HIRE- PURCHASE LECTURE NOTES

INTRODUCTION
NATURE AND CHARACTER OF HIRE PURCHASE
The concept of hire-purchase has its origin in the common law as the
easiest method by which manufacturers of goods, dealers and traders
could grant long –term credit facilities to their customers who may wish
to purchase various categories of goods but may not be financially
buoyant enough to out rightly purchase them from such dealers or
manufacturers. He pays for the goods by installments which may be
annually, quarterly, monthly, weekly, etc. By this method, a prospective
buyer of goods or chattel may agree with the dealer to part with
possession of a chattel or good to him in consideration for an
installmental payment while he concedes a right to use same during the
period covered by the agreement, along with an option to purchase the
good at the end of the hire-purchase period or return the good to the
dealer. The issue of purchase can therefore only be conceived after the
hire period. A person hires first and purchases later if he wishes to do
so.
During this period, the hirer, being the consumer, is allowed to take
physical custody of the item as well as the right to use with some
reservations. At the end of the hire period he will either return the goods
or opt to exercise his option to purchase by paying the option fee.
While the growth and development of the system has been very rapid in
some advanced economies such as the US and the United Kingdom,
among others, it has been rather slow in others, especially third world
countries like Nigeria.
This is attributable to some reasons among which are the goods involved
are luxury goods such as vehicles, generators, televisions, refrigerators,
air-conditioners, among others which an average Nigerian cannot afford.
In Addition to this, apart from mechanically propelled vehicles, all other
items which exceed two thousand naira cannot be purchased under the
Hire-purchase Act.
Equally, the system is alien to customary operation in Nigeria. In the
same vein, when the system became popular in Nigeria it was subjected
to a lot of abuses and unethical practices thereby depriving their
customers of certain rights and protection the law intended them to have.
This rendered the system unattractive to potential customers. For
instance, the practice where a hiring company would resort to “snatching
back” of their goods from their customers for trivial defaults, such as
failure to pay any of the installments. Such goods may be disposed off
without compensating the original hirer for the amount he had already
paid for the goods. In this way, the company or dealer makes
considerable profit to the detriment of the consumer whose option to
purchase is thereby ended.
By the early seventies, the hire- purchase system had developed to a
considerable extent in Nigeria and with the advancement in education
and trade; the Nigerian consumer has begun to appreciate the developing
trade transactions as well as his right under the system. The hire
purchase system under the common law caused considerable hardship to
the hirers owing to the fact that he (hirer) only enjoyed minimum legal
protection, in addition to the abuses and injustices he was subjected to.
However, there was tremendous change in the 21 st century due to the
existence of information technology.
The Hire-purchase Act in Nigeria was originally modeled after the
United Kingdom Hire –purchase Act, 1938 and the Advertisement
(Hire-purchase) Act of 1957.The Act was modified to meet the
particular needs of Nigerian society.
The law governing Hire-purchase in Nigeria is the Hire Purchase Act,
2004. In Nigeria today, because of the rapid development in trade and
industry coupled with a rapid rise in the standard of living, it has become
familiar to see or hear Nigerians discuss or contemplate transactions
which have the characteristics of hire-purchase or a close similarity with
hire-purchase agreements.
It is an easy and inexpensive method of secured financing.
Definition and meaning of Hire- Purchase
The Hire- purchase Act, in Section 20(1) defines a hire-purchase
agreement as a 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. In other words, a hire- purchase
agreement is a bailment of a chattel with an option to the hirer to buy or
return the chattel.
A contract of hire-purchase has been defined as a ‘contract of hire with
an option to purchase under which the owner of the chattel undertakes to
sell it to, or that it shall become the property of, the hirer conditionally
on his making a certain number of payments. Until the making of the
last payment, however, no property in the chattel passes. 1 Hire-purchase
is an agreement for the bailment of goods (for the use of the goods)
under which the hirer or recipient agrees to pay certain amount as
deposit and further monthly installments each month in consideration of
being granted possession and use of goods and an option to purchase
them after a stipulated time or period, having paid a stipulated total sum.
The above definition is clear and leaves us in no doubt as to the nature of
a hire- purchase contract. It is an agreement concluded between a bailor,
that is the owner, and a bailee, i.e the hirer, in respect of some particular
goods. The bailee in law only has an immediate possession of the goods
which are the subject-matter of the bailment. The characteristics of this
bailment is that it is coupled with an option to purchase the goods bailed
subject to the condition that the bailee, i.e the hirer, pays every
instalment on the goods in accordance with the original agreement
between the owner and the hirer. Until this is done, ownership of the
goods is still with the bailor. Thus in Helby V Matthews (1895) A.C
471, the hirer of a piano with an option to purchase pledged it with a
1
Halsbury Laws of England, Volume I, 1st edition, p.554, paragraph 1124
pawnbroker. The court held that the owner could recover the piano from
the pawnbroker. There are exceptions to this general rule, unless the
hirer can plead successfully the exception that at the time of the sale he
had already exercised his option to purchase and was a buyer in
possession, such a sale shall be invalid.
There are broadly three reasons for the adoption of the hire-purchase
system
(a)The first and foremost reason is to allow credit to someone who is
unable to pay cash for the goods he wants and who would be glad
to pay some deposit and thereafter pay the balance instalmentally
at a stipulated rate of interest. Since this encourages people to
demand more goods, the system has become an instrument of
economic policy.
(b) The second reason for the hire purchase device is that a
dealer in particular goods or the manufacturer cannot always
provide credits and yet
Basic Features of Hire-Purchase
The fact that parties to an agreement expressly call it a hire-purchase
does not necessarily make it one. It is important to examine the
transaction as a whole so as to discover the intention of the parties.
1. It is a contract between owner and hirer. It must be in writing,
stating the total price to be paid under the agreement, the initial
deposit, number of instalments or interest payable and include
certain statutory terms in line with section 2 of the Hire-Purchase
Act.
2. The relationship is that of the bailor and bailee (Jajira V
Northern Brewery Coy Ltd(1972) NMLR 29 the court pointed
out that while the plaintiff was allowed to possess the goods during
the period of instalmental payments, the possession could not be
called bailment which is an essential feature of a hire purchase
agreement. The bailee has the right to possess and use the property
 during the bailment subject to the payment of a rental by way of
instalment to the owner.
3. Though the property in the goods will eventually pass to the hirer,
it never did when the agreement took effect. (It will only pass
when conditions are met) Hence, the hirer cannot validly dispose
of the property during the period of the bailment. See Ono
Jefegwono V Agunbiade & Anor (HC Benin Suit/No/B /5 /75
and Okeke V United Nigeria Ins. Co. (1972 Pt. 2 ECSLR 803)
In Ono Jefegwono V Agunbiade & Anor (HC Benin Suit/No/B /
5 /75 it was held that until the hirer has paid the last of a certain
number of payments specified in the agreement, no property in the
goods passes to him. He is nothing than a hirer that pays from time
to time for the hire.
4. The hirer enjoys the right to determine the agreement at any time
by returning the goods to the owner. Upon doing that he would no
longer be liable to make further payment beyond the sum then due
and unpaid.
5. The hirer also enjoys the option to purchase the goods for a
nominal sum at the expiration of the period. The property in the
goods, however, remains in the owner until the hirer exercises his
option.
Distinction between Hire-Purchase and Other Similar
Transactions
There are other similar transactions which bear close resemblance to
hire-purchase.
Sale and Hire Purchase: Contracts of sale resemble contracts of
hire-purchase very closely and indeed the real object of a contract of
hire-purchase is ultimately the possible sale of goods.

Main distinction
1. Sale of Goods Act infers obligation to pay the agreed price,
payment of which shall be enforced by legal action. For Hire –
Purchase on return of goods he cannot be forced to pay the
balance. He pays instalment as long as he keeps the goods. Helby
V Mathews (supra).
2. Under the Sale of Goods Act, a buyer cannot return goods unless
he is exercising an option to reject the goods, but in Hire-
Purchase, he can terminate the agreement at anytime. Joe Allen&
Co. V. Sari Adewale & Anor. (1929) 9NLR 115 the court
emphasized this distinction as follows: the test to be applied is
whether or not the party receiving the goods has the legal right to
return them at his own option and thereupon to cease paying
installment. If he has, the agreement is an agreement to hire with
possibly an option to purchase. If he has not, the agreement is an
agreement to sell. The owner is bound to collect the goods, if the
hirer wishes to return them.
3. Under the Sale of Goods Act property in goods passes when the
contract is made or soon after, but in hire purchase, the hirer
acquires ownership in exercise of option to buy. Yakassai V Incar
Motor (Nig.) Ltd. (1975) SC 107 at P 113
4. The owner in hire purchase has a statutory right to repossess the
goods if the hirer fails to pay the due installments. Not so under the
Sale of Goods Act.
5. No formality is required for entering into a contract of sale; a sale
transaction could be done orally while hire- purchase has a lot of
formalities.
Credit Sale and Hire-Purchase
Credit sale under common law is a sale where the price is paid or
payable by stated or agreed installments. No limits in such
installments.
Main distinction
1. Under hire purchase, hirer has the option to complete payment
or return the goods while under credit sale, the buyer is under an
obligation to complete the full purchase price.
2. In credit sales, the seller sells or agrees to sell and the buyer
buys the owner cannot recover the property even if the buyer is
in default of payment the seller can enforce the rights to compel
payment and will not have automatic right to recover the goods
while under hire –purchase the owner can recover the goods
back through a court action if the hirer defaults in the
instalmental payment.
3. A buyer in a credit sale can confer a valid title to a third party
who buys the goods before completing payment of the purchase
price whereas an hirer cannot pass a valid title to a third party
during the subsistence of the hire purchase agreement.
4. In credit sale agreement the parties are aware from the
beginning of the contract that the property in the goods will
eventually pass to the buyer upon the fulfillment of the agreed
condition, while in the case of hire purchase, there is no
agreement to the effect that property would pass. Whether
property passes or not is strictly dependent on the hirer’s
exercise of option.
Bill of Sales and Hire-Purchase
A bill of sales is a document evidencing the title of the seller to the
goods in the buyer’s possession. Here the buyer who has become
the owner of goods and has taken delivery gives the seller a right
to seize them upon his default of payment of the unpaid purchase
price. A bill of sales merely evidences the fact that there is an
actual sale without situation but that title does not pass until all the
instalmental payments have been made. Upon full payment, the
property automatically goes to the buyers. However, such a
document will not be valid until it is registered.
In the case of hire-purchase, the agreement is for bailment not sale
of goods. The issue of sale can only arise when the hirer exercises
his option to purchase. Ownership does not therefore pass
automatically because the hire period has elapsed.
Conditional Sale and Hire-Purchase
A conditional sale is a contract whereby the transfer of the
property in the goods is subject to some conditions to be fulfilled
subsequently by the buyer. The conditions are usually in relation to
the payment of the purchase price.
Section 1(3) SGA allows transfer of property in the goods to take
place at a future time or subject to conditions to be fulfilled after.
This is common to both conditional sale and hire –purchase. Since
possession is acquired, the owner retains the property or ownership
in the goods until the fulfillment of the stipulated conditions.
Main distinction
In a hire purchase, the hirer only holds as a bailee not as a buyer,
which means he can only take possession and use the goods during
the period of the contract, in the case of a conditional sale, the
buyer may transfer a good title to an innocent third party.
In a conditional sale, the buyer takes ownership upon completion
of payment while a hirer would still need to exercise his option as
to whether to purchase or not.
In Amao V Ajibade & Ors (1955-56) WRNLR, the buyer was
allowed possession of goods upon payment of a deposit of 400
Pounds. The agreement provided that the balance had to be paid in
three equal installments and that the owner was to retain ownership
until the full purchase price 11045 Pounds is paid. It was held that
the agreement was a conditional sale and not a hire-purchase
agreement.
Lease and Hire-Purchase
The word ‘lease’ is used with reference to equipment. It is a
contract whereby the owner of a property grants to another, the
right to posses, use and enjoy the property for a specific period of
time, in exchange for periodic payment of a stipulated price
referred to as rent. Upon expiration of the lease period, the lessee
must return the goods to the lessor. Although the lessor parts with
the goods during the lease period, he does not pass with the
ownership or contemplate same throughout the lease. Leasing of
capital goods on long-term basis is often done because of high
capital cost as a result of which many cannot indulge in outright
purchase. Items such as oil rigs, aircrafts, ships, tankers, tractors
might be subject matters of equipment leasing. In Akibiya V
Sambo (Suit NP. NCH /10/73 the plaintiff entered into an
agreement to lease a motor vehicle for 12 months. The agreement
was renewable for a further 12 months after which the lessee was
to return the good. The parties described the agreement as a hire-
purchase. It was held that the transaction was a lease which only
conferred on the lessee a right to use the good and return it after
the expiration of the lease.
Main distinction
The hire- purchase agreement is similar to a lease in that the owner
parts with possession of goods in return for a rental but in addition
to a mere right to use, the hirer is given an option to purchase the
goods at the end of the contract period.
Hire purchase is fully regulated while lease is not and is subject to
individual contracts.
The goods involved in equipment leasing are capital goods while
those in hire purchase are consumable goods not exceeding two
thousand naira unless they are vehicles.
Loan and Hire Purchase
 A loan may be defined as lending money by one person called the
lender to another called the borrower. The agreement usually
requires that the borrower pays back the money at a future date
with or without interest. A borrower may therefore charge or
mortgage his goods to the lender as security for such loan. The
understanding between them usually is that the borrower retains
possession of the goods while he parts with documents of
ownership to the lender to enable him recover his money. If he
pays his debts in compliance with the agreement, the lender would
have no recourse to the property used as security for the loan. But
if he defaults, the lender can sell the security to recover the loan.
It could also be a loan obtained from a third party to finance credit.
The buyer may be granted the loan on terms that the ownership in
the goods is given to third parties financier until loan is repaid in
full with agreed interest.
The practice is common in Nigeria where employers finance their
employees for the purchase of motor vehicles popularly known as
‘car loan’ The repayment is usually by deducting a certain agreed
specific sum from the employee’s salary every month for the
period or duration of the agreement. In Jajira V North Brewery
Co. Ltd.(Supra) A Kano High Court held that an agreement of this
nature is neither a hire purchase nor a credit sale agreement. But a
loan of money upon security of goods sold.

FINANCING HIRE PURCHASE

TRANSACTIONS
In a number of cases the dealers or sellers finance the transaction
themselves. But in most cases third parties are invited to finance the
deal. This method is known as triangular transaction and it’s common
in hire purchase transaction.
The prospective buyer approaches the dealer of the goods he wishes
to take out on hire-purchase. The dealer would normally stock the
hire-purchase proposal forms of a particular finance company willing
to do business with him. He then produces one of these forms, which
is in effect a request to be granted credit for the purchase of the
goods, and the prospective buyer fills it. The forms are sent to finance
company which if satisfied with the credit worthiness of the buyer
purchases the goods from the dealer for the cash price. The finance
company then lets the goods on hire purchase to the buyer for cash
price and his substantial ‘hire purchase charge’ Transaction becomes
between hirer (buyer) and the finance company (the owner). The hirer
pays the agree deposit and is granted possession of the goods.
Consequently, the dealer has secured a sale, the hirer, the goods he
wanted and the finance company a contract which is in reality a loan
secured on goods.
Another method, especially between manufacturers and purchasers or
where the goods are of particular value is the use of bills of exchange
or promissory notes. A hire-purchase agreement is entered into
between the owner of the goods and the prospective buyer. The latter
is given possession of the goods in return for which he gives the
owner a promissory note binding him to pay agreed hire-purchase
price by installments as set out in the hire-purchase agreement. In
such a case, both the “owner” in the hire-purchase agreement and the
payee of the promissory note, are one and the same person, i.e the
dealer. On receipt of the promissory note, the dealer will usually
either discount it with a bank or endorse it over to a finance company
in return for a payment representing on amount agreed to be advanced
by the company.
This procedure is not common today. In Modern Light Cars Ltd V
Seals (1934) I. R.B. 32, in that case, it was agreed in writing between
the plaintiffs as owners of a motor car and a hirer thereof that the
plaintiffs should let the vehicle to the hirer for a sum payable in part
on the execution of the said agreement and the hirer should give to the
plaintiffs a promissory note for the total amount of the monthly
installments. The promissory note was to be given not as payment of
the installments but as collateral security Roche, J held that the
agreement was a hire-purchase agreement and was neither a sale on
credit, an agreement to sell nor a bill of sale and that the promissory
note was given only as a collateral security for the installments and
not in payment thereof.
The fact that the owner of the goods let on hire-purchase accepts a bill
of exchange or promissory note as collateral security for the payment
of the installments due under the agreement does not deprive him, or
suspend, the remedies he is entitled to under the agreement, such as
the right to re-possess the goods on defaults of installmental payment
by the hirer.
There are other methods by which the finance company can act to
finance hire-purchase transactions they include block discounting,
hire purchase stocking and mortgage agreements.
Under a block discounting agreement, the dealer agrees to assign to
the finance company his rights under blocks of hire-purchase
agreements as stated intervals. The finance company takes over these
hire-purchase agreements from the dealer at a discount while the
dealer is made responsible for collecting the installments from the
hirer as agent for the finance company. In this situation, there are
about three sets of relationship between the finance company and the
dealer. As regards the discounting itself their relation is that of buyer
and seller, and as regards the collection of installments, it is that of
principal and agent. Besides, the dealer might have guaranteed the
payment of the installments in which case there is also the
relationship of creditor and guarantor.
By stocking agreement method, the dealer procures a finance
company to assist him in purchasing stock for his hire-purchase
business. Usually the finance company acquires ownership of the
dealer’s stock of goods which it then lends out on hire purchase to the
dealer. The dealer is however granted authority to sell or let them out
on hire purchase to his own customers. There are some legal
difficulties associated with this method. First, the dealer may sell the
goods thereby passing a valid title to them to the goods sub-buyer, as
a mercantile agent. Second, there is also the danger that the
transaction between the finance company and the dealer might be
held to constitute a bill of sale by way of security and therefore
unlawful not being registered. For these reasons and others, stocking
agreements have lost their popularity with finance companies.
Although a common feature of hire-purchase finance in the developed
countries like the United Kingdom, the mortgaging of the hire-
purchase agreement is not yet practiced in Nigeria. Under this
method, the dealer instead of outright sale of his hire-purchase
agreement, he may mortgage either his right of property in the goods
or his contractual rights under the agreement to a finance company.
The mortgage may be a legal mortgage which usually takes the form
of an assignment in favour of the finance company with a provision
for re-assignment or redemption. It may also be an equitable
mortgage which is usually effected by an intention to assign, which
assignment has not been perfected. Both types of mortgages can be
created orally or in writing.
THE TRIANGULAR TRANSACTION
A hire- purchase agreement could involve just two parties namely,
the owner and the hirer. The number of parties involved in a hire-
purchase transaction is usually dependent on whether or not the
owner needs to resort to a third party to finance the transaction.
Where the owner lets the goods directly to the hirer and no third party
is involved, the transaction is strictly between the between the two of
them. Vey often we find out that this is not the case since hire-
purchase is a very expensive venture and sometimes requires the
owner to part with so many goods within the same period and then
wait for the hirers to pay for them by way of small installments.
Unless an owner in a hire- purchase contract is particularly rich, such
a venture would amount to tying down a lot of capital. It is for this
reason that it sometimes becomes important for owners to seek
assistance from finance companies to finance the transaction. There
are usually three principal parties involved in this type of transaction.
They are; the dealer, the finance company and the hirer. In addition to
this there may be the guarantor of the hirer. Of all the types of hire-
purchase financing discussed above, this is the most popular method
of financing in Nigeria. On the face of it, there may be two or three
interrelated but distinct relationships: a contract of sale between the
dealer and the finance company, a contract of hire-purchase between
the finance company and the hirer, and a contract of guarantee
between the finance company and the guarantor.
Relationship between finance company and dealer
There is primarily the relationship of buyer and seller between the
dealer, the original owner of the goods, and the company which
finances the hire-purchase transaction.
Their rights and obligations are governed by the Sale of Goods Acts.
The usual implied terms under the Sale of Goods Acts, namely, (a)
undertaking as to title, (b) correspondence with some description, and
(c) quality and fitness for particular purpose all apply. However,
ordinarily a buyer has the right to reject the goods purchased and
delivered for breach of any of these implied terms, the finance
company usually will not be in a position to exercise this right. This is
because the goods are usually delivered direct to the hirer.
Sometimes the finance company do insist that the dealer should
guarantee the hirer so that in the case of default by the hirer, the
dealer would pay or ‘recourse agreement’ may be entered between the
finance company and the dealer- it binds the dealer to repurchase the
goods from the finance company on default by the hirer for balance
due on the hire purchase. But the right is difficult to enforce since the
finance company may not be in position to re-deliver the goods to the
dealer, it would not be able to enforce his right under the “recourse
agreement”. Contract of indemnity or guarantee has better attraction
to finance companies than such agreement.
 The most important aspect of the relationship between the finance
company and the dealer concerns the question can the dealer be
treated as the agent of the finance company since the dealer handles
all the deals? The deposit is paid to him, the proposal form given by
him to the prospective hirer and frequently he is the party that
receives the installment payments when they are due. However,
sometimes things may go wrong, for example,
(a)The goods may be defective in one form or the another’
(b) The dealer may not be entitled or have the right to sell the
goods in question,
(c)The dealer may be dishonest and absconds with the deposit paid by
the hirer,
(d) The wrong figures, i.e other than those which the hirer has
agreed, may be inserted in the document by mistake or fraud,
(e)The goods may be damaged or stolen before the finance company
has completed the transaction
In any such situation, the hirer is left face to face with the finance
company which in law is the owner of the goods, the subject-matter of
the hire-purchase contract, but which has never seen them, knows
nothing about them and may have no resource to remedy the defect. The
company is in fact well aware that the hirer looks to the dealer to handle
any complaints. The finance company is left with the security of the
goods for the title and condition of which it is entirely dependent upon
the dealer. The claim that the dealer has acted as agent for the finance
company is thus naturally put forward in order to give the hirer a
remedy, this being a means of making the finance company responsible
for the dealer’s acts or defaults.
Contentions of this kind have received divergent responses in a number
of cases by the courts. Under common law, it depends on the express
terms of the agreement between the parties. In Igbadume V Bent
Worth Finance Co. (Nig.) Ltd (1965) 66 MWNLR 122, it was held
that a dealer might become the agent of the finance company by express
or implied authority, even by conduct. To lay down a dogmatic rule that
the dealer can never be an agent of the finance company may spell doom
to either of them or to an innocent third person in an appropriate
occasion where there is an express or implied authority to act as an
agent.
In some instances, the finance company may authorize the dealer to
perform certain acts on its behalf, such as receiving deposit or delivering
the goods to the hirer, but the finance company will not be held liable for
any act of the dealer not so authorized. See Amusan & Anor v
Bentworth Finance Company Ltd (1966) NMLR 275 where it was
held that a dealer should not by reason of taking care of certain aspects
of the transaction on behalf of the finance company thereby become its
general agent. The hire- Purchase Act has accepted that the finance
company is responsible for certain acts, statements or omissions of the
dealer. Section 3(e) of the Act provides that any provision in an
agreement whereby an owner is relieved of liability for the acts or
defaults of any person acting on his behalf in connection with the
formation or conclusion of a hire-purchase agreement shall be void. It is
to be recalled that usually the hirer is not in direct contact with the
finance company, all antecedent negotiations being handled by the
dealer. The deposit is paid to him, the proposal form given by him to the
prospective hirer and frequently he receives the installments when they
are due.
RELATIONSHIP BETWEEN DEALER AND HIRER
Ordinarily, there is no contractual relationship between the dealer and
the hirer. No contract of sale, no hire –purchase agreement. See Drury v
Victor Buckland (1941) 1 All E.R 269. But a contractual relationship
may arise where the dealer quite independent of the hire –purchase
agreement makes or takes what is generally referred to as “collateral
contract” or “collateral warranty”. It is collateral because it is subsidiary
to the hire-purchase agreement and a warranty because it denotes a
promise intended to be binding. Where this happens the dealer may
become liable to the hirer if it is broken. In Andrew v Hopkinson
(1956) 3 All E.R 422, the dealer showed the plaintiff a 1934 vehicle and
told him that “it is a good little bus, I would stake my life on it. You
would have no trouble with it.” Consequently, the plaintiff agreed to
take the car out on hire-purchase and the dealer sold the car to a finance
company. When the car was delivered, it was found, after one week, to
be defective owing to failure of steering mechanism. The hirer sued the
dealer for damages for breach of warranty and negligence. It was held
that the words referred to above amounted to a warranty that the car was
in good condition and reasonably safe for use on the high way; that the
hirer had acted on this warranty accepting delivery of the car and
entering into hire-purchase agreement, and that he may sue the dealer
and recover damages for the breach of it. The court has also held that the
dealer may be liable to the hirer in negligence if he puts into circulation
a chattel to the hirer which is dangerous or defective and the hirer is
injured as a result.
Other Relationships
It is common for the owner to require that the hirer gets another person
to guarantee his payment under the agreement. By doing so, the owner
protects himself against failure of the hirer to pay (default of payment) If
the hirer defaults, the guarantor takes over the payment since he stands
in the position of a surety. Although the guarantor secures the payment
of the installment, he does not become liable until the hirer defaults. As
for contract of guarantee- section 20 of Hire Purchase Act is explicit. “a
contract of guarantee” for this purpose must be made at the request of
express or implied of the hirer or buyer” and not the owner. Contracts of
guarantee is not the same with that of indemnity.
FORMALITIES
Under common law, no special form is required for hire purchase. It
may be orally, in writing, with or without seal.
Under Hire Purchase Act
 (a)The Act ensured that the terms of each transaction are made clear
to the prospective hirer before or after the time of entering into the
transaction.
(b) Certain statutory formalities are prescribed with penalties for
non-compliance
(c)Certain terms are made ineffective if included in hire-purchase
agreement.
1. Notice of cash price
Section 2(1) of the Hire Purchase Act provides that before agreement,
the owner shall notify the prospective hirer in writing the cash price of
the goods. That is price at which the goods may be purchased by the
hirer for cash. Who is the owner? Section 20(1) the person who lets or
has let goods to a hirer under the hire purchase agreement that is the
finance company, but in practice notice is given by the dealer. In Alhaji
Kelani Adediran v John Olu Balogun & Anor (1982) OGSLR
183,@page 287 Somolu, J , opined that the reason for fixing the hire
with knowledge of the cash price of the goods he intends to take on hire
purchase is to make him aware that he has an option to buy the goods on
cash basis an alternative to hiring it. Essentially, is to afford him the
opportunity of comparing this with the hire purchase price and weighing
the cost of the credit facilities being offered to him under the latter
before taking a final decision.
Section 2(1) of the Act went further to stipulate ways in which this
requirement may be complied with.
(a)It must be stated in a separate document other than the note or
memo of the hire purchase agreement and it must precede the
agreement.
(b) The prospective hirer inspects the goods and at the time of
the inspection tickets or labels were attached or displayed with the
goods stating the cash price.
 (c)By hirer selecting the goods for example by reference to a
catalogue, price list or advertisement which clearly stated the cash
price
2. Note or memorandum in writing
Section 2(2) of the Hire-Purchase Act requires that a note or
memorandum of the hire-purchase agreement must be made and signed
by the hirer and by or on behalf of all the other parties to the agreement.
It must therefore be made before it is signed. The note or memorandum
must be signed both by “the hirer” and “by or on behalf of all other
parties to the agreement” The implication of the foregoing is that the
hirer should sign personally and not by an agent on his behalf while the
finance company may sign by an agent.
Section 2(2) provides that the note or memorandum should contain
certain information and term
(a)A statement of the hire-purchase price of the goods;
(b) A statement of the cash price of the goods;
(c)A statement of the amount of each installment payable;
(d) A statement of the date or the mode of determining the date
of payment of each installment;
(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) A 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 owner’s
right to recover possession of the goods. In Eastern Distributors
 Ltd. v Goldring the court held that a memorandum must contain all
these terms at the time the hirer is being called upon to sign.
Section 2(2) of the Act also requires a copy of the note or memorandum
to be delivered or sent to the hirer within fourteen days of the agreement.
This provision is complied with if the note or memorandum is either
actually delivered to the hirer or deposited with a third party common
carrier like post office for onward transmission to the hirer within the
stipulated time. The time of the hire purchase agreement begins to run
from the date the hire- purchase agreement is completed.
EFFECT OF NON COMPLIANCE BY OWNER
Under section 2(2) of the Act, 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.
i. Enforcement of Agreement: Section 2(2) of the Act merely
states that the hire-purchase agreement is rendered
“unenforceable” by non compliance of the provisions of the
section. This does not mean that the agreement is rendered void
ab initio, neither does it change the character of the agreement.
In Opoginin v Adeyemi, an Ado Ekiti High Court rejected an
argument by the plaintiff’s counsel that non-compliance with
section 2 rendered the agreement void and therefore should be
treated as a credit sale. This difference in wording is significant
and suggests that the hire-purchase agreement remains effective
but that the rights under it cannot be enforced. Secondly, the
sanction for non-compliance operates against the owner only.
“an owner shall not be entitled to enforce” the agreement. There
is nothing in this provision to suggest that it may not be
enforced by the hirer. However, since the hirer stands to gain by
its unenforcement against him by the owner, there would seem
to be no logical reason why he would wish to enforce it against
the owner.
ii. Recovery of goods: Section 2 of the Act restricts the owner’s
right to recover the goods from the hirer if a provision of the
section is not complied with. In Yusuf and Anor v Oyetunde
and Anor the owners failed to state in writing to the hirer the
cash price of the vehicle the subject matter of the agreement
before the agreement was entered into. A Kaduna High Court
held that to enforce any right to recover the goods within the
meaning of the section means that the owner cannot recover the
goods by instituting proceedings for their recovery and by
exercising his right under the agreement to seize them extra-
judicially.
iii. Enforcement of guarantee: The owner is also barred from
enforcing his right against the guarantor under contract of
guarantee. Since the liability of the guarantor depends upon
confirmed liability of the hirer, it is obvious that the same result
should be contemplated. See Younis v Chidiak and
Anor(1970) 1 All NLR 188 where it was held that a contract of
guarantee to pay the debt of another must be under seal or
otherwise supported by valuable consideration and that
forbearance to support or take the principal debtor to court given
at the request of guarantor is a sufficient consideration for a
guarantee.
iv. 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 prejudice the hirer, and
(b) It will be just and equitable to do so.
The dispensing power of the court only avails a plaintiff in respect of
the provisions of Section 2(1) and 2(2) (b) (c) or (d). The court has no
dispensing power in regard to section 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 supra, the
owners failed to state in writing to the hirer the cash prices of the
vehicles let before the agreements were entered into. 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 section 2(2) and to disregard the owner’s breach of the
statutory duty because the hirer was not prejudiced. The court
rejecting this plea stated that the hirer has been prejudiced in that he
has been unlawfully deprived of what the law permitted him to keep.
It further declared that where a contract is declared unenforceable by
an express provision of a statute, equity will not assist the party
disentitled to enforce it for any redress, that equity will not listen to
the protest of the owner and that it is inequitable to permit the hirer to
keep the goods without paying for them.
Illiterate hirers
An illiterate person is neither mentally nor physically incapacitated.
His only incapability is that he is unable to read or write in any
language whatsoever.
The illiterate Protection Act Cap 83, Laws of Nigeria, 1958 defines
an illiterate as a person who is unable to read or write in any
language. The Act provides certain statutory protection in favour of
such a person since it is important that he understands the nature of
the agreement into which he intends to enter by appending his
thumbprint or signature.
Section 3 of the Act provides that any person, who writes any
document at the request or on behalf or in the name of an illiterate
person, must write on the document his name as the writer, his
address, whether or not a fee has been charged and the amount against
the number of copies written, etc.
 Oputa J.tried to explain the effect of the Illiterates Protection Act as
follows in the case of Osefo v Nwana (1971) 1NCWR 421
An illiterate person is a person who is unable to read with
understanding and to express his thoughts by writing in the language
used in the document made by or prepared on his behalf.
A graduate of English may well be an illiterate in German etc. The
objective of the Act is to protect an illiterate person from possible
fraud. Therefore, the law insists on strict compliance with this
provision.
Under section 4 of the Act, a writer who fails to comply with the
requirement aforesaid is guilty of a criminal offence.
Where an agreement requires an illiterate party’s signature or thumb-
print, the maker must include an illiterate just to show that he has read
and explained the document to the illiterate in the language that he
understands before appending the signature or thumb-print. Failure to
do this will make the agreement unenforceable against the illiterate
person. See the case of Grigiri v Elf Marketing (Nig) Ltd. (1997) 2
NWLR (Pt 487) 368
It should be noted, however that the Illiterate Protection Act cannot
be used as a weapon of attack, rather, it could be used as a weapon of
defence. In the case of Igbadume v Bentworth Finance (Nig) Ltd.,
(1965-66),28,42 the court rejected the submission by the plaintiff
illiterate that the hire-purchase agreement was void ab-initio and held
that the section is meant to protect the illiterate against fraud but that
the illiterate should not use it as a means of perpetuating fraud on
others. See Amiza v Nzeribe (1989) 4 NWLR 755
CONTENT OF HIRE-PURCHASE AGREEMENTS
The hire-purchase agreement usually sets out the terms of the
transaction. For example, the description of goods to be let, the price, the
period of hiring, the deposit and instalment, minimum payment clause,
the option, subject to any such terms agreed upon by the parties.
Certain terms are implied by Section 4 of the Hire-Purchase Act. The
terms of the contract can therefore be broadly divided into express and
implied terms. The express terms are those agreed upon by the parties,
while the implied terms are those imposed by the law. Any attempt by
the parties to exclude any of the implied terms shall be void. Because of
the special nature of hire-purchase transactions, Section 2 of the Act sets
out in clear terms what should be included in the agreement while
section 4 implies further terms into the agreement. Section 3 prohibits
inclusion of terms prohibits inclusion of terms prohibited by the Hire-
Purchase Act.
Express Terms
Subject to the provisions of the Act, the parties are free to provide for
whatever terms they deem suitable for their particular circumstance,
especially as regards the period of contract, the price to be paid in total,
the instalments of hire, the deposit, the restrictions on the contracts
among others. Section 2 of the Hire-Purchase Act sets out certain terms
which must be included as terms of the hire-purchase contract, for
example there must be a statement of the cash price, initial deposit,
instalments, duration of contract, true interest rate, goods which form the
subject matter of the contract, and notice specifically placed, stating that
the hirer has an option to determine the agreement at anytime or
purchase the goods and that the owner’s right of repossession is
restricted. Etc. Apart from these, the parties may agree on other terms
which could be added to the contract. An important restriction to the
freedom to contract is contained in Section 3 which provides that the
following provisions in a hire-purchase agreement shall be void. These
include any of the following provisions whereby:
i. 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 any such entry. It is pertinent to
relate this with Section 2(2) (c) which compels a prominent
notice in the agreement restricting the owner’s right of
 repossession. A contrary clause authorizing him to take
possession or be relieved from liability will therefore be
counter- productive, if he does, to the intention of the Act. Such
a clause was inserted in the agreement in United Dominions
Corporations(Nig) Ltd v Ladipo (1971) 1 All N.L.R 102
where the owner without permission from the hirer or his agent
entered the hirer’s premises to seize the vehicle on default by
the hirer. It was held that the only remedy the owner might be
disposed to is damages for trespass on wrongful entry.
ii. The right conferred on a hirer by the Act to the determine the
hire – purchase agreement is excluded or restricted or any
liability in addition to the liability imposed by this Act is
imposed on a hirer by reason of the termination of the hire-
purchase agreement by him under the Act. Note that by Section
2(2) the option to the hirer to determine or purchase is an
integral part of the contract and cannot be removed by contract.
He can also not be subjected to any penalty for exercising his
option either way.
iii. A hirer after the determination of the hire-purchase agreement
or the bailment in any manner whatsoever is subject to a
liability to which he would not have been subjected if the
agreement had been determined by him under this Act. An
example of this is where a hirer is to pay more than the
minimum payment of half of the total hire- purchase price
provided by section 8(2) of the HPA or
iv. Any person acting on behalf of owner or seller in connection
with the formation or conclusion of a hire-purchase or credit
sale agreement is treated as or deemed to be the agent of the
hirer or buyer. This would have the effect of making it look as
though an owner who is acting in breach is acting on behalf of
the hirer. Where a person acts on behalf of another to carry out
acts which the other is prohibited from doing, it is presumed
that the person so acting, carried out the will of the other in
 respect of the default or (We have already noted that in a typical
hire-purchase transaction, there is a business deal in which an
owner, a dealer and an hirer are concerned. Each party is out
purely and independently to do business and wants much from
the deal as he or it can possibly secure. The dealers will do
business with as many owners as are ready and willing to
accommodate the hirer who comes through him, and the hirer
with as many dealers as are able to secure for him owners who
are willing to let him have goods on acceptable hire- purchase
terms. The dealer under normal circumstances does not act as
agent of the hirer in procuring hire-purchase agreement.
Occasionally, finance companies have been cited as co-
defendants in actions by hirers in regard to the supply of
defective or unsatisfactory goods. To avoid this, it became the
practice for finance companies to insert clauses in hire-purchase
agreements stating that the dealer did not act as agent of the
owner but was to be deemed as agent of the hirer. Sub-section
(e) renders any such clause void and ineffectual. This does not
however mean that the dealer will invariably be regarded as an
agent of the owners neither does it preclude the owners from
limiting their liability as a principal for the acts of the dealer.
v. An owner or seller is relieved from liability for the acts or
defaults of any person acting on his behalf in connection with or
conclusion of a hire –purchase or credit sale agreement. This
will amount to a reversal of the rules of agency which imposes
liability on the principal for the acts of his agent. A principal
cannot do through an agent, that which is incapacitated from
personally doing; or (This section renders void 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.)
vi. A hirer or buyer is required to avail himself of the services as
insurer or repairer in any other capacity 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. The idea is that they gain both
in regard to the hire purchase itself and the insurance aspect of
the deal. Subsection (f) puts an end to this practice and renders
void and ineffectual any clause reserving such right.)
Apart from the above void provisions which tend to exclude the implied
terms of a contract, parties are generally free to include what they agree
upon in their hire-purchase contract. It is important that all terms which
the parties choose to include in their contract are lawful. Before adding
other terms, the agreement must consider and include issues mentioned
in Section 1 relating to the nature or value of goods and Section 2 of the
HPA, relating to the specific issues that should be contained in the note
and memorandum in writing.
Implied Terms
In addition to the express statutory terms and any other lawful terms
which the parties may choose to include in their agreement, Section 4
provides for a number of conditions and warranties which are to be
implied into every hire- purchase contract notwithstanding any
agreement by the parties. Out of the five implied terms, two are
warranties while 3 are conditions. The terms which are quite similar to
those provided by Sale of Goods Act, 1893 Section 12 to 15
a. Title
Section 4(1)(b) of the Act provides that there shall be an implied
condition on the part of the owner that he will have the right to sell the
goods at the time the property is to pass. In the case of Karflex Ltd v
Poole (1933) 2 KB 251 the plaintiff purported to have bought a car from
‘A’ and let it out on hire to the defendant. When the defendant fell into
arrears of payment, the plaintiff repossessed the car and sued for the
enforcement of the minimum payment clause. It was discovered that ‘A’
had no title to the car and could therefore not have passed a good title to
the plaintiff. He then counter- claimed for the return of his deposit. It
was held that the plaintiff was in breach of section 4 (1) (b) since no
valid title had been passed to him. He therefore had no right to sell when
he did. Goddard J. stated that, where a person is letting out chattel on
hire purchase, he does thereby imply by contract not that he will at
sometime become possessed of that property during the currency of the
agreement but that he is the owner of that property at the time when he
lets it out. The rationale being that you cannot give someone the right to
purchase if you do not have the right of ownership in respect of the
goods.
The basic elements of all hire purchase agreements are a combination of
bailment and an option to purchase. The option to purchase can only be
given by a person who has title to sell the goods. Once the right of the
owner to sell is removed, the right to give that option is also removed
and therefore there can be no hire-purchase agreement. There is a total
failure of consideration if the option is given by someone who has no
right to give it, since he cannot give better than he has. This is quite
similar to section 12(1) of the Sale of Goods Act.
b. Quiet Possession
Section 4 (1) (a) of the Act provides for a warranty of quiet possession.
It states that, “there shall be an implied warranty that the hirer shall have
and enjoy quiet possession of the goods” this provision has the
semblance of section 12 (2) of the SGA. The very nature of hire-
purchase makes it imperative that the first part of the contract is for
possession and use of the subject matter. It is only at the end that a
decision is taken about a purchase. If the right to possess and use is
disturbed, then the contract cannot stand.
Under common law, once the hirer is given the possession of the goods,
he becomes entitled to quiet possession of them for his own use and
benefit for the duration of the hiring. In Lee v. Atkinson &Boos (1909)
Cro.Jac.236 it was held that neither the owner nor anyone claiming
through him has any legal right to disturb his possession and use without
due cause. The owner in addition to putting the hirer in possession of the
goods hired, must also ensure that he remains in peaceful or undisturbed
possession of the same during the continuance of the agreement. The
warranty protects the hirer against any interference either by the owner
himself or by third parties acting lawfully. It does not however protect
him when he himself is in breach of the agreement, for the owner may
thereby exercise his right of repossession. In the case of Lloyds and
Scottish Finance Ltd. v Modern Cars and Caravans Ltd (1962) 2 All
ER 732, the dealer’s invoice attached to the hire-purchase agreement
expressly stated inter alia that the goods were unencumbered and free
from any lien. Unknown to both the finance company and the hirer, the
caravan had been obtained against a previous owner under a writ of
attachment. The sheriff subsequently repossessed the caravan from the
hirer and it was held inter alia, that there was a breach of warranty of
quiet possession. The fact that the sheriff could exercise his right which
was proper to that of the original owner against any purchaser would
definitely disturb the purchaser’s right of quiet possession.
The warranty of quiet possession is an assurance from the owner of the
goods hired to the hirer against any adverse consequence of the owner’s
defective title and of any disturbance that follows from it. The warranty
is therefore limited to ensure that while the hirer is not in breach of his
contract, his right of quiet possession cannot be disturbed.
c. Warranty of Freedom from Encumbrance
Section 4(1)(c) of the Act provides that there shall be an implied
warranty that the goods shall be free from any charge or encumbrance in
favour of any third party at the time when the property is to pass. Like
the condition of title, this warranty does not arise until the time when the
property is to pass. The effect here is that if there was a charge or
encumbrance on the goods in favour of a third party at the time of the
conclusion of the or the delivery of the goods to the hirer, this provision
is not breached if the owner procured its discharge by the time the hirer
elects to exercise his option to purchase.
d. Merchantable Quality
Section 4(1) (d) provides that
Except where the goods are let as second hand goods and the note and
memorandum of agreement made in pursuance of section 2 of the Act
contains a statement to that effect, an implied condition that the goods
shall be of merchantable quality, so however, that no such condition
shall be implied by virtue of this paragraph as regards defects which the
owner could not reasonably have been aware of, at the time when the
agreement was made or if the hirer has examined the goods or a sample
of them as regards defects which the examinations ought to have
revealed.
The condition as to merchantable quality will not apply where:
i. The goods are second- hand goods and the note or
memorandum evidencing the agreement contains a statement to
that effect.
ii. The defects are such that the owner could not reasonably have
been aware of at the time of making the agreement.
iii. The hirer had examined the goods or sample and failed to detect
defects which such examinations ought to have revealed.
Goods are therefore merchantable when they have the quality that a
reasonable man acting reasonably will after full examination not have
detected the defects.
Where the goods are not second hand goods, this condition may be
excluded if it can be shown that before the agreement both the defect
and the exclusion were brought to the hirer’s notice.
There is a duty on the owner to deliver the goods in a state that it was at
the time of the hirer’s inspection to absolve him from liability under this
section. In Karsales (Arrow) Ltd v Wallis (1956) 2 All ER. 866 the
hirer inspected the car and found it in a fairly good condition. When the
car was delivered on a month later, it was found to be in a deplorable
condition, incapable of self propulsion and with some vital parts missing
or damaged. Denning 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 hirer
makes his application on the faith of his inspection and on the
understanding that the goods will be delivered in substantially the same
condition. 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
Section 4(2) of the Act 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 that purpose.
Section 4(3) of the Act provides that the owner shall not be entitled to
rely on any provision in the agreement excluding or modifying this
condition unless he proves that before the agreement was made the
provision was brought to the notice of the hirer and its effect is made
clear to him.
This condition is wider under the Hire-Purchase Act than at common
law in the following respects:
i. It is not necessary to show that in selecting the goods, the hirer
relied on the owner’s skill and judgement as he would be bound
even if he had relied on his own skill.
ii. Unlike at common law, the breach of this condition entitles the
hirer to repudiate the contract for breach even though the defect
does not amount to frustration of the contract.
Some hire- purchase agreements contain a declaration by the hirer that
he has examined the goods and that they are in all respects fit and
suitable for the purpose for which he requires them. Such clauses will
not be binding unless they have been brought to the notice of the hirer.
In the case of Lowe v Lombard Bank Ltd. (1960) All ER 611 CA the
plaintiff, a widow aged sixty-five years, agreed to purchase a second
hand car on hire-purchase form a motor car dealer for 200 Dollars. She
had not seen the car but was told that it was in perfect or almost perfect
condition, she signed a printed hire-purchase agreement form issued by
the defendants but failed to read the form. It contained a clause requiring
her to keep and maintain the goods in good condition and to pay
punctually all license duties, taxes, and registration charges in respect of
the goods and the user thereof. Another clause provides inter alia that:
The hirer acknowledges that he has examined the goods prior to signing
this agreement and that there are no defects in the goods which such
examination ought to have revealed and that the goods are of
merchantable quality. The hirer further acknowledges and agrees that he
has not made known to the owners expressly or by implication the
particular purpose for which the goods are required and that the goods
are reasonably fit for the purpose for which they are in fact required.
These clauses were never brought to her notice. On the evening of the
day she signed the agreement, the car was brought but had to be taken
away for some minor adjustments. The car was handed over to the
plaintiff at a later date and she signed a receipt stating that she confirmed
that she had examined the goods acknowledged that the same was in
good order and condition and to her satisfaction in every respect. Of
course she did not and could not have examined the car as alleged. The
car was in fact, completely unroadworthy, the engine, the steering, and
brakes all being defective. In an action by the plaintiff against the
defendant, it was held that there was an implied condition of fitness
under Section 8(2) of the English Hire Purchase Act 1938( which is
similar to Section 4(2) of the Nigerian Hire –Purchase Act) That the
plaintiff did by implication make known to the defendants the purpose
for which the car was required, namely, as a means of transport, that the
exclusion of the condition and warranties were not brought to her notice,
nor was the effect made plain to her, and therefore, the defendants could
not rely on such exclusion, if it purported to exclude implied conditions.
f. Description/Sample
Although the Hire-Purchase Act makes no provision as regard goods
bailed or hired by description, common law rules apply in conjunction
with the provisions of the Act; Section 4 subsection 4 contains a proviso
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 hire-purchase agreement. There is an implied condition under
common law that goods bailed or hired by description shall correspond
with the description given and that if the goods are hired by reference to
a sample as well as description, it is not sufficient that the bulk of the
goods correspond with the sample if the goods do not correspond with
the description. These are protected by Sections 13 and 15 of SGA
which can be imported into the hire-purchase agreement
Where goods are hired by reference to a sample, there is an implied
condition that:
i. The bulk will correspond with the sample in quality,
ii. The person to whom the goods are hired will have reasonable
opportunity of comparing the bulk with the sample,
iii. The goods will be free from any defects rendering them
unmerchantable which would not be apparent on reasonable
examination of the sample. In the case of Karsales (Harrow)
Ltd. v Wallis (1956) 2 All ER 432, a garage owner was shown
a second – hand car in an excellent condition and he sought and
obtained finance for the purchase of the car. The finance
company agreed to finance the agreement even though they had
not seen the car. Upon delivery of the car to the hirer, it was
discovered that it was in fact in a deplorable state and was
different from what the hirer had earlier inspected. The tyres
had been changed, the chrome strips around the body were
missing, all the valves were burnt and worse still, the car had to
be towed to the hirer’s premises. In a suit for the unpaid hiring
charges, the plaintiff sought to rely on the exemption clause in
the agreement. It was held that, there was a fundamental breach
as the plaintiff had failed to supply what had been contracted
 for. There was an implied obligation on the owner to deliver the
car to the hirer in substantially the same condition as it was
when it was first inspected by the hirer. Also in Astley
Industrial Trust Ltd v. Grimley (1963) 2 All ER 33at 46-48 it
was held that in a contract of letting or hiring, there is an
implied stipulation that the goods hired shall correspond with
the description of the goods contracted to be hired. The lender
must, therefore, lend that which he contracts to lend and not
something which is essentially different.
Exclusion/ Exemption clauses
The essence of providing the mode of creating hire-purchase
agreements, implied terms and void terms is to properly regulate hire-
purchase agreements so that the correct things are placed in the
agreements to protect the parties. The Act also insists by virtue of
section 2 that the terms agreed upon are clearly stipulated in a note or
memorandum.
The parties cannot through indifference or misconduct choose to
deliberately violate rights that are protected by the Act by deliberate
insertions of contrary terms.
Parties are at liberty to provide for exemption and exclusion clauses
in their agreements so long as they do not affect the very basis of their
contract. By virtue of S.4(3) of the HPA, the warranties and
conditions set out in subsection 1 of the section shall be implied
notwithstanding any agreement to the contrary, and the owner shall
not be entitled to rely on any provision in the agreement excluding or
modifying the conditions set out in subsection 2 of this section unless
he proves that before the agreement was made, the provision was
brought to the notice of the hirer and its effects made clear to him and
yet he chose to go into the agreement.
It is quite common to find hire-purchase agreements which have been
drafted in such a way as to exclude or exempt the conditions or
warranties implied by the Act. By virtue of section 4 (3) of the Act,
the implied warranties of quiet possession and freedom from
encumbrance or charge as well as the implied condition as to title and
merchantable quality in section 4 (1) cannot be varied or excluded by
the agreement, but the implied condition as to fitness for a particular
purpose may be modified or excluded provided that before the
contract is made, the owner brings to the notice of the hirer, the
exclusion or modification and the effects of such have been made
clear to him. In the case of Karsales (Harrow) Ltd v Wallis(supra)
an exclusion clause that “No condition or warranty that the vehicle is
road worthy or as to its age, condition, or fitness for any purpose is
given by the owner or implied therein” was held not applicable to the
contract as the hirer was entitled to reject the car notwithstanding the
exclusion clause. As Birkett L.J said, “a car which will not go is not a
car at all” Lord Denning further stated that “Exemption clauses, no
matter how widely they are expressed, only avail the party when he is
carrying out his contract in its essential respects. He is not allowed to
use them as covers for misconduct or indifference or to enable him
turn a blind eye to his obligations. They do not avail him when he is
guilty of a breach which goes to the root of the contract”
Also in the case of Ogwu v Leventis Motors Ltd (1963) 2 All NLR
65 the lorry hired had registration number BYA 648 but on delivery,
it was discovered that an older lorry had been sent but the said
number had been affixed. The contract also contained an exemption
clause as to its fitness or quality. It was held that the owners were in
breach of a fundamental term of the contract and that the exemption
clause could not protect them from liability. Similarly, in Yeomen
Credit co v APPS (1962) 2 the hirer took a car under a hire-purchase
agreement which provided that “no warranty whatsoever is given by
the owner as to age, state or quality of the goods or as to fitness for
any purpose and any implied warranties or conditions are hereby
excluded”. When the car was delivered, it was found that the brake,
clutch and steering were all defective, thereby making the car
unroadworthy and unusable. It required between 70 Dollars to 120
Dollars to put it in a reasonable condition. Furthermore, it took the
hirer one and half hours to drive three to four miles. The hirer
retained the car for three months, and paid instalments hoping that the
owners would repair the car, but when they did not, the hirer rejected
it. At that time, he was one month in arrears. He was sued for the
instalment and he counter claimed for all the sums he had paid
contending that there was total failure of consideration. It was held
that the accumulated effect of the breach amounted to a fundamental
breach and as it was a continuing one, the hirer was entitled to reject
the car but that as he had derived some benefit, there was no total
failure of consideration and so he was only entitled to damages.
In Fanworth Finance Facilities Ltd v Attryd (1970) 1WLR 2 1053,
it was held that a hirer does not affirm a contract despite considerable
use of a defective good, if he had repeatedly made demands that the
goods be repaired.
OWNERSHIP, TITLE AND MINIMUM PAYMENT CLAUSE
The transfer of property
The essence of a hire- purchase contract is to give the hirer a bailment
of goods coupled with an option to purchase. As a result of this, one
of the essential characteristics of hire-purchase is that the property in
the goods remains with the owner during the currency or continuance
of the hire-purchase agreement. The property in the goods only passes
to the hirer after he has paid the final installment and he exercises his
option to purchase, all he has as regards the goods is a right to
possession and use since no property passes to him until he exercises
the option to purchase. Occasionally the problem can arise as to
whether the hirer can pass a valid title to the goods hired to a third
party during the currency of the hire-purchase agreement or prior to
the exercise of the option to purchase. If no property passes to the
hirer, then he will have no title to dispose of the goods to a third
party. He cannot pass title to what he does not have. This is the
general principle expressed in the nemo dat rule as it relates to Sale of
Goods. Section 12 (1) Sale of Goods Act.
The transfer of title
It is a general principle of law as expressed in the Latin maxim nemo
dat quod non habet, that a person cannot pass a better title than he
himself has. This principle although particularly relevant to contracts
of sale of goods, also has equal application to hire-purchase contracts.
In Helby v Mathews (1875) A.C 471, at 477 Lord Herschell, L.C
explained that:
a person who is in possession of a piano under such an
agreement…is no more its apparent owner than if he had merely hired
it, and in the latter case anyone taking it as security should have no
claim to hold it against the owner.
A hirer (bailer) under a hire- purchase agreement does not acquire
title which can be transferred to a third person. Thus, under the Nemo
dat principle, a hirer (bailee), although in possession of the goods, the
subject matter of a hire-purchase agreement and to all outward
appearance to the owner, cannot confer title on a transferee until, in
effect, his agreement has been fully performed, i.e. he has paid the
final instalment or exercises the option to purchase the relevant
goods. The effect of this generally 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.
While a person possessing goods under a hire-purchase agreement
clearly does not have the general property in the goods, the subject
matter of the agreement, nevertheless there remains the question
whether he has any propriety interest in them over and above his
possessory and contractual rights. The classical view is that no such
interest exist which may survive the premature termination of the
hire-purchase contract whereby lawful possession was given by the
owner, or which is binding on persons other than the parties to that
contract. Thus in Olametan v. CFAO (1959) LLR 42, it was held
that a hirer could not sell the subject matter of hire without the
consent of the owner.
It means therefore that any purported disposition by way of sale,
pledge, execution of a bill, among others will not prevent the owner
from recovering the goods from a third party. The hardship caused to
the innocent purchasers by hirers from strict adherence to the nemo
dat rule prompted Delvin J’s statement in Eastern Distributors Ltd
V Golding (1951) 2QB 600 that
It is very hard on the defendant who is clearly, in a small way of
business. But his fate is unfortunately a common one where hire-
purchase agreements are concerned. It is now one of the regular ways
in which unsuspecting buyers are deceived by what they take to be
ownership of the hirer.
In view of this harshness, the courts have devised some exceptions to
the general rule. The rationale for the exceptions is that while it is
necessary to protect the property of the owner so that no one can give
a better title than he has, the law must also try to protect commercial
transactions with third parties who take for value, without notice that
the hirer was merely in possession and was not indeed the owner. The
problem usually faced by courts is how to determine which of the two
innocent people (i.e. the owner or the third party) should be allowed
to suffer for the fraud of the hirer. While the exception to the general
rule can easily check this, one wonders what will become the fate of a
third party whom the state chooses to prosecute for being in
possession of stolen goods. We wonder if this would go far
considering that the hirer obtained possession with consent of the
owner. Unless it is possible to prosecute a hirer for stealing, it would
be more difficult to consider suing a third party to whom he has sold
as one being in possession of stolen goods.
Exceptions to the Rule
The necessity of these exceptions is the application of the second
principle mention above, namely the protection of commercial
transactions so that a bonafide purchaser for value without notice is
allowed to get a better title. What follows then are these exceptions
which have been evolved either by the courts or from the
interpretation of the wordings of the Act in relation to the nemo dat
rule.
(a) Estopel
From the wording of Section 21 of the Act, it is clear that estoppel by
conduct precludes an owner from denying the hirer’s authority to sell
goods on his behalf. For estoppels to operate it must be shown that:
i. The owner had by his words or conduct represented to the third
party that the hirer was either the true owner or had authority to
sell
It should be noted that mere delivery of the goods to the hirer without
more does not constitute such estoppel, unless the owner also delivers
documents of title to the goods or make unequivocal representation
that the hirer had authority to sell the goods.
In Central Newbury Car Auctions Ltd v Unity Financial Ltd
(1956) 3 All ER 905 it was held that a car registration book or car
certificate was not a document of title and that since it in fact
contained a warning to that effect that a person in whose name a
vehicle is registered may or may not be the owner, the plaintiffs had
not represented “C” to be the owners or that they had the owner’s
authority to sell.
ii. The third party must have acted in reliance on such representation
and
iii That his position has been altered at his own detriment. See
Eastern Distributors Ltd v. Goldering (1957) 2 Q.B 600
(b) Mercantile Agency
Where a hirer obtained possession of goods in his capacity as a
mercantile agent as distinct from a hirer, any sale, pledge or other
disposition of the goods made by him in the ordinary course as his
business of a mercantile agent shall be as valid as if he was expressly
authorized by the owner of the goods to make same, provided that the
person taking over the goods as a result of the disposition acted in
good faith and had not at the time of the disposition noticed that the
person making the disposition had no authority to make same. In
Belvior Finance Co Ltd. v. Herold G. Cole & Co Ltd. (1969) 2 All
ER 904, a company engaged in the business of letting cars on hire-
purchase acquired its fleet of cars by means of hire-purchase
agreement. On this occasion, the company sold to the defendant a car
it took on hire-purchase from the plaintiff, without the palintiff’s
consent and without exercising its option to purchase. It was held that
the company was not a mercantile agent within the meaning of
section 2 of the Factors Act and that even if it was ordinarily a
mercantile agent, it was not in possession of the particular cars he
sold on that capacity.
The following requirements are therefore essential for this exception
to operate.
i. Merchantile agent
The hirer must have obtained the goods from the owner as a
merchantile agent in that goods of that description are in the ordinary
course of business consigned to him and sold by him. Section 1 of the
Factors Act defines a merchantile agent as an agent having in the
ordinary course of his business as such agent, authority either to sell
or consign goods for the purpose of sale or to buy goods or raise
money on security of goods.
ii. Ordinary course of business: At the time of disposition, the
mercahntile agent must have been acting in the ordinary course
of business as is normally expected of mercantile agents. It
should, therefore, not be an odd transaction.
iii. Consent of the Owner: The goods must have obtained by the
hirer with the consent of the owner. E.g he must not have stolen
them or obtained them by deceit or fraud.
iv. Good Faith of third party: A third party seeking to rely on this
exception must have in the purchase of such goods acted in
good faith and without notice that the mercantile agent had no
authority to sell. See St. Margaret’s Trust Ltd v Castle (1964)
Current Law 175(a) Also in Staff Motor Guarantee Ltd v
Wagon Co Ltd (1934) 2KB 305, it was held that for a good
title to pass, it must be shown that a dealer is in possession not
in any other capacity. E.g bailee, hirer, but must be in
possession as a merchantile agent.
(c) Assignment of Option
A purported pledge may operate as an assignment by the hirer of his
right to exercise an option to purchase rather than passing of title.
Since he has no title, he cannot transfer it. He can however transfer
what he has, which is an option to purchase. The effect of such an
assignment would be to transfer his right under the hire –purchase
agreement to the third party i.e to pay all installments when due and
to exercise his option at the end of the hire period. In Belsize Motor
Supply Co.v Cox (1914) 1KB 244 a clause that the hirer shall not
relet sell, or part with possession was held not to prevent a pledge of a
taxi cab by the hirer. Channel J. stated that such a pledge or purchaser
takes such title as the pledgor or vendor has and whether the pledge to
the defendant was rightful or wrongful… the defendants thereby
acquired such rights as the original hirer had.
(d) Ratification
Where a hirer sells without the authority of the owner, the owner may
ratify the sale and ask for the unpaid balance of the hire-purchase
price and option fee to be paid. In such a case the third party acquires
a good title to the goods. See Butterworth v Kingsway Motors
(1954) 2 All ER
(e) Sale in Market Overt
Section 22 of the Sale of Goods Act provides that where goods are
sold in the market overt in accordance with the usage of the market,
the buyer acquires good title to the goods, provided he buys them in
good faith and without notice of any defect or want of title on the part
of the seller. This exception applies to sale of goods as well as hire-
purchase agreements so that if the hirer sells goods in a market overt
according to the usage of that market he passes a good title (on the
part of the seller) to an innocent third party purchaser.
Although, it is arguable that a person to whom stolen goods are sold
may be prosecuted by the state for being in posseesion of stolen
property under S. 317 of the Penal Code, it is pertinent to note that
such a person is only culpable if he had knowledge that the goods
were stolen.
Although the expression market overt has not been statutorily
defined, it has been construed to cover open, public and legally
constituted market. In Reid v. Metropolitan Police
Commisioner(1973) QB 551, it was held that since the essence of the
rule relating to market overt is that the sale is done in public and in
the open, the goods themselves must be displayed in the market, so
that a sale by sample would not be protected. A sale in a shop will
also not be protected unless it takes place in the public part of the
market. It is also important that the sale takes place between the hours
of sunrise and sunset.
(f) Motor Vehicle
Sections 27 and 29 of the English Hire-Purchase Act state special
exceptions in relation to motor vehicles let under hire-purchase or
conditional sale agreements.
Section 27(1) provides that where a motor vehicle has been let under
a hire purchase agreement or has been agreed to be sold under a
conditional sale agreement, and before the property in the vehicle
passes to the hirer or buyer, he disposes of the goods to another
person, that person will acquire a good title if he disposes to:
a. A private purchaser for value in good faith and without notice of
the hire-purchase or conditional sale agreement, or
b. A trade or finance purchaser who then proceeds to dispose to a first
bona fide private purchaser in good faith without notice of the hire-
purchase agreement or conditional sale.
A trade or finance purchaser has been defined as a person who carries
on a business which consist wholly or partly of the following:
a. Purchasing motor vehicles for the purpose of sale or
b. Providing finance by purchasing motor vehicles for the purpose of
letting them under hire –purchase agreement or agreeing to sell
them under conditional sale agreements.
Dealers and finance companies are therefore covered under this
definition. Thus, if a motor vehicle is let under hire-purchase to “A”
(a hirer) who wrongfully disposes of it to ‘B’ a trade or finance
company who then disposes to ‘C’, it means that:
a. ‘C’ will acquire a good title even if ‘B’ had disposed to a series of
trade or finance purchasers before it got to him as the first private
purchases;
b. ‘C’ will only acquire a good title if he purchased in good faith and
without notice of the prior hire-purchase agreement. Once “mala
fide” or bad faith is established he will not be protected.
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. See Helby v. Mathews supra.
Under the Hire- Purchase Act, this right of the hirer to terminate is
not only reserved but extended. Section 2(2) (c) of the Act states that
the note or memo must contain a notice to hirer of such right
Section 3(b) also provides that any term in an agreement excluding or
restricting the hirer’s right to determine the agreement is void.
Equally, Section 8 provides for the manner in which this right could
be exercised and the extent of the liability to be incurred by the hirer
on so doing.
The section provides as follows:
The hirer may terminate the agreement at any time before the final
payment falls due by giving notice, of the termination to any person
entitled or authorized to receive any sums payable under the
agreement.
There are basic ingredients for the effective exercise of this
indefeasible right. First, the notice to be given must be in writing;
secondly, the hirer is entitled to its exercise so long as the final
payment is not due. Thirdly, such notice should be submitted to the
owner but where the dealer or any other person is an agent of the
owner for the purpose of receiving instalmental payments it could be
given to him or such other person.
Besides, the agreement also might contain terms on which the hirer
may terminate the agreement. Thus, the hirer may terminate the
agreement either under statutory powers given by section 8(1) or
under the term of the agreement itself.
It is pertinent to point out that the exercise of this power to terminate
does not necessarily put an end to the agreement for all purposes.
This is so where some rights remain in respect of the goods
themselves, such as the right to possession for which recourse can be
had to the terms of the agreement. The perennial question is the extent
of the hirer’s liability after so doing, which in turn raises the issue of
minimum payment clause.
The minimum payment clause
It is common place for a hire- purchase agreement to 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 a
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 instalmental payments. Such a clause is
generally referred to as “minimum payment clause” and is designed
to represent the sum payable by the hirer to ensure that the owner
suffers no loss as a result of such event. But often the hirer is required
to pay an arbitrary and exorbitant sum which in no way represents the
true loss accruing to or suffered by the owner. The law governing the
hirer’s liability under the “minimum payment clause” differs,
depending on whether the agreement is governed by common law or
the Hire Purchase Act.
At 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. The question whether the “minimum payment
clause” was a penalty or liquidated damages did not arise. Therefore
such a clause was enforceable against the hirer who chooses to
exercise his right of termination or otherwise in breach of his
agreement.
At common law, the hirer must honour the terms of the agreement,
hence the clause is enforceable against the hirer. In Associated
Distributors Ltd v Hall (1938) 2K. B 83, the hirer having paid only
one instalment 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. Sellers, LJ.,
distinguishing cases in which the owner had breached the contract
said :
There has been a number of cases…all of which turned upon…where
there has been a default in payment or a breach of a term of condition
and the agreement itself has been determined by the owner. The cases
as I understand them…seem to establish the view that they are to be
regarded as liquidated damages, but it is not necessary in the present
instance as to express any opinion upon those decisions, because they
have nothing to do with the particular case which are here to
determine, for here the hirer, not the owners terminated the hiring. He
has exercised an option and the terms on which he may exercise the
option are those set out in clause 7. The question therefore whether
these payments constitute liquidated damages or penalty in the
instances mentioned does not arise in the present case.
This decision was followed by the same court in Campbell Discount
Co Ltd V Bridge (1961) 1 QB 445, there the hirer after payment of
one installment only informed the owners in writing that he could not
keep up the payments and returned hired car to them. The relevant
clause required the hirer in such an event to pay by way of
depreciation such further sums as may be necessary to make rentals
paid and payable equal to two-thirds of the hire-purchase price. The
court held that looking at the contract at the date of its creation, the
amount claimed was not a penalty but was the sum payable as
compensation to the owners for the hirer’s exercise of his right to
terminate the contract before the hiring period expired.
In Coonden Engineering Co Ltd v Stanford (1953) 1 Q.B 86, the
hirer having fallen into arrears with the installmental payments, the
owners terminated the agreement, took possession of the car and
claimed under “minimum payment clause” which required one
hundred percent compensation for depreciation. It was held by
majority of the Court of Appeal (English) that the claim was a penalty
and not recoverable.
The courts have sought to draw a distinction between cases where the
hirer breaks the contracts and the owners then terminate it, from those
where the hirer exercises his right to terminate the contract and return
the good to the owners. The courts have generally held that any
minimum payment will be enforceable that being the consideration by
the hirer for exercising his statutory right of termination. The ultimate
result is that the hirer breaks the contract and the owners terminate the
agreement, the hirer even if dishonest, can escape liability because he
can claim that the sum is a penalty and therefore unenforceable
against him. On the other hand, if he is an honest man who says he
cannot keep up the instamental payments and returns the goods, he is
caught by the “minimum payment clause” as purporting to be the
price of his exercise of his option.
In Amusa and Anor V Bentworth Finance (Nig) Ltd (1965) 1 All
NLR 382 where the plaintiff claimed a specific sum of money “being
arrears of rental, re-possession expenses and agreed depreciation
amount and cost” In respect of the issue of “depreciation amount”, the
defendant claimed that it was a “penalty”. The court held that where a
hirer exercises his right of option which he is entitled to, he cannot
complain that the “minimum payment clause” is a penalty.
Under the Hire- Purchase Act
Section 8(1) of the Hire-Purchase Act now prescribes the maximum
liability the hirer can incur on the exercise by him of his right of
termination. It provides that on determining the agreement under the
section, the hirer is liable:
Without prejudice to any liability which has accrued before the
termination, to pay the amount, if any, by which one-half of the hire-
purchase price exceeds the total of the sum paid and the sums due in
respect of the hire-purchase price immediately before the termination,
or such less amount as may be specified in the agreement.
Here, the hirer is laible to pay first, any arrears of installment due and
unpaid prior to the termination. See the case of Incar Motors (Nig)
Ltd V Elias Bus Transport Ltd (1970) 2 All N.L.R 74. This is
because the sum is an accrued liability for which 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 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,
Tunde took a car on hire-purchase having a total hire- purchase price
of #5000 paid a deposit of #500 and a total of #600 as instalmental
payments while owing as arrears #200. His liability on termination
will be calculated as follows: the total sum paid and due but unpaid
#1200 (i.e #2500-#1300) Tunde will then have to pay a further sum of
#1200 in addition to the sum of #200 due and unpaid making a total
of #1400.
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. Thus if in the example given
earlier Tunde had paid #1000 as deposit and #1200 as total
instalmental payments while owing #400 as arrears, his liability will
be calculated as follows: the total sum paid plus the sum due and
unpaid stand at #2,600 (i.e, #1000 +#1200+#400) One half of total
hire-purchase price is #2500, which is #100 less than the total sum
paid and due but unpaid(i.e #2600-#2500) Tunde will therefore not
be liable to pay any other sum since he has already paid #100 over
and above one-half of the total purchase price. He will, however,
remain liable to pay the sum of #400 owing as instalments due and
unpaid because the sum already belongs to the owner.
Note that S. 3(b) of the Act provides that any agreement subjecting the
hirer to a liability which exceeds that which he would b liable under S.
8(1) is void and of no effect. Consequently, the hirer is not bound to
redeliver the goods to the owner, his obligation being only to permit the
owner to retake them. Any term in any agreement that he should do so
would be void and ineffectual under this provision. On the other hand,
under Section 8(2) the hirer on exercise of his right to terminate under
sub-section (1) of that section is liable in addition to damages to the
owner if he fails to take reasonable care of the goods, under sub-section
3(a) the hirer is now liable, on such termination, to return the goods to
the owner immediately and settle all outstanding liabilities in accordance
with the foregoing. It is further provided in sub-section 3(b) that where
he wrongfully retains possession of the goods after such termination, the
court may, on application by the owner, direct that the goods be returned
to the owner without giving the hirer an option to pay the value of the
goods.
RECOVERY OF GOODS BY OWNER
At Common Law
Usually, every hire-purchase agreement contains a clause which entitles
the owner to re-possess the goods on any breach by the hirer, to pay an
instalment or to do so as provided in the agreement. At common law, the
owner’s right of re-possession is absolute for the hirer’s right under an
agreement is entirely and exclusively dependent upon the terms of his
agreement. These terms invariably put him in a very weak and
precarious position for in the absence of any stipulation to the contrary,
the owner may re-possess the goods extra-judicially and without court
order, on any breach whatsoever by the hirer to pay an instalment or to
do so punctually. 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 the 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 and no matter how insignificant the sum involved is
in relation to that already paid under the particular agreement. In Atere v
Amoo and Anor (1957) WRNLR 176 the hirer had paid a total sum of
995 Pounds out of the total hire-purchase price of 1000 Pounds before
he defaulted. It was held that despite the fact that the outstanding sum
was only 5Pounds the owner had the legal right to re-possess the
relevant vehicles. It is absolutely indisputable that the owner would be
able to resell the vehicle a lot more than the outstanding balance. What
is worse for the hirer is that he remains also liable for that balance
having accrued and the owner is not obliged to account to him for the
excess should he decide to resell it. Once the hirer is in default, he has
no right under the common law and not even equity can ameliorate or
rectify it.
Secondly, the hirer, subject to the terms of the particular agreement, may
pay the agreed instalments 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 the exercise of his right
of re-possession. Thus in Bentworth Finance (Nig) Ltd v De Bank
Transport Ltd, (1968) 3 ALR Comm.52; It was held that a provision
in a hire- purchase agreement for punctual payment of instalments
means payment on the day stipulated in the agreement. It was held
further that if such payment be made only one day late, the hirer will be
regarded as in default and the owner may immediately determine the
agreement and resume possession of the goods and that equity will not
assist the hirer even though he defaults in the last instalment. See also
Sanyaolu v Bentworth Finance (Nig) Ltd (1972) 2 ULLR 431.
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. In D.O Williams v UAC Ltd (1937) 13 NLR 134, the
defendant owners, after re-possession of the vehicle, the subject matter
of the agreement broke up the same to be used as spare-parts. The
plaintiff hirer sued for an account and payment to him of any balance
found due. The court held that the claim was misconceived and that
upon the termination of the agreement, the hirer ceased to have any
interest in the vehicle and the owner was entitled to deal with it as
pleased and that there was no principle of equity barring him from doing
so.
Lastly, if the hirer defaults by wrongfully returning the goods before the
expiration of the hired period, he may still remain liable to pay the rent
for the entire hired period unless the owner elects to determine the
agreement upon such default. He may also be liable to pay substantial
amount as damages for the default. In Incar (Nig) Ltd v Elias Bus
Transport Ltd (1970) 2 All NLR 74, it was held that where the hirer
wrongfully repudiates the hire- purchase agreement by not paying the
instalments due and evinces an intention not to pay the future ones and
the owner resumes possession, the latter can claim the arrears of
instalments due prior to the termination as well as damages arising from
the repudiation of the agreement.
Under the Hire- Purchase Act
The Act seeks to protect the hirer against the rigors of Common Law.
The Hirer’s right was increased and the owners right of repossession is
now restricted. Section 2(2) in addition provides that the note or
memorandum must contain a provision restricting the owner’s right to
enter and recover possession of goods let under a hire-purchase contract.
Under the Act, the right of the owner to recover possession of the goods
is largely determined by the proportion of the total hire-purchase price
paid or tendered by the hirer. Section 9(1) of the Act provides that:
Where goods have been let under a hire-purchase agreement and the relevant proportion of the hire-purchase price
has been paid (whether in pursuance of a judgement or otherwise) or tendered by or on behalf of the hirer or any
guarantor, the owner shall not enforce any right to recover possession of the goods from the hirer otherwise than by
action.

The general purport of this provision is to restrict the owner’s right to

recover certain goods.
The meaning of Recovery of Possession
The Act does not define the phrase “to recover possession” but in
Mercantile Credit Co Ltd v Cross (1965) 2 QB 205, it was held that to
recover possession for this purpose under the equivalent English
provision, does not include possession obtained when the hirer
voluntarily returned the goods at the owner’s demand. In that case, it
was held inter alia, that a demand by the owner of hired goods coupled
with a re-taking of possession of the goods voluntarily surrendered by
the hirer does not amount to an enforcement of the owner’s right to
recover possession within the equivalent provision of the English Hire-
Purchase Act 1938.
The provision will not be infringed where the hirer voluntarily
surrenders possession even though it was done at the suggestion of the
owner.
Thus in Mercantile Credit Co. Ltd v Cross (1965) 2 QB, 205, the hirer
of a motorcycle fell into arrears after paying the required statutory limit
to protect him, the owner wrote him a letter of termination asking him to
give up the vehicle which he did. In an action for wrongful repossession,
it was held that, a demand coupled with repossession of goods
voluntarily surrendered by the hirer, did not amount to enforcement of
the owner’s right to recover possession within the meaning of the Hire-
Purchase Act.

In Peacock v Anglo Auto Finance Ltd (1968) 112 Sol Journ.746, it

was held that in order to exclude the “application of the provision in
question, consent must be that of the hirer himself or his legal
representative.
Section 9(1) of the Act also states that the recovery of possession must
be “from the hirer” Possession obtained from a third party not within
this definition is not tantamount to recovery of possession under the
section.
Under the Act, therefore, recovery of possession is given very strict
interpretation. Only re-possession obtained directly from the hirer or his
acknowledged representative satisfies the provision of the Act.
The meaning of relevant proportion
In order for the right of the owner to be restricted under the provisions of
Section 9 (1) of the Act, the hirer must have paid what the Act calls
“relevant proportion of the hire –purchase price”
Section 9(4) provides that where the hirer has paid three- fifths [3/5] in
the case of motor vehicles and one half [1/2] in the case of other goods,
the owner shall not enforce any right to recover possession from the
hirer otherwise than by action. By such payment the hirer becomes
protected in respect of the owner’s forceful repossession. Pending the
action, however, the owner is empowered to take measures to safeguard
his goods against depreciation.
Section 9(5) provides that where three or more instalments of the hire
purchase price of a motor vehicle under the agreement are due and
unpaid, the owner may remove the motor vehicle to any premises under
his control for the purpose of protecting it from damage or depreciation
and retain it there pending the determination of any action and the owner
shall be liable to the hirer for any damage or loss which may be caused
by the removal.
It is further provided in section 20(3)(b) of the Act that where
installation costs are included in the hire-purchase price, the relevant
proportion in such a case is the whole cost of such installation together
with half or three-fifths of the remainder of the hire-purchase price as
the case may be. Once the hirer has paid or tendered such relevant
proportion or such has been paid or tendered on his behalf, the owner
can no longer exercise his right of re-possession unilaterally. Any
attempt to do so will amount to a breach of the hire-purchase agreement
for which he will remain liable in damages to the hirer.
Payment or tender to forestall re-possession
Section 9(1) of the Act protects goods from re-possession by the owner
where relevant proportion of the hire-purchase has been “paid or
tendered by or on behalf of the hirer or any guarantor.” Tender signifies
the ability and willingness to pay and thereby keeping the hire-purchase
contract alive. Tender is willingness to pay and therefore an owner
cannot by his wrongful refusal to accept the sum tendered hope to
exercise his right of re-possession if the sum is sufficient to bring the
total amount paid and tendered within the relevant proportion range.
However, the payment or tender must be made before the agreement is
terminated or re-possession effected. It may be recalled that where the
agreement is terminated by the owner, the hirer ceases to have any
proprietary rights under it and therefore cannot thereafter claim the
protection given by the sub-section. On the other hand, where it is only
the hiring that has been terminated by the owner by lawfully exercising
his right of re-possession, it would seem that on subsequent payment or
tender the hiring can be resumed by the owner returning the goods to the
hirer. Thereafter the goods would become protected under the section if
the amount now paid brings the total payment within the relevant
proportion range.
Recovery of Possession by Action
Recovery of goods under section 9 of the Act is stated to be “other than
by action. This means that when the hirer has paid the relevant
proportion of the hire-purchase price or more, the owner on the
occurrence of a default, by the hirer, may recover possession of the
protected goods only by legal action. The intention of the legislature is
to prevent the recovery of possession of any goods under a hire
-purchase agreement otherwise than by an action in court, once the
relevant proportion of the price is paid. This raises the issue of
jurisdiction of a court in an action for re-possession of hired goods. Or
jurisdiction is restricted to only certain category of courts? Generally,
this depends on the market value of the goods in question. Where the
market value is more than one thousand naira, the owner may make the
application to a High Court of a state where the hirer resides or carries
on business or where the agreement was concluded. Where however the
market value of the goods is one thousand naira or less, the application
should be made to the magistrate court or district court of such state.
In Babajide v Bankole(1962) 2 All NLR, the plaintiff instituted
proceedings in Grade A Customary Court against the defendant claiming
damages for unlawful re-possession and detention of a motor vehicle,
the subject of the hire-purchase agreement, judgement was given in
favour of the plaintiff and the defendant appealed to the High Court.
Charles J, held inter alia, that the Customary Courts Law of 1957 of the
then Western Region did not give a customary court power to adjudicate
upon hire-purchase transactions and the parties could not give it a power
which it did not have; consequently, it has no jurisdiction to entertain the
claim and its judgement therefore was a nullity.
Interim right to re-possession
Hire- Purchase (Amendment) Decree No. 23, 1970 amended section 9 of
the principal Act by providing for sub-section (5). This sub-section state
inter alia that in the applications of this section to motor vehicles, where
three or more instalments of the hire-purchase price of a motor vehicle
under the agreement are due and unpaid, the owner may remove the
motor vehicle to any premises under his control for the purpose of
protecting it from damage or depreciation and retain it there pending the
determination of any action, and the owner shall be liable to the hirer for
any damage or loss which may be caused by the removal.
In Ebohimi v Nigeria Technical Co Ltd (1976) 4SC 53 the issue was
raised as to whether three or more instalments due and unpaid mentioned
in the provision must be consecutive before the owner could exercise the
right of interim re-possession. The learned trial judge held, inter alia,
that notwithstanding that three-fifths of the hire purchase price had been
paid, the owner of a vehicle has the authority to re-possess the vehicle
under section 9(5) if there is a default in the payment of three
instalments. He pointed out, however, that such re-possession does not
immediately give the owner of the vehicle the power to deal with it in
any way which is prejudicial to the interest of the hirer but only as a
means of ensuring that the vehicle is safe until the action is determined.
The Supreme Court upheld the decision of the trial judge observing that:
prior to the amendment …the provision of the principal Act worked considerable hardship on the owner of a hire
vehicle who, as the law then stood, was unable to re-possess the same from a mischievous hirer having contrived to
pay three-fifths of the hire-purchase price, albeit with considerable difficulty and by irregular instalment even if in
breach of the hire-purchase agreement, deliberately embarks upon complete abuse and misuse of the hired vehicle,
until he can bring an application to court pursuant to the provision of sub-section (1) of that section. It is
undoubtedly the intention of the legislature, by promulgating Decree No. 23 of 1970, to remedy this situation and
give the owner of the hired vehicle the necessary power to re-possess and keep the same in a state of repair pending
the intervention of the court under the provision of section 9(1) of the principal Act. This we think is the raison
d’etre of sub-section (5) of the principal Act .