Hirer’s rights

A hire purchase agreement is the lease or hire of chattels (goods) with an option to purchase. At the point where the hirer exercises the option he or she becomes the buyer. A hire purchase agreement is not a contract for the sale and purchase of the chattel and as a result, ownership does not pass to the hirer and he cannot dispose of the goods either by sale or otherwise during the period of the agreement.

There are a number of identifying elements of a hire-purchase transaction which have been highlighted in Staffs Motor Guarantee Ltd. v British Wagon Co. [1934] 2 K.B. 305 as follows: (1) the creditor (e.g. Courts or Dacosta Mannings) remains the owner of the goods until the hirer exercises the option to purchase; (2) the hirer gets physical possession of the goods; (3) the Hirer is not obliged to exercise the option to purchase; and (4) where the hirer defaults on the payments, the owner can end the agreement and repossess the goods and sell or lease them to a third party subject to statutory controls.

The Hire-Purchase Act, Chapter 328 sets out the rights and obligations of the parties to a hire-purchase agreement where the total purchase price of the goods is $12,000 or less. The owner of the goods must provide information as to the cash price of the goods prior to the entering into a hire-purchase contract and the usual price tags showing the cash price and the hire-purchase price as seen in stores is enough to satisfy section 4.

A separate note or memorandum of the agreement setting out a description of the goods as well as the instalments to be paid and the date on which they fall due must subsequently be provided to the hirer.

When one enters into a hire-purchase agreement and find difficulty in making the payments or the goods are no longer required then section 6 of the act stipulates that written notice of termination may be given to the owner by the hirer and the goods returned. Any instalments which have fallen due before the giving of notice must still be paid. The agreement continues in full force until such time as the goods are delivered to the owner. Section 7 provides a laundry list of terms and conditions which would be null and void if inserted in the hire-purchase agreement. For example, a clause allowing an owner to forcibly enter onto the hirer’s premises and remove the goods is null and void. The hirer is entitled to have quiet possession of the goods during the term of the agreement and the owner remains liable in damages for the wrongful entry and/or any damage caused thereby. Likewise a clause imposing a penalty for early termination of the agreement is of no effect.

Where an amount equal to 66 per cent of the hire-purchase price has been paid by the hirer then the owner of the goods is prohibited by section 8 from enforcing the agreement otherwise than by an action in court. Where the owner breaches this section then the hirer is released from any obligation to pay the balance and furthermore is entitled to be refunded all the money previously paid on the agreement.

Where less than 66 per cent of the hire-purchase price has been paid then the owner must give the hirer 21 days notice in writing by registered mail of his intention to recover the goods as stipulated by section 18. If the outstanding sums are paid before the expiration of the 21-day period then the agreement continues in force. Breach of section 18 likewise relieves the hirer of any further obligations and entitles him to a refund of the amounts already paid.

Thanks to the “new” suite of consumer legislation, the Consumer Claims Tribunal in Kimone Phillips v Courts (B’dos) Ltd, Case No. 87, considered the situation where the hire-purchase goods are defective and returned to the owner in light of the Consumers Guarantee Act, 2002. The tribunal came to the conclusion that there is no difference between faulty goods purchased directly versus through a hire-purchase agreement and the owner is not entitled to pro-rate the refund. The tribunal then ordered that Courts repay to the claimant the full sum she had paid in respect of a defective computer.

Not being able to afford the full cash price and having to enter into a hire-purchase agreement does not mean that you do not have any rights.

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