit.
Take note that the dispensing power of the court only avails in respect of the provisions
of S. 2(1) and 2 (2), (b), (c) or (d). The court has no dispensing power in regard to S.2
(2)(a) i.e. in regard to the existence of a note or memorandum made and signed by the
parties as stipulated. In YUSUF and ANOR V. OYETUNDE and ANOR (1975)
NNLR 116. The owners failed to state in writing to the hirer the cash prices of the
vehicles let before the agreements were entered into. The agreement also failed to state
the rates of interest. The hirer after taking delivery of the vehicles defaulted in his
instalmental payment whereupon the owners seized the vehicles and sold them. The
owners nevertheless enjoined the court to dispense with the requirement of S.2 and to
disregard the owner's breach of the statutory duty because the hirer has not been
prejudiced. The court in rejecting the plea held that the hirer has been prejudiced in that
he has been unlawfully deprived of what the law permitted him to possess.

(C). ILLITERATE HIRERS

S.2 of the Hire-Purchase Act of 2004 affords adequate protection to an illiterate hirer
and such a person can also call in aid other than legal probs sign. S.3 of the Illiterate
Protection Ordinance Cap. 88 Laws of Nigeria 1990/2004, provides that anyone, who
writes a document at the request or on behalf of an illiterate person must also append to
the document his own name and address as the writer thereof.
Under S.4, it is provided that if the writer fails to comply with the foregoing
requirements, he will be guilty of a criminal offence. In S.C.O.A., ZARIA V. OKON
(1960) NNLR 34, the Federal Supreme Court then defined an
"illiterate person" as he who is not sufficiently literate to understand the meaning and
effect of document which he is signing. The same court also held that he is illiterate if he
does not understand the language in which the document is written even though he
understands and can read or write some other language.

Where an illiterate person is a party to a hire-purchase agreement the matter may be

raised as to who is the writer of the agreement on his behalf. The writer may be the
finance company that prepared the agreement or the dealer or his agent who filled the
form for him.

It would appear that it is the person who filled the hire-purchase form for the hirer that
should be regarded as the "writer" for this purpose. A reason in support of this may be
that the hirer usually was never at any time in direct touch with the finance company.
In IGBADUME V BENTWORTH FINANCE (NIG)LTD. (1965/66) WMNLR 122, a
hire-purchase clerk under the employment of the dealers completed the hire-purchase
form for an illiterate hirer. A Benin High Court held that the provisions of Illiterate
Protection Ordinance were applicable and that the clerk was bound to read over the
agreement and explain it to the hirer before he was asked to sign it. It held further that he
was also obliged to write his own name and address at the bottom of the agreement as the
writer, the proper time for compliance being at the time of the execution of the document.
It should be recalled that under S.4 of the Ordinance, failure of the writer to comply
with its provision renders him liable to criminal prosecution.
Note that the Act aimed at giving protection to an illiterate hirer against fraud but the
illiterate should not use it as a means of perpetuating fraud on others.

CONTENTS OF HIRE-PURCHASE AGREEMENT

The Hire-Purchase Act, 2004, not only regulate the contents of hire-purchase
agreements, but also contains a number of provisions for the protection of the interest of
the hirer particularly S.3 of the Act provides that certain terms when used in
hire-purchase agreement shall be void. S. 4 prescribe certain implied terms and seek to
regulate their exclusion.
Under the common law, persons entering into contracts are of equal bargaining power
and hire-purchase agreements are entered into on terms of a standard agreement.
Such agreement are usually drafted by one of the parties and more often than not contain
numerous clauses designed to protect the interest of that particular party only.
To meet this abuse of bargaining power continued first paragraph i.e. the Hire-Purchase
Act, 1965 (infra).

Avoidance of Certain Terms

S.3 renders ineffective certain terms, which are often found in hire-purchase agreements.
Such terms when enforced were usually detrimental to the interest of the hirer.
This section renders them void whether they are contained in the hire-purchase agreement
itself or in the note or memorandum required under S.2 supra.

The terms mention in the said S.3 are:

(a)​Whereby an owner or a person acting on his behalf is authorized to enter upon
any premises for the purpose of taking possession of goods which have been let
under a hire-purchase agreement or is relieved from liability for such entry.
Here, if the owner without authority enters the hirer's premises for the purpose of
repossessing, the hired goods he may be liable in damages to the hirer for trespass. It was
therefore the usual practice for owners to insert into hire-purchase agreement clauses
granting to themselves such right or permission.
Such a clause was inserted in the agreement in UNITED DOMINIONS
CORPORATION (NIG.) LTD V. LADIPO (1971) 1 ALL N.L.R. 102 where an owner
without permission from the hirer or his agent enters the hirer's premises to seize the
vehicle on default by the hirer. It was held that the most the owner might be disposed to is
damages for trespass on wrongful entry.

The effect of S.3(a) is simply to prevent the owner from relying on any contractual right
of entry arising from any hire-purchase agreement or the note or memorandum thereof.
This is because any provision. in an agreement, or a note memorandum granting such a
right is void abinitio and of no effect.

(b)​Whereby the right conferred on a hirer by this Act to determine the

hire-purchase agreement is excluded. or restricted or any liability in addition to
the liability imposed by the Act is imposed on a hirer by reason of the
determination of the hire-purchase agreement by him under this Act.

Sub-section (b) controls the insertion of provisions limiting the hirer's right to determine
the agreement or increasing the maximum payments beyond that stipulated under the Act
for such termination. It may be recalled that both under Common Law and the
Hire-Purchase Act (S.8), one of the essential features of hire-purchase agreement is the
unqualified right of the hirer to terminate the agreement and return the goods to the
owner at any time before the final payment falls due. The first part of this sub-section
precludes the owner from excluding or restricting this right and renders any attempt to do
so futile.

(c)​Whereby a hirer, after the determination hire-purchase agreement or the

bailment in any manner whatsoever, is subject to a liability, which exceeds the
liability, which he would have been subject to if the agreement had been
determined by him under this Act.

As earlier noted sub-section (b) renders void any provision seeking to raise the hirer's
liability above statutory limit if he exercises his unqualified right of termination
sub-section (c) extends this provision to even cases where the agreement was terminated
other than by the hirer. It should be noted that while sub-section (b) applied to cases of
termination of the hire-purchase agreement, sub-section (c) applies to termination of the
hiring.
(d)​Whereby any person acting on behalf of an owner or seler in connection with
the formation or conclusion of a hire-purchase agreement is treated as or
deemed to be agent of the hirer or buyer.
In a typical hire-purchase transaction, there is a business deal in which an owner, a dealer
and a hirer are concerned. The dealer, under normal circumstances does not act as agent
of the hirer in procuring a hire-purchase agreement.
Occasionally, however, finance companies have been cited as co-defendants in actions by
hirers in regard to supply of defective or unsatisfactory goods. To avoid this, it became
the practice for finance companies to insert clauses in hire-purchase agreement stating
that the dealer did not act as agent of the owner but was to be deemed as agent of the
hirer. This sub-section renders any such clause void and ineffectual.

(e)​Whereby an owner or seller is relieved from liability for the acts or defaults of
any person acting on his behalf in connection with theformation or conclusion
of a hire-purchase agreement
Sub-section (e), which is complimentary to sub-section (d) renders void and ineffectual
any clause seeking to absolve the owners from liability for misrepresentation and
breaches of conditions or warranties by the dealer while acting on behalf of the owners.
The agreement in CAMPBEL DISCOUNT CO. LTD. V. GALL (1961) 24 M.L.R. 502
contained such a clause (Cl.12) and Pearse, L.J., Observed that by virtue of the English
Act of 1938 (the equivalent of S. 3(e) of the Nigerian Act the clause was void.

(f)​ Whereby a hirer or buyer is required to nail himself of the services, an insurer
or repairer or in other capncity whatsoever, of a person other than a person
selected by the hirer or buyer in the exercise of his unfettered discretion.

It has been the practice for owners to reserve for themselves the right to insure or
recommend any insurance company they pleased. Such insurance company
recommended is one which either belongs to the owner or one which it has associate
interest.

Sub-section (f) puts an end to this practice and renders void and ineffectual any clause
reserving such right.
Implied Terms
S.4 of the hire-purchase Act prescribes certain implied terms while also seeking to
regulate their exclusion; certainties conditions and warranties similar to those provided
by the Sale of Goods Act 1893 are implied here. They cannot be excluded or modified
except expressly as provided in the Act itself. Invariably these are to the advantage of the
hirer. S.4 (4) contains a proviso to the extent that nothing in the section shall prejudice the
operation of any other enactment or rule of law whereby any condition or warranty is to
be implied in a hire-purchase agreement.

Implied terms are:

(a)​Quiet enjoyment: S. 4(1)asays an implied warranty that the hirer shall have and
enjoy quiet possession of goods;
(b)​Title or right to sell: S.4(1) (b)provides an implied condition on the part of the
owner that he shall have a right to sell the goods at the time when the property is
to pass.
(c)​ Charge or encumbrance: S.4 (1)(c) states that an implied warranty that the
goods shall be free from any charge or encumbrance in favour of any third party at
the time which the property is to pass.
(d)​Merchantable quality: S.4(1)(c)provides for the implied term of "Merchantable
quality". This term is taken from S. 14(2) of the sale of Goods Act 1893 but
neither this Act nor the Hire-Purchase Act contains definition of the term. In
KARSALES (HARROW), LTD V. WALLIS (1956) 2 ALL E.R. 866 the hirer
inspected the car and found it in a fairly good condition. When the car was
delivered a month or so later it was found to be in a deplorable condition,
incapable of self-propulsion, and with some of the vitals points missing or
damaged. Denning, L.J., stated, that under a hire-purchase agreement there is an
obligation on the owner to deliver the goods in substantially the same condition as
when seen and examined by the hirer. The owner, he pointed out, must know from
the ordinary course of business that the hirer makes his application on the faith of
his inspection and on the understanding that the goods will be delivered in
substantially the same conditions. He concluded that it is an implied term of the
agreement that pending delivery the goods will be kept in suitable order and repair
for the purpose of the bailment.
(e)​Fitness for particular purpose: S. 4 (2) provides that where the hirer expressly or
by implication makes known the particular purpose for which the goods are
required there shall be an implied condition that the goods shall be reasonably fit
for the purpose. The above is also taken from S. 14(2) of the Sale of Goods Act.
 In BENTHWORTH FINANCE (NIG) LTD. V. DEBANK TRANSPORT LTD
(1968) ALR 52 where the court held that the duty of the owner under an implied
condition of fitness is to ensure that the goods are as fit for the purpose of the
hiring as they can be on the part of anyone responsible for the condition of the
goods.

OWNERSHIP, TITLE AND MINIMUM PAYMENT CLAUSE

Here, we are going to examine two of the most important aspects of hire-purchase
transaction, namely:
1. the passing of property or title or ownership in the goods hired from the owner to the
hirer, or from the owner to a third party and unqualified right of the hirer to determine the
agreement.
The Hire-Purchase Act, unlike the Sale of Goods Act 1893, contains no detail rules
regulating the transfer of title or property in the goods let on hire-purchase from the
owner to the hirer. In fact, the Hire-Purchase Act has not employ the term "title" as with
the case in the Sale of Goods Act 1893.

THE TRANSFER OF PROPERTY

(a) may be recalled that one of the characteristic features of hire-purchase agreement is
that the property in the goods hired remains with the owner during the continuance of the
hire-purchase agreement.
It only passes from him to the hirer after the latter has paid the final installment and has
exercised his option to purchase the goods.
Prior to these events, the hirer has merely the right or title or possession and use of hired
goods.
However, the hirer's option may be of two kinds, active or passive. It is passive where the
agreement provides that the goods shall become the hirer's on the happening of a stated
event or on the payment by the hirer of a stated total sum. The hirer's option is active
where the agreement contains a provision to the effect that after the hirer has made all the
payments required of him under the agreement, he may purchase the goods.

(b)The Transfer of Title

It is a fundamental principle of Nigerian law that no person can transfer to another that
which he does not have. This principle is often expressed in the form of the Latin Maxim
"Nemo dat quod non habet". This principle is particularly relevant to contracts of sale
of goods but also has equal application to hire-purchase contracts. Thus, in HELBY VS.
MATHEWS 91895) AC 471 LORD HERSCHELL, L.C. explained that:
 a person who is in possession of a piano under such agreement… is no more its
apparent owner than if he had mereby hired it, and in the latter case anyone taking it as
security should have no claim to hold it against the owner.

A hirer under a hire-purchase agreement does not acquire title, which can be validly
transferred to a third person. Under the nemo dat principle a hirer, although in possession
of the goods, the subject matter of the hire-purchase agreement and to all outward
appearance the owner, cannot confer title on a transferee until he has paid the final
instalment or exercise the option to purchase the goods.
The effect of this is that any purported conveyance of the goods hired, as by way of sale,
pledge or gift will not prevent the owner from recovering the goods from the third party
concerned.

It is pertinent to note that under the common law if the bailee acts in a way, which
destroys the basis of the contract of bailment, the bailor becomes entitled at once to bring
the contract to an end and at once acquires the right to immediate possession of the article
bailed. Parting with possession of the goods to a third party would normally be regarded
as such an act, and any well drafted hire-purchase contain prohibition clauses against
selling, pledging, assigning or parting with possession except with the owner's consent.

The strict application of these common law principles has caused greater hardships to
innocent purchasers from hirers who in no way have reasons to believe that the goods
were hired.

The courts have, however, admitted some exceptions to the rule in order to mitigate this
harshness, or simply on the ground of mercantile convenience.
It is therefore important to examine these exceptions to determine the extent to which
they affect the owners right of recovery.

1.​ Where the goods have been let to a mercantile agent under a hire-purchase
agreement. See S. 2 of the Factor Act, 1889. In ASTLEY INDUSTRIAL
TRUST LTD. V. MILLER (1968) 2 ALL E.R. 36 where it was held that the
statutory power to a mercantile agent to pass title under the said provision of the
said Act applied only where he had possession in his capacity as a mercantile
agent and on the true owner having consented to his having possession in that
capacity.
2.​ Sales in market overt where goods are sold according to the usage of the market,
the buyer acquires a good title to the goods. See S. 22 (1) of the Sale of Goods
Act 1893 and the case of BISHOP GATE MOTORS FINANCE
CORPORATION V. TRANSPORT BRAKERS LTD. (1949) 2 K.B. 322.
3.​ Release by owner where the hirer purports to dispose of the hired goods to a third
party and the owner on becoming aware of this agrees or does so on the condition
that the unpaid balance of his hire-purchase price is settled forthwith, the owner is
said to have released his rights under the agreement or ratified the purported
disposition. The third party who subsequently obtains possession from the hirer
thereby acquires a good title to the goods. See the case of BUTTERWORTH V.
KINGSWAY MOTORS OR ORS (1954) 2 ALL E.R. 694.
4.​ Assignment of option of purchase where the hirer in his disposition makes an
assignment of his option to purchase or the benefit he has in the meantime
acquired under the agreement. In BELSIZE MOTOR SUPPLY CO. V. COX
(1914) 2 K.B. 244 the hire-purchase agreement provided that the hirers were not to
re-let, sell or part with the vehicle without the consent of the owners. In breach of
this term the hirer, after paying some instalments and without the consent of the
owners, pledged the car to the defendant who took it in good faith and without
notice of the owners right. In an action by the owners against the pledgee, it was
held that pledgee had an interest in the vehicle and the owners were therefore not
entitled to its return but only to the value of the owner's interest therein, i.e. the
amount of the hire-purchase remaining unpaid. The decision is subsequently
approved in WHITLEY LTD. V. HILT (1914) 2 K.B. 808 where a full Court of
Appeal (English) gave an unequivocal assertion that a hirer's interest under a
hire-purchase agreement is assignable. The decision in the above case was applied
in NIGERIA TECH. CO. LTD V AMACO TRADING CO. & ANOR.
OCHCJ/7/74 PAGE 909.
5.​ 5.Hirer's Right of Termination at Common Law, the right of the hirer to terminate
the agreement and return the goods to the owner before the final payment is due is
unqualified. Besides, no formality is required for the exercise of such right. In
HELBY V. MATHEWS, SUPRA, LORD MACNAGHTEN N pointed out that:
If the object of desire loses its attraction on closer acquaintance - if faults are
developed or defects discovered - if a converted treasure is becoming a burden and
an encumbrance, it is something, surely, to know that the transaction may be
closed at once without further liability and without payment of any forfeit.
Under the Hire-Purchase Act, this right of the hirer to terminate the agreement is not only
reserved but also extended. Under S. 2(2) (c) of the Act, the note or memorandum
required under the section must contain a notice, advising the hirer, inter alia, of his right
to terminate the agreement. We have also already seen under S. 3(b) that any term in an
agreement excluding or restricting the hirer's right to determine the agreement is void.
Furthermore, S.8 of the Act provides for the manner of exercise of this right and the
extent of the liability to be incurred by the hirer in doing so.
It provides that the hirer may terminate the agreement at any time before the final
payment falls due by giving notice, of the termination in writing to any person entitled or
authorized to receive any sum
payable under the agreement.

The Minimum Payment Clause

All hire-purchase agreements must contain a clause stipulating a specific sum, which the
hirer should pay in the event of his exercise of his right of termination or otherwise in the
event of breach by him of the agreement.
This sum is to be paid in addition to the sums already paid or accrued, provided the hirer
had not already paid up to that sum in his installments payments.
Such a clause is generally referred to as "minimum payment clause" and is designed to
represent the minimum sum payable by the hirer to ensure that the owner suffers no loss
as a result of such an event. It is pertinent to note here that the principle of law governing
the hirer's liability under the "minimum payment clause" differs, depending on whether
the agreement is governed by common law or Hire- Purchase Act.

At Common law
Under common law, it was originally considered that in all cases the owner was entitled
to rely on the minimum payment clause in a hire-purchase agreement. Such a clause was
enforceable against the hirer who chooses to exercise his right of termination or
otherwise in breach of his agreement. In ASSOCIATED DISTRIBUTORS LTD. V.
HALL (1938) 2 K.B. 83 The hirer having paid only one installment returned the hired
bicycle to the owners. The clause provided that in any such event the hirer should make
up a sum equivalent to not less than one-half of the total hire-purchase price including the
option.

The Court of Appeal (English) in a unanimous decision held that no question as to the
owners' claim being liquidated damages or in the nature of a penalty arose and therefore
the money for which the hirer had made himself liable had to be paid and the claim could
not be impeached on any principle of law.
However, in COODEN ENGINEERING CO. LTD V. STANFORD (1953) 1Q.B. 86
The hirer having fallen into arrears with the instalmental payments, the owners
terminated the agreement; took possession of the car and claimed under the "minimum
payment clause" which required one hundred percent compensation for depreciation. It
was held by the majority of the Court of Appeal (English) that the claim was a penalty
and not recoverable.
Under this clause, the earlier the determination of the hiring by the owner the greater the
gain, and in so far as the depreciation of the vehicle will probably be smaller. The owner
will soon sell or otherwise turn it into a profitable account again.

Under the Hire-Purchase Act

S.8 of the Act prescribes the maximum liability the hirer can incur on the exercise by
him of his right of termination.
Under this subsection, the hirer is liable to pay first, any arrears of instalment due and
unpaid prior to the termination. This is because the sum is an accrued liability for which
he is already indebted to the owner and which is recoverable by a separate and distinct
action. Secondly, if the total amount paid
by the hirer up to the time of the termination (including the initial deposit) together with
the amount of installments due and unpaid are less than one-half of
the hire-purchase price, the hirer must pay to the owner a further sum to bring his total
payments up to one half of the said price.

For example, X took a car on

hire-purchase having a total hire-purchase price of N5,000 paid a deposit of N500 and a
total of N600 as instalmental payments while owing as arrears N200. His liability on
termination will be calculated as follows: the total sum paid plus the sum due and unpaid
stand as N1,300 (i.e. N500 (deposit) + N600 (instalments +
(arrears); one -half of the total hire-purchase price is N2,500 which exceeded the total
sum paid and due but unpaid by N1,200 (i.e. N2,500- N1,300)
X will then have to pay a further sum of N1,200 in addition to the sum of N200 due but
unpaid making a total of N1,400.
If, on the other hand, the total amount paid, including the initial deposit, together with the
amount due but unpaid equal half or exceeds half of the total hire-purchase price, no
further liability will be incurred by the hirer. However, he will still remain liable to the
owner for the sum due and unpaid.
It should be recalled that under S. 3(b) of the Act any term in an agreement subjecting
the hirer to a liability which exceeds that which he would be liable
under S.8(1) is void and of no effect.

Recovery of Goods by Owner

At common law:
At Common Law the owner's right or re-possession is absolute for the hirer's right under
an agreement is entirely and exclusively dependent upon the terms of agreement.

These terms in variably put him in a very weak and precarious position for the absence of
any stipulation to the contrary, the owner may re-possess the goods extra-judicially and
without a court order. The strict application of this Common Law principle often puts the
hirer to great hardship and works injustice against him in a number of ways.

First, there is absence of a right accruing to him to redeem the hired goods after a default
in instalmental payment, even if this is in respect of the last instalment. See ATERE V.
AMAO (1957) WRNLR 176.

Secondly, the hirer, subject to the terms of the particular agreement, may pay the agreed
instaments in advance but never in arrears. It is immaterial whether the particular
payment is in respect of the first or the last instalment. Failure to pay an instalment on the
agreed date constitutes a breach, which entitles the owner to exercise his right of
re-possession. See BENTWORTH FINANCE (NIG) LTD. V. DEBANK
TRANSPORT LTD. (1968) 3 ALR 52.

Thirdly, the hirer has no legal interest in the goods re-possessed by the owner even when
their subsequent sale may yield to the owner substantial surplus over and above the
balance outstanding in the agreement. See D.O. WILLIAMS V. UAC LTD (1937) 3
NLR 134.

Under the Hire-Purchase Act

The Hire-Purchase Act seeks initially to protect the hirer from some of the rigours and
harshness of the Common Law rules outlined above. However, under the Act, the owner's
right of re-possession remains essentially restricted. In addition, it is required that the
note or memorandum made pursuant to S. 2 (2) of the Act must contain a notice which is
at least as prominent as the contents of the note or memorandum in the terms provided
rest of the the Act.

MISCELLANEOUS STATUTORY PROVISIONS

The Powers of the Minister:

The Minister of Commerce, the Supervisory Ministry, is given three broad categories
of powers under the Hire-Purchase Act in respect of hire-purchase transaction. These are
essentially regulatory in nature and include the following powers:

1.​ Power to regulate terms

2.​ Power to regulate hire-purchase business
3.​ Power of exclusion.

1.power to regulate terms: Under S.5 of the Act he is given power to enact subsidiary
legislation to be published in the Federal Gazette in respect of the following:

(a)The maximum interest or other charges payable;

(b)The maximum deposits which a hirer must pay

(c)The maximum period of time for the re-payment of the purchase price;

(d)The methods by which the sum are to be determined;

(e)Penalties for non-compliance with such subsidiary legislation not exceeding a fine of
(one thousand naira).

2. Power to regulate hire-purchase business

Under S.18(1) of the Act the Minister may also enact subsidiary legislation to be
published in the Federal Gazette for the control of hire-purchase business in the country.
He is empowered in this regard to required from persons engaged in hire-purchase
business to make returns to him with full details of all hire-purchase transactions entered
into by them and to furnish him with other information relating to their business as may
be so prescribed.
S. 18(2) empowers him to appoint inspectors to investigate persons engaged in
hire-purchase business. An inspector may be empowered to enter any premises which
appear to him to relate to hire-purchase business and inspect there any books or
documents relating to the business and take copies of, or of anything contained in any
such book or document. It is an offence punishable on summary conviction to a fine not
exceeding (one thousand naira) for any person to willfully obstruct or delay an
inspector in the performance of his duties -sub-section (4).

3. Power of Exclusion
The minister is also given power under S. 19(1) of the Act to make an order excluding
from the operation of the Act.

(a)Goods of any description or class specified in the order.

(b)Any statutory corporation so specified.

Under (a), the Minister could for example, in order to encourage or facilitate credit
extension to farmers make regulation that the Act shall not apply to agricultural
implements such as tractors. Statutory corporation for the purpose of (b) is defined in
subsection (2) as meaning "a body corporate established directly by law in force in
Nigeria".
Duty to furnish information by the owner and the Hirer S.6 of the Act provides that both
the owner and the hirer are obliged under the Act to furnish certain information to each
other relating to hire-purchase transactions.

Appropriation of Payments
S.7 of the Act deals with appropriation of payments where a hirer may sometimes take
different goods belonging to the same owner under different hire-purchase agreements.
He may also after having entered into the one agreement take more goods on
hire-purchase from the same owner. The goods may be of the same type or description or
totally, different from those comprised in the earlier agreement. This situation may give
rise to problems when the due instalmental payments are remitted in one lump-sum.
At Common Law, the hirer may indicate to the owner how the lump-sum should be
disbursed or appropriated. In the absence of such appropriation, the owner may himself
make such appropriation as he thinks fit. He may, for example, appropriate all the
payments to one of the agreements or two only or all as the case may be and in whatever
proportion he chooses See CITY DISCOUNT CO. LTD. V. MACLEAN (1874) L.R.
9C.P. 692.

It should be pointed out however that the statutory appropriation provided under the said
S. 7 is applicable "notwithstanding any agreement to the contrary".

TERMINATION OF HIRE-PURCHASE AGREEMENT

A hire-purchase agreement may be determined in any of the various ways by which a

simple contract may be determined. It may be determined in the following ways;
by performance, subsequent agreement, notice to terminate, breach and repudiation by
either of the parties, frustration, judgment of a competent court and by express term of
the agreement.

(1)Termination by due performance

A hire-purchase agreement can come and frequently comes to an end by due performance
without running its full hire period. It is not uncommon for a hirer to complete his
payment of the total hire-purchase price ahead of time. This generally happens as a result
of the relevant goods being traded in by way of exchange for new goods. This leaves the
dealer of the new goods, in consideration of the new business, to settle forthwith the
outstanding balance of the old agreement.
The hirer may also well ahead of time decide to pay the remaining installments at one
scoop. If the owner accepts this the agreement becomes terminated or discharged at the
point and event.

(2)Termination by subsequent agreement

During the continuance of any hire-purchase agreement, the parties may by a fresh
agreement terminate the original contract, provided that the original agreement is still
executory. The consideration for the new agreement consists in the promise by each party
to release the other from his or her existing obligations under the original contract. The
clearest way of doing this is by the substitution of an existing hire-purchase agreement by
a new one.
Another method by which a hire-purchase agreement may be terminated by subsequent
agreement is by merger. The principle of merger in relation to hire-purchase agreements
applies where an agreement not under seal is followed by another under seal between the
same parties and relating to the same goods.
In that event, unless a contrary intention of the parties is established, the later agreement
will be deemed to have extinguished and replaced the former.

3. Termination by notice to terminate

Under the Common Law, a hire-purchase agreement may be determined by notice given
by either party to the other expressing the intention so to do. This is notwithstanding the
fact that the agreement contains no provision for the giving of notice.
Where the agreement is one governed by the hire-purchase Act, the hirer is given an
indefeasible statutory right to terminate the agreement by giving notice in writing to the
owner or any other person entitled or authorized to receive the sums payable under the
agreement. The hirer can effectively exercise this right only if he does so before the final
instalment falls due. Thus, where the final instalment has fallen due, this statutory right of
termination is lost and can no
longer effectively be exercised, or reviewed. No such statutory right is accorded to the
owner and therefore he can only fall back on his Common Law right.

(4)Termination by breach and repudiation by Hirer.

If the hirer renounces his obligations under an agreement or commits a breach of its terms
in such a way as to evince an intention he no longer be bound by the agreement, the
owner is entitled to sue him for the breach. If the breach is a fundamental breach or a
breach of fundamental term, the owner may accept the breach treating it as a repudiation
of the agreement. In that event, he becomes entitled, if he chooses, to terminate the
agreement.
Thus, the owner can refuse to accept the hirer's repudiation, in which case the hirer
remains liable to him for the remaining instalments as they fall due. A hirer will be held
to have repudiated his contact if he is guilty of failure to perform so substantial a term as
to go to the root of the contract. See AMUSAN AND ANOR V. BENTWORTH
FINANCE (NIG) LTD. (1966) NMLR 276, U.D.C. (NIG.) V. LADIPO (1971) ALL
N.L.R. 102.

(5) Termination by breach and repudiation by the Owner:

Similar principles as discussed above apply to a case of repudiation of a hire-purchase
agreement by the owners. Thus, if the owner repudiates the agreement and the hirer
accepts this, the latter may determine the agreement and sue for damages. Instances of
renunciation of the agreement by the owner are extremely rare, basically because he
usually stands to gain if the agreement is left to run its full course. It will therefore be
disadvantageous to him to renounce the agreement.
Most instances of repudiation by the owner arise out of a failure to observe any of the
implied terms or where he re-possesses the goods in contravention of some provisions of
the hire-purchase Act. In TABANSI AGENCIES LTD. V.INCAR MOTORS (NIG)
LTD. CCHCJ 7174; P. 923 the plaintiff had paid more than the relevant proportion, (i.e.
more than half the total hire-purchase price of the goods), when the owner, the defendant,
re-possessed them without their consent. A Lagos High Court held that the re-possession
was unlawful and, consequently, the agreement became determined by virtue of the
provision of the said S. 9(2).
(6)

Termination by Frustration
The general principle of law of contract that, where without the fault of either party, a
contract becomes impossible to be performed or otherwise frustrated, the parties are
discharged from further performance under it, applies equally to hire-purchase
agreements. Thus, if the goods, the subject-matter of a hire-purchase agreement, are lost,
or destroyed by inevitable accident, by an act of God, or by theft by third party, or
otherwise ceases to exist through no fault of either party, the agreement is frustrated. The
hirer is thereafter discharged from his obligation to pay future instalments of the hire
-rent and also from his liability to return the hired goods to the owner. See
BENTWORTH FINANCE (NIG) 1973 LTD. V. ALHAJI SANI BAKORI (1973)
NRNLR 50.

(7) Termination under the terms of the agreement

It has already been pointed out that the statutory right of the hirer to determine an
agreement under the provisions of S. 8 of the hire-purchase Act is without prejudice to
any right to determine it by virtue of the provisions of the agreement itself. In practice,
most hire-purchase agreements only allow the hirer to determine the agreement during
the continuance of the hiring upon payment by him to the owner of the amount
encompassed in the "minimum payment" clause.
Most hire-purchase agreements invariably contain clauses permitting the owner to
terminate the agreement in the event of a breach by the hirer of any term.
The main purpose of such a clause is to enable the owner to re-possess the goods without
the necessity to prove repudiation of the agreement by the hirer.
The right of the hirer or owner to terminate under an agreement is a contractual right
granted under the terms of the agreement upon the occurrence of certain events and must
be distinguished from any statutory or common law right.

(8)Termination by Judgment of a Court:

Any court may give a declaration that the failure of an owner to comply with any of the
formalities provided under the Act has prejudiced the hirer under the provision of S.2(2).
In that event, it may decide that the agreement became unenforceable against the hirer
and that the hirer could then keep the goods without payment for them. Such a decision
invariably discharges the parties from any liability in respect of the agreement and
tantamount to bringing the agreement to an end.