By S.O. Giwa Esq.

It is no gainsaying that the HIRE-PURCHASE is as common as pure water sachet among Nigerians. This form of contract is a commonest transaction which many Nigerians – literates and illiterates enjoyed entering into with utmost view of maximizing profit in such transaction.

A contract is not in doubt an agreement between private parties creating mutual obligations enforceable by law and entering into a contract or engaging in a contract is a right of every citizen of Nigeria guaranteed under the law.

Entering into Hire-Purchase is a ubiquitous contract among the transporters which keeps life going in Nigeria. It is a known fact that no Nigerian is barred from doing any contract so long as the said contract is a lawful contract in the eye of law.

Resorting to the recovery of the possession of the hired goods by force or sometime with the use of law enforcement agents for the recovery of the hired goods by the owner in the event of hirer’s default to make one or two instalments as agreed is ubiquitous practice of many owners. This practice is often hinged on the fact that the hirer has agreed to the recovery of the hired goods upon his failure or default to make one or more instalments in the agreement and the usual excuse is the settled principle of law that parties are bound by the agreement duly executed by the parties thereto.

One wonders if the principle of law that parties are bound by the agreement duly executed by the parties is applicable to hire-purchase agreement made without strict compliance with the relevant provisions of the Hire-Purchase Act which are provided to regulate a Hire-Purchase transaction as well as the agreement to be entered into by parties thereto. It is against this background that this piece is written with a view to discussing the proprietary or otherwise of the act of resulting to self-help in recovering the hired goods for reason that the hirer has defaulted in making instalments as agreed to in the agreement entered into with the owner and duly executed by him (the hirer). The writer also aims at extending the discussion in this piece to the rights and limitations of the parties to the contract of Hire-Purchase with reference to the relevant provisions of the Hire-Purchase Act. What then is a HIRE-PURCHASE?

MEANING OF HIRE-PURCHASE UNDER THE LAW

A judicial definition of a Hire-Purchase in Scammel v. Austin (1941) 1 All E.R 14, was given as a complex transaction, not a contract of sale but a bailment. The term ‘bailment’ refers to a legal relationship between two parties where property are transferred from a bailor (person who delivers the property) to a bailee (the person who receives the property). In bailment, the bailor transfers physical possession of a piece of personal property to the bailee for a certain period of time but retains ownership.

In Halsbury’s Laws of England Vol. 1st Edition, a contract of hire-purchase has been defined as:

‘a contract of hire with 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.’

A statutory flavor given to the definition of a hire-purchase in section 20 of the Hire-Purchase Act, 1968, Cap. H4, Laws of the Federation of Nigeria 2004, goes thus:

‘The bailment of goods in pursuance of an agreement under which the bailee may buy the goods or under which the property in the goods will or may pass to the bailee (the Hirer), and ‘‘hire- purchase agreement’’ shall be construed accordingly; and whereby virtue of two or more agreements, none of which by itself constitutes a hire-purchase agreement; there is a bailment of goods and either the bailee may buy the goods, or the property therein will or may pass to the bailee, the agreements shall be treated for the purposes of this Act as a single agreement made at the time when the last of the agreements was made.’

Flowing from the foregoing is the fact that hire-purchase agreement is an agreement concluded between a bailor, that is, the owner, and a bailee that is the hirer, in respect of some particular goods with the option of the hirer purchasing the goods. A Hire-Purchase transaction is a bailment of goods but with a provision for the option of sale or transfer of the property in the goods bailed from the bailor to the bailee. It is an agreement concluded between the owner and the hirer in respect of some particular goods with the option of the hirer purchasing the goods.

Besides the definition of the hire-purchase is the need to say that further reference to the provision of section 1 of Hire-Purchase Act depicts that unlike the other contracts where parties are at liberty to reduce their terms and conditions into writing at will, the hire-purchase transaction as well as agreement of the parties thereto is regulated by the Hire-Purchase Act. Thus, the hire-purchase transaction is sui generis and not a private contract like other contracts. The provision of Section 1 with the heading (TRANSACTIONS REGULATED BY HIRE-PURCHASE ACT) provides thus:

‘Subject to the provisions of section 19 of this Act, the provisions of this Act (other than the provisions relating to the control of advertisement) shall apply in relation to

All hire-purchase agreements and credit-sale agreements (other than agreements in respect of motor vehicles) under which the hire-purchase price or total purchase price, as the case may be, does not exceed two thousand naira, All such agreements in respect of motor vehicles, irrespective of the hire-purchase or the total purchase price, being agreements made after the commencement of this Act; and the expression ‘hire-purchase agreement’ and ‘credit-sale agreement’ in the following provisions of this Act shall be construed accordingly.’

It is noteworthy that a reference made to section 19 in section 1 of the Hire-Purchase Act fortifies the fact that apart from the fact that the Hire-Purchase Act regulates the hire-purchase transaction as well as its agreement to be executed by parties, the Act gives power to the Minister to make regulations for further regulation of the hire-purchase transaction with its agreement. The provision of section 19 with the heading ‘POWER OF MINISTER TO EXCLUDE GOODS, ETC., FROM OPERATION OF THE ACT’ and the provision in section 19 of the Act goes thus:

The Minister may by order published in the Federal Gazette‐ exclude from the operation of this Act goods of any description or class specified in the order; and exclude from the operation of this Act any statutory corporation so specified. In this section, “statutory corporation” means a body corporate established directly by a law in force in Nigeria. It is also the provision of the Hire-Purchase Act that before any hire-purchase agreement is entered into in the hire-purchase transaction, the owner is duty bound to communicate to the prospective hirer in writing a price at which the goods, the subject matter of the hire-purchase transaction, may be purchased by the prospective hirer for cash and no right to enforce agreement if the owner failed to comply with the provision of section 2 of the Act. For easy reference, the provisions of section 2 of the Hire-Purchase Act headed ‘REQUIREMENTS RELATING TO HIRE‐PURCHASE AGREEMENT’ go thus:

Before any hire‐purchase agreement is entered into in respect of any goods, the owner shall state in writing to the prospective hirer, otherwise than in the note or memorandum of the agreement, a price at which the goods may be purchased by him for cash (in this section referred to as the” cash price”): Provided that this subsection shall be deemed to have been sufficiently complied with‐

If the hirer has inspected the goods or like goods and at the time of his inspection tickets or labels were attached to or displayed with the goods clearly stating the cash price either of the goods as a whole or of all the different articles or sets of articles comprised in the goods; or If the hirer has selected the goods by reference to a catalogue, price list or advertisement which clearly stated the cash price either of the goods as a whole or of all the different articles or sets of articles comprised in the goods. An owner shall not be entitled to enforce a hire‐purchase agreement or any contract of guarantee relating to the agreement or any right to recover the goods from the hirer, and no security given by the hirer in respect of money payable under the hire‐purchase agreement or given by a guarantor in respect of money payable under a contract of guarantee relating to the agreement shall be enforceable against the hirer or guarantor, unless the requirement specified in subsection (1) of this section has been complied with and ‐ a note or memorandum of the agreement is made and signed by the hirer and by or on behalf of all other parties to the agreement; and the note or memorandum contains‐ a statement of the hire‐purchase price and of the cash price of the goods to which the agreement relates and of the amount of each of the instalments by which the hire‐purchase price is to be paid and of the date, or the mode of determining the date, upon which each instalment is payable; and a statement of the deposit paid; and a statement of the true rate of interest calculated in such manner as the Minister may by regulations published in the Federal Gazette prescribe; an a list of the goods to which the agreement relates sufficient to identify them; and the note or memorandum contains a notice, which is at least as prominent as the rest of the contents of the note or memorandum, in the terms provided by the Schedule to this Act; and [Schedule.] a copy of the note or memorandum is delivered or sent to the hirer within fourteen days of the making of the agreement: Provided that, if the court is satisfied in any action that a failure to comply with the requirement specified in subsection (1) of this section or any requirement specified in paragraph (b), (c) or (d) of this subsection has not prejudiced the hirer, and that it would be just and equitable to dispense with the requirement, the court may, subject to any conditions that it thinks fit to impose, dispense with that requirement for the purposes of the action.

The provisions of this section shall apply to credit‐sale agreements as they apply to hire‐purchase agreements, but as if‐ for any reference to the owner, hirer or hire‐purchase price there were substituted respectively a reference to the seller, buyer and total purchase price; and paragraph (c) of subsection (2) of this section, and the reference to that paragraph in the proviso to the subsection, were omitted.

Flowing from the provision of section 2 of the Act is an indisputable fact that the owner must state in writing a price at which the goods may be purchased by hirer in cash before entering into the agreement. Also, no security by the hirer in respect of money payable under the agreement or given by a guarantor shall be enforceable if the owner failed.

From the foregoing, it is indisputable and deductible that the hire-purchase transaction is a special transaction whose agreement vis-à-vis the terms and conditions including warranties is regulated by the Act of the parliament and parties are therefore not at liberty to do as they wish nor entering into any self- made agreement that runs contrary to any provision of the Hire-Purchase Act. How then can the hired goods be recovered by the owner and no refund of the total sum of money being paid as instalments by the hirer to the owner for reason that the hirer has failed or refused or neglected or defaulted in making one or two instalments without recourse to the provision of the Hire-Purchase Act on the required step to take by the owner for the recovery of possession of the hired goods?

This owner’s act of denying the hirer of his earlier instalments paid so far on the hired goods to the owner after taking the possession of the hired goods by force for reason that the hirer has defaulted in making one or two instalments is now a ubiquitous practice by many owners of the hired goods in our society.

One keeps wondering if such act is the provision of the law that governs the hire-purchase transaction and if the provision of a clause that the owner shall take the hired goods and the hirer shall forfeit all the sums of money paid so far for the instalments in the event of the hirer’s default in making one or more instalments in the hire-purchase agreement made by the parties forms part of the provisions made for in the Hire-Purchase Act for the notorious principle of law that parties are bound by their agreement to be applicable.

Reading through the provisions of the Hire-Purchase Act under discussion with a view to quenching the thirst of the writer’s disturbing aforesaid thought evinced the provisions of sections 9 and 10 of the Hire-Purchase Act which provide for both restriction on the recovery of hired goods only by court action and powers of court in action to recover hired goods. The provisions of sections 9 and 10 of the Hire-Purchase Act go thus:

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 judgment 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 and except as provided by subsection (5) of this section. if an owner recovers possession of goods in contravention of subsection (1) of this section, the hire‐purchase agreement, if not previously determined, shall determine and ‐ the hirer shall be released from all liability under the agreement and shall be entitled to recover from the owner in an action for money had and received all sums paid by the hirer under the agreement or under any security given by him in respect of the agreement; and any guarantor shall be entitled to recover from the owner in an action for money had and received all sums paid by him under the contract of guarantee or under any security given by him in respect of that contract. The provisions of subsections (1) and (2) of this section shall not apply in any case in which the hirer has determined the agreement or the bailment by virtue of any right vested in him. In this section and elsewhere in this Act, “the relevant proportion”, where the reference is to the relevant proportion of the hire ‐ purchase price of any goods or to the relevant proportion of a part (however described) of that price, means‐ In the case of goods other than motor vehicles, one‐half; and In the case of motor vehicles, three‐ Flowing from the above quoted provisions of section 10, it is crystal clear that recovery of goods under the hire-purchase agreement under the Act is only restricted to an action in court by the owner against the hirer and the statutory restriction imposed on the owner under section 9(1) of the Act protects the goods from repossession not only where the relevant proportion has been paid or tendered. This is the provision section 9 of the Act.

The hardship inflicted on the owner by this provision is not unknown by the writer especially where the hirer defaults in payment after paying three-fifth of the hire-purchase price and he abscond with the goods to an unknown address, and the owner’s remedy is an action in court where there is default in payment. Since the whereabouts of the hirer may remain unknown, any action brought by the owner may prove expensive and dilatory.

Section 9 (5) reduced the hardship on the owner in relation to the repossession of goods. Provision of section 9(5) of the Act empowers the owner to keep the removed goods in his possession and protect the goods from damages or depreciation or retain the goods pending the determination of the case. The owner would be liable to the hirer for any damage or loss which may be caused by the removal. Section 9 (5) of the Act must be adhered to strictly for an action under section 9(1) of this Act to succeed. The provision of section 9(5) of the Act goes thus:

In the application of the provisions of this section to motor‐vehicles, where three or more installments 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. Flowing from the provision of section 9 (5) of the Act, where three or more instalments of the hire-purchase price of a motor-vehicle under the agreement are due and unpaid, the owner may upon the order of the court 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.

SECTION 10.POWERS OF COURT IN ACTIONS TO RECOVER GOODS

(1) Where, in any case to which section 9 of this Act applies, an owner commences an action to enforce a right to recover possession of goods from a hirer after the relevant proportion of the hire‐purchase price has been paid or tendered as aforesaid, the owner shall not take any step to enforce payment of any sum due under the hire‐purchase agreement or under any contract of guarantee relating to the agreement, except by claiming the sum in the action.

(2) Subject to such exceptions as may be provided for by rules of court, all the parties to the agreement and any guarantor shall be made parties to the action

(3) Pending the hearing of the action the court shall, in addition to any other powers, have power, upon the application of the owner, to make such orders as the court thinks just for the purpose of protecting the goods from damage or depreciation, including orders restricting or prohibiting the use of the goods or giving directions as to their custody.

(4) On the hearing of the action the court may, without prejudice to any other power‐

(a) make an order for the specific delivery of all the goods to the owner; or

(b) make an order for the specific delivery of all the goods to the owner and postpone the operation of the order ‐

(i) on condition that the hirer or a guarantor pays the unpaid balance of the hire‐purchase price at such times and in such amounts as the court thinks just having regard to the means of the hirer or guarantor; and

(ii) subject to the fulfillment of such other conditions by the hirer or a guarantor as the court thinks just; or

(c) make an order for the specific delivery of a part of the goods to the owner and for the transfer to the hirer of the owner’s title to the remainder of the goods.

(5) No order shall be made under subsection (4) (b) of this section unless the court is satisfied that the goods are in the hirer’s possession or control at the time when the order is made.

(6) The court shall not make an order transferring to the hirer the owner’s title to a part of the goods unless it is satisfied that the amount which the hirer has paid in respect of the hire‐ purchase price exceeds the price of that part of the goods (determined in accordance with subsection (9) of this section) by at least the relevant proportion of the unpaid balance of the hire‐purchase price.

(7) Where damages have been awarded against the owner in the proceedings, the court may treat the hirer as having paid in respect of the hire‐purchase price, in addition to the actual amount paid, the amount of the damages, or such part thereof as the court thinks fit, and thereupon the damages shall accordingly be remitted either in whole or in part.

Flowing from the provision of section 10 of the Act is the fact that where an action to enforce a right to recover possession of goods from a hirer after the relevant proportion of the hire-purchase price has been paid or tendered, the owner shall not take any step to enforce payment of any sum due under the hire-purchase agreement except by claiming the sum in the action.

It is important to note that recovery of goods under the hire-purchase agreement under the Act is only restricted to an action in court by the owner against the hirer.

If the owner recovers goods in contravention of the rule then the hire-purchase agreement is determined and his guarantors are relieved of any liability under the agreement.

It is pertinently important to conclude by making it known that the Hire-Purchase Act makes provisions on the clauses that are not to be provided for in the Hire-Purchase Agreement (section 3 of the Act), the hirer’s right to determine hire-purchase agreement (section 8 of the Act) and the rights and liabilities in the event of determination of the Hire-Purchase Agreement (section 8 of the Act)

SIX CLAUSES THAT MUST NOT BE IN A HIRE-PURCHASE AGREEMENT AND MAKE AGREEMENT VOID IF PRESENT IN THE AGREEMENT

Clause restricting/excluding the right of hirer to determine hire-purchase agreement given to him under the Act Clause imposing any liability in addition to the liability by the Act on a hirer by reason of the termination of the hire-purchase agreement by him under the Act Clause relieving owner from 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 Clause requiring a hirer to avail himself of services of a person not his choice as insurer or repairer. Clause subjecting the hirer to a liability which exceeds the liability which the Act subjects the hirer to in the event an agreement had been determined by him Clause which makes any person who acts on behalf of an owner in connection with the formation or conclusion of a hire-purchase agreement as the agent of the hirer

SECTION 8. RIGHT OF HIRER TO DETERMINE HIRE‐PURCHASE AGREEMENT

A hirer shall, at any time before the final payment under a hire‐purchase agreement falls due, be entitled to determine the agreement by giving notice of termination in writing to any person entitled or authorized to receive any sums payable under the agreement and shall, on determining the agreement under this section, be 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 sums 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. Where a hire‐purchase agreement has been determined under this section, the hirer shall, if he has failed to take reasonable care of the goods, be liable to pay damages for the failure. In any circumstances where‐ a hirer determines or has determined a hire‐purchase agreement under this section, he shall, immediately upon the determination, return the goods to the owner and settle all outstanding liabilities subject as prescribed in the foregoing provisions of this section; and having determined a hire‐purchase agreement, the hirer wrongfully retains possession of the goods, then in any action brought by the owner to recover possession of the goods from the hirer, the court shall, unless it is satisfied that having regard to the circumstances it would not be just and equitable so to do, order the goods to be delivered to the owner without giving the hirer an option to pay the value of the goods. Nothing in this section shall prejudice any right of a hirer to determine a hire‐purchase agreement otherwise than by virtue of this section. It is noteworthy that where the hirer has exercised his right to terminate the agreement, guarantors are not relieved of any liability under the agreement and the owner can repossess the goods whether the proportion has been paid or not.

It is hereby advised that if any person is engaged to prepare a hire-purchase agreement for parties, such person should make the agreement with full reference to the provisions of the Hire-Purchase Act and any aggrieved party should avoid taking law in his hand and seek appropriate redress in court of law as provided for under the Hire-Purchase Act. Ubi jus ibi remedium meaning ‘where there is a right, there is a remedy.’

Written S.O. Giwa Esq. a.k.a pentalk (Ibadan based Legal Practitioner)