Many people buy goods on hire purchase such as fridges, stoves and washing machines ("white goods"), electronic items and furniture.Hire purchase involves an agreement between the hirer and the owner where the ownership of the goods passes to the hirer after a certain part of the hire purchase price has been paid. Until this amount has been paid, the hirer is merely a "bailee."
Hire purchase is therefore an agreement for the bailment of goods where the bailee may buy the goods. It is a type of instalment credit where a person is able to obtain an item through a loan or credit which is paid off over a period of time.
The relationship between the owner of the goods and the hirer is governed by the Hire Purchase Act, Chap 82:33. This act is intended to provide protection for consumers who buy goods on hire purchase. It does not deal with the financial terms of the hire purchase agreement, such as the downpayment, interest rate and period of the agreement.
The reasonableness of the financial terms is governed by other pieces of legislation which may apply to a hire purchase agreement. Questions about the quality of the goods are governed by the Sale of Goods Act.
The provisions of the Hire Purchase Act apply to those agreements where the hire purchase price does not exceed $15,000 so that the legislation is clearly intended to protect people of modest means. It also means that court actions to enforce agreements which fall under the act are dealt with in the magistrates court as petty civil suits, and not in the High Court.
The act provides that in making a hire purchase agreement:
�2 the owner must indicate the cash price as well as the hire purchase price, otherwise the owner cannot enforce the agreement;
�2 the amount of each instalment is stated;
�2 there is included a notice that the hirer can terminate the agreement by giving the owner notice and paying off any arrears of instalments;
�2 there must be a notice that where 70 per cent of the hire purchase price has already been paid, the owner cannot recover the goods from the hirer without going to court to do so; and
�2 where less than 70 per cent of the hire purchase price has been paid, the owner must give the hirer 21 clear days written notice of his intention to recover the goods, and if the hirer pays all instalments due, the agreement will continue in force and the owner cannot then recover the goods.
An owner cannot make an agreement under a hire purchase agreement which has terms which are contrary to these key provisions of the act, or which seek to avoid liability for forcible entry, or impose additional liability on the hirer. If he does so, those terms will have no effect.The Hire Purchase Act is an important piece of consumer protection legislation and is enforced by the Consumer Affairs Division of the Ministry of Legal Affairs.
�2 This column is not legal advice. If you have a legal problem, you should consult a legal adviser.
Coordinated by: Roshan Ramcharitar