The Elements of a Hire Purchase Contract

The legislation which hire-purchase in Malaysia in the Hire-Purchase Act 1967 . However , this act is not applicable to all items or goods under hire-purchase. This Act is only apply to all hire-purchase agreement relating to goods specified in the First Schedule of the said Act. This hire-purchase agreements which relating to other goods are governed by common law . Moreover, in Section 1(2) of the Hire-Purchase Act 1967 (Revised 1978) states, this act shall apply throughout Malaysia and in respect only of hire-purchase agreements relating to the goods specified in the First Schedule. Besides, the list of goods in the First Schedule is the good must be all consumer goods. Then, for the motor vehicles, it must be namely as invalid carriages , Motor Cycles, Motor Cars including taxi cabs and hire cars, Goods Vehicles where the maximum permissible laden weight does not exceed 2540 kilograms and buses which is including stage buses. Moreover, The phrase of consumer goods is define in Section 2(1) of the said Act as good purchased for personal, family or household purposes.

On the other hand , a hire-purchase agreement is includes in a letting a goods with an option to purchase and an agreement for the purchase of goods by instalments , but it does not include any agreement of whereby the property in the goods comprised therein passes at the time of the agreement or upon at any time before the delivery of the goods and the agreement which is under which the person by whom the goods are hired or purchased is a person who engaged in the trade business of selling goods of the same nature or description as the goods comprised in the agreement in Section 2(1) of Hire-Purchase Act 1967.

In this Act, a ‘hirer’ means a person who takes or taken goods from an owner under a hire-purchase agreement and includes a person to whom the hire’s rights or liabilities under the agreement have passed by assignment or operation of law in the Section 2(1) of the said Act. Moreover, the ‘owner’ is a person ho lets or has let goods to a hirer under a hire-purchase agreement and includes a person to whom the owner’s rights or liabilities under the agreement have passed by assignment or by operation of law in Section 2(1) of the aforementioned Act.

Thus, the provision in the Hire-Purchase Act 1967 would apply to the hire-purchase of the aforementioned goods and the other types of goods are governed by the common law. Besides, according to common law, the hire-purchase transactions is a contract whereby the owner lets out goods on hire and agrees that on completion of the necessary payments , the hirer may either return the goods and terminate the contract or elect to but the goods. In other words , the hirer is given an option to purchase at the end of the duration of hire . They may decline to accept this option if he so chooses. Furthermore, in every hire-purchase agreement, the hirer cannot sell the goods under hire. This is because the hirer is not the owner of the goods and as such, he cannot pass a good title to the third parties. If he sells the goods , he may be liable to the owner for conversion.

For example, as sample of agreement attached at appendix, mostly vehicles purchase is using hire-purchase agreement because the hirer want to make a instalment payment to the owner. In the agreement, there are specific term and condition to be stated. Firstly, in the agreement must stated a specific date on which the hiring shall be deemed to have commenced. Then, they also must be stated specific number of instalment to be paid under the agreement by the hirer. Moreover, in the hire-purchase agreement also must specify the amount of each of these instalments and the person to whom and the place at which payment of these instalments are to be made. Next, they must also stated specific time for the payment of each of these instalments. And then , in the agreement , also must be contain a description of the goods sufficient to indentify them. Furthermore, in the agreement must be stated the address where the goods under the hire-purchase agreement are.

Moreover, in Section 4C of the Hire-Purchase Act 1967 states where any part of the consideration is or is to be provided otherwise than in cash, shall contain a description of that part of consideration and shall sell out in a tabular form such as the price at which at the time of signing the agreement the hirer might have purchased the goods for cash which is in Act referred to and in the agreement to be described as cash price. Second, the amount paid or provided by way of deposit which is in the Act referred to and in the agreement to be described as deposit, showing separately the amount paid in cash and the amount provided by any consideration other than cash. Third, they must state any amount included in the total amount payable to cover the expenses of delivering the goods or any of them or to be order of the hire which is in this Act referred to and in the agreement to be described as freight. Next, any amount included in the total amount payable to cover vehicle registration fees in respect of the goods which is in the agreement to be described as vehicle registration fees. Then, they also stated in the agreement any amount included in the total amount , payable for the insurance in respect of goods or any of them. Then, the amount of any charges included in the total amount payable which can see in the agreement to be described as term charges. Furthermore, the annual percentage rate for terms charges which shall be calculated in accordance with the formula set out in the Seventh Schedule. Then, the in this agreement will stated the total amount which in this Act referred to as the balance originally payable under the agreement and the total amount payable.

On the other hand, in the agreement, shall not contain any particulars which differ in any material way from the particulars contained in the written statement or statements served on the hirer pursuant to Section 4(1)(a) or 4(1)(b) . Then, A hire-purchase agreement that contravenes Subsection (1) shall be void and the owner who enters into hire-purchase agreement in contravention of Subsection (1) shall be notwithstanding that the hire-purchase agreement is void, be guilty of an offence under this Act.

Part 2

In this part, I will discuss the elements of hire-purchase contract and normal contract. The first essential elements of valid contract is offer and acceptance. In the agreement , there must be a ‘lawful offer’ and a ‘lawful acceptance’ of the offer . The adjective ‘lawful’ implies that the offer and acceptance must satisfy the requirements of the contract act in relation thereto. Both contract should have offer and acceptance which is the seller and the buyer are agree with the contract and goods are ready to sold.

The second elements is intention to create legal relations. In the contract, there must be an intention among parties that both agreement should be attached by legal consequences and create legal obligations. Moreover, agreements of social or domestic nature do not contemplate legal relations, and such they do not give rise to a contract. Moreover, an agreement to dine at a friend’s house in not an agreement intended to create legal relationship and thus do not result in contracts. Both hire-purchase contract and normal contract should have intention to create legal relations.

Furthermore, the third element is lawful consideration which is the presence of consideration. Consideration has been defined as the price paid by one party for the promise of the other. Both hire-purchase contract and normal contract also have this elements in their agreements. Moreover, an agreement is legally enforceable only when each of the parties to it gives something and gets something something. Besides, the something given or obtained is the price for the promise and is called ‘consideration’ subject to certain exceptions , gratuitous promises are not enforceable at law. Moreover, The ‘consideration’ may be an act which is doing something or forbearance which is not doing something or a promise to do or not to do something . Besides, It may be past, present or future but only those consideration are valid which are ‘lawful’. The ‘consideration is ‘lawful’ unless it is forbidden by law or is of such a nature that, if permitted it would defeat the provision of any law , or is fraudulent, or involves or implies injury to the person or property of another , or is immoral, or is opposed to public policy.

The next elements is capacity of parties which the parties to an agreement must be competent to contract . However, the question that arises now is that the parties are competent and what are not. The contracting parties must be of the age of majority and of sound mind and must not be disqualified by any law to which they are subject. Besides, if any of the parties to the agreement suffers from minority, lunacy, idiocy, drunkenness and others. The agreement is not enforceable at law, except in some special case. For example, in the case of necessaries supplied to a minor or lunatic, the supplier of goods is entitled to be reimbursed from their estate.

On the other hand, the next elements is free consent. Free consent of all the parties to an agreement and this concept has two aspects which are consent should be made and it should be free of any pressure or misunderstanding. “ Consent’ means that the parties must have agreed upon the same thing in the same sense . There is absence of free consent, if the agreement is induced by coercion, undue influence, fraud , misrepresentation, or mistake. Besides, if the agreement is vitiated by any of the first four factor, the contract would be voidable and cannot be enforced by the party guilty of coercion undue influence and others. Moreover, the other party can either reject the contract or accept it, subject to rules laid down in the act. If the agreement is induced by mutual mistake which is material to the agreement, it would be void.

Furthermore, the next elements is lawful object . For the information of a valid contract it is also necessary that the parties to an agreement must agree for a lawful object. The object for which the agreement has been entered into must not be fraudulent or illegal or immoral or opposed to public policy or must not imply injury to the person or the other of the reasons mentioned above the agreement is void. Thus, when a landlord knowingly lets a house to a prostitute to carry on prostitution, he cannot recover the rent through a court of law or a contract committing a murder is void contract and unenforceable by law.

Next, writing and registration. According to the Indian contract Act, a contract to be valid, must be in writing and registered. For example, it requires that an agreement to pay a time barred debt must be in writing and an agreement to make a gift for natural love and affection must be in writing and registered to make the agreement enforceable by law which must be observed.

Moreover, certainty is the next elements of contract. Section 29 of the contract Act provides that ” Agreements, the meaning of which is not certain or capable of being made certain, are void.” In order to give rise to a valid contract the terms of the agreement must not be vague or uncertain. It must be possible to ascertain the meaning of the agreement, for otherwise, it cannot be enforced . For example, A, agrees to sell B ” a hundred ton of oil” there is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainly.

Besides, the next elements is possibility of performance. Yet another essential feature of a valid contract is that it must be capable of performance. Besides, by Section 56 lays down that “An agreement to do an act impossible in itself is void”. If the act is impossible in itself, physically or legally, the agreement cannot be enforced at law. For example, A agrees with B, to discover treasure by magic. The agreement is not enforceable.

Furthermore, not expressly declared void. The agreement must not have been expressly declared to be void under the Act. Sections 24-30 specify certain types of agreements that have been expressly declared to be void. For example, an agreement in restraint of marriage, an agreement in restraint of trade, and an agreement by way of wager have been expressly declared void under sections 26, 27 and 30 respectively.