LAW ON HIRE PURCHASE
INTRODUCTION
Governing statute: Hire-Purchase Act 1967
Definition of hire-purchase agreement:
s.2(1): ‘hire-purchase agreement’ includes
a letting of goods with an option to purchase and;
an agreement for the purchase of goods by
installments.
The Act is concerned with a transaction where a
person acquires goods and pays them off by
installments, title remaining with the owner
despite possession being given to the hirer.
Cases
Credit Corporation (M) Tractors Malaysia Bhd v.
Bhd v. The Malaysian Kumpulan Pembinaan
Industrial Finance Corp & Malaysia Sdn Bhd [1979]
Anor (1967)
The Federal Court held that
The High Court held that on a proper construction of
the agreement, it was clearly
until the hirer had
the intention of the parties
exercised his option to that property in the tractor
purchase by paying the was not to pass until full
total amount and fulfilling payment. In consequence, it
all his obligations under a was not a sale on installment
HPA, no property in the terms but more in the nature
car passed to the hirer. of a hire-purchase.
Goods
All consumer goods Motor vehicles, namely:
S.2(1) defined • Invalid carriages;
consumer goods to • Motor Cycles;
mean "goods • Motor Cars including
purchased for taxi cabs and hire cars;
personal, family and • Goods vehicles;
house hold purposes”. • Buses, including stage
buses.
FORMATION AND CONTENTS
Part II of the Act contains essential
requirements as to the procedure, form and
content of hire-purchase agreements.
Breach of these provisions renders an
agreement void, and in several instances, the
commission of an offence.
Formation
• Pre-contractual obligations – (Part II of HPA) providing written information to the prospective hirer. The documents so
provided must be duly signed by the provider. Failure on their part to observe these obligations will render a HPA void.
Pre- • Second Schedule of HPA 1967: i) s.4(1)(a) imposes an obligation on an owner or its agent to serve on the prospective
contr hirer the Part I documents ii) s.4(1)(b) imposes the same on the dealer.
act
• S.4A requires a HPA to be in writing
Writt • An agreement is void if a hand writing ‘is not clear and legible’
en
agre • If the agreement is printed, the print is of a size smaller than the type known as ten-point Times (s.45)
eme
nt
• S.4B(1): a HPA to be signed by or on behalf of all parties to the agreement
Sign
ature
• S.4B(2): No owner, dealer, agent or person acting on behalf of the owner shall require any intending hirer to
of sign a HPA unless such HPA or document has been duly completed. Failure to comply- the HPA is void
parti
es
• S.4C(1) requires the HPA to contain the following information – a date on which the hiring starts: the number of
installments to be paid by the hirer, the address where the goods kept etc. The HPA also must provide a table.
Cont • The agreement must not contain any particulars which are inconsistent with the particulars contained in the mandatory
ents pre-contractual written statements. Otherwise, the HPA is void.
Sepa • Where more than one item of goods is purchased, there must be a separate HPA in respect of every item.
rate • A contravention of this requirement renders the agreement void and the owner guilt of an offence (s.4D)
agre
eme
nt
• No addition or alteration can be made to a HPA containing the terms and conditions in relation to any of the matters
set out in the pre-contractual statement required to be served on the prospective hirer pursuant to s.4(1)(a) & (b)
Alter • Any such alteration/addition will have no effect unless the hirer 0r his agent has consented by signing /initialing the
ation agreement in the margin opposite the change (s.39)
s
Service of documents
S.5(1) requires the owner to serve on the hirer
and the guarantors a copy of the HPA within
21 days after it is made.
Failure to comply will render the HPA
unenforceable by the owner (s.4(1A)). It is not
void.
Deposit
In the absence of a prescribed minimum
deposit required of a hirer, an owner entering
into a HPA must first obtain from the hirer a
deposit in cash or in goods, or partly in cash
and partly in goods, to a value of not less
than one-tenth of the cash price of the
goods (s.31(1)).
Protection of Hirers & Guarantors
Certain conditions and warranties are implied
by section 7 in every hire-purchase
agreement.
These implied conditions and warranties
cannot be excluded or modified
Statutory Rights of Hirer
Part IV of the Act provides the following statutory rights
to a hirer:
1. Right to copy of statement relating to his financial
position (s.9).
2. Right to appropriation of payment (s.10).
3. Right to apply for an order for goods to be removed
(s.11).
4. Right to assign (s.12).
5. Right by operation of law (s.13).
6. Right to early completion of agreement (s.14).
7. Right to terminate agreement (s.15).
8. Right on repossession by owner (s.16).
1. Right of hirer to statement relating to his
financial position (s.9)
At any time before the final payment, upon written
request, the hirer has a right to be supplied within 14 days
a statement by the owner showing the information listed
below:
a) The amount paid to the owner by or on behalf of the
hirer;
b) The amount which has become due under the
agreement;
c) The amount which is to become payable under the
agreement; and
d) The amount derived from interest on overdue
installments.
The request to supply a statement need not be
observed if the owner has sent the hirer a similar
statement within a period of 3 months immediately
preceding the receipt of the request.
In the event of a default to supply by the owner
without reasonable cause, then while the default
continues, the owner is not entitled to enforce the
HPA against the hirer/guarantor.
If the default continues for a period of one month, the
owner is guilty of an offence. On conviction, he is liable
to a fine not exceeding RM1000.
2. Right to appropriation of payment (s.10)
S.10 of the Act provides a hirer the right to appropriate
payment where he has more than one agreement, and
payment is insufficient to discharge the total amount
due.
The hirer can direct payment to a particular agreement
or payment to any two or more agreements in such
proportion as he thinks fit.
In the absence of an instruction by the hirer where there
is more than one agreement, payment is to be
appropriated towards satisfaction of the payment due
in the order in which the agreements were entered into.
3. Right to apply for an order for goods to be
removed (s.11)
It is a common practice to insert into a HPA a term
to the effect that the hirer must keep the goods in
a place stated in the agreement.
Any removal from the stated place will be treated
as a breach of agreement.
S.11 confers a right on the hirer to apply to a
Magistrate for an order permitting him to so move
the goods.
Where an order is granted, the new place will
become the place where the goods should be kept.
4. Right to assign hirer’s rights (s.12)
By s.12(1), the right, title and interest of a hirer under a
HPA may be assigned with the consent of the owner but if
his consent is unreasonably withheld, then consent may
be waived.
This right cannot be modified or excluded by a term in the
HPA, and if there is such a term, it is void under s.34(g).
In practice, owners often demand ‘under the counter’
payment for consent to assign.
Demand for payment is clearly unlawful under
s.12(2).-”..no payment or other consideration shall be
required by an owner for his consent to such an
assignment.
In other circumstance where, at the request
of a hirer, the owner fails or refuses to give his
consent to an assignment, the hirer may
apply to the High Court for an order declaring
that the consent has been unreasonably
withheld.
5. Right by operation of law (s.13)
S.13 provides that the right, title and interest
of a hirer under a HPA can pass by operation
of law to the personal representative of the
hirer.
This occurs on the death or the bankruptcy of
the hirer.
The personal representative and the
liquidator, as the case may be, are bound by
provisions of the HPA.
6. Right to early completion of agreement
(s.14)
S.14(1) confers on the hirer the right to an early
completion of the HPA.
To exercise that right, the hirer needs to give
written notice to the owner indicating his
intention and, on or before the day specified for
that purpose in the notice, pay or tender
payment to the owner the net balance due
under the HPA.
The ‘net balance’ is the balance originally
payable under the agreement.
7. Right to terminate the agreement (s.15)
S.15(1) confers on the hirer the right to
terminate the HPA at any time by returning
the goods to the owner.
Generally, goods should be returned during
ordinary business hours at the place at which
the owner ordinarily carries on business or to
the place specified for that purpose in the
agreement.
S.15(5)(a): the hirer may require the owner to sell the
goods to any person introduced by the hirer who is
prepared to buy the goods for cash at a price agreeable to
the owner.
S.15(5)(b): where the value of the goods at the time when
it is returned to the owner is more than the balance
outstanding under the HPA, the hirer is entitled to the
difference which is recoverable as a debt due.
S.15(5)(c): where the value of the goods is less than the
balance outstanding under the HPA, the owner is entitled
to the difference which is recoverable as a debt due.
8. Right of hirer on repossession by owner
(s.16)
S. 16-20 of the Act.
Repossession occurs
when there is default by
the hirer and in most instances, for non-
payment of instalments.
Procedure before repossession
The hirer has defaulted in two successive payments or the last payment
In the case where a hirer is deceased, the number of defaults is
increased to four successive defaults (s.16(1))
The owner has served on the hirer a written notice in the from set out in
thehas
The period fixed by the notice Fourth Schedule.
expired, which must not be less than 21
days after the service of the notice (s.16(1)). Case: Pang Brothers’ case
Repossession
Upon the owner taking possession of the goods, he must provide a
receipt in respect of the goods (s.16(4)).
Procedure after repossession
After repossession
The owner must serve on the hirer and every guarantor, if any, a written
notice in the form set out in the Fifth Schedule within 21 days (s.16(3).
Service of Fifth Schedule notice
The owner must not sell the goods without the written consent of the hirer until the expiry of
21 days after the date of the service on the hirer of the required notice prescribed in s.16(3)
Resell
Any sale in contravention of the
Sale can be by auction or private treaty
requirement constitutes an offence
Rights of hirer on repossession
S.18 confers on the hirer certain rights and
immunities when goods are repossessed. Upon
receipt of a s.16(3) notice, the hirer may within 21
days give notice to the owner requiring him to:
a) Redeliver to or to his order the goods that have
been repossessed (subject to compliance by the
hirer with the provisions of s.19); or
b) Sell the goods to any person introduced by the hirer
who is prepared to buy for cash at a price not less
than estimated value of the goods set out in the
notice.
s.19(1)
The hirer may regain possession of the goods
provided, within 21 days after giving notice to
the owner pursuant to s.18(1), the hirer:
a) Pays or tenders to the owner any amount due
in respect of the period of hiring up to the date
of the payment or tender;
b) Remedies any breach of the agreement or pays
to the owner the costs and expenses
reasonably and actually incurred by the owner
in remedying the breach.
