Note for Hire Purchase Act Business Law

1. HIRE PURCHASE ACT
Business Law
PREPARED BY :
1. NUR SALWATI HANIM BINTI MOHAMAD AMRAN (MI42008613)
2. NUR SYAKHIRAH BINTI AB RAHMAN (M142003713)

2. INTRODUCTION
WHAT IS HIRE PURCHASE (HP)?
• HP is the hiring of goods with the option to buy the goods at the end of
the hire purchase term. If you take on HP financing, you are the hirer
and financier is the owner. As a hirer, you will have to repay the
financier based on the agreed duration while you have possession of
the vehicle. When all the instalments are paid up, ownership is then
transferred to you.
GOVERNING LEGISLATION – THE HIRE PURCHASE ACT 1967
• HP transactions are governed by the Hire Purchase Act 1967 (HP
Act). The HP Act sets out the forms and contents of HP agreements,
the legal rights, duties, obligations of hirers and financiers. The HP Act
is administered by the Ministry of Domestic Trade and Consumer
Affairs.

3. DEFINITION OF HIRE PURCHASE
Section 2(1) of the Hire Purchase Act 1967
“ Hire Purchase agreement includes a letting of goods with an
option to purchase and an agreement for the purchase of
goods by instalments (whether the agreement describes the
instalments as rent or hire or otherwise), but does not include
any agreement –
a) Whereby the property in the goods comprised therein
passes at the time before delivery of the goods,
b) Under which the person by whom the goods are being
hired or purchased is a person who is engaged in the
trade or business of selling goods of the same nature or
description as the goods comprised in the agreement.”

4. Parties in a hire-purchase
agreement
PARTIES CHARACTER
Hirer
 a person who takes or has taken goods from an owner under
a hire-purchase agreement and includes a person whom the
hirer’s rights or liabilities under the agreement have passes
by assignment or by the operation of law
Owner
 a person who lets or has let goods to a hirer under hire-
purchase agreement and includes a person to whom the
owner’s rights or liabilities under the agreement have passed
by assignment or by the operation of law.
Guarantors
 an owner may require a hirer to furnish a guarantor or such
number of guarantors acceptable to the owner to guarantee
the performance of the hirer’s obligations under the hire-
purchase agreement by virtue of section 20A of the Act.

5. FORMATION AND NATURE OF
HIRE-PURCHASE AGREEMENT
THE HP AGREEMENT
The HP agreement must have the following information:
 Description of motor vehicle;
 Computation of the total sum payable;
 Minimum deposit;
 Term charges and annual percentage rate for term
charges;
 Late payment charges;
 Date on which hiring commences;
 Number of instalment repayments;
 Amount of each instalment repayment;
 Person to whom repayments are to be made, time and
place of repayments; and
 Address where the motor vehicle is to be kept.

6. Case: Low Ping Ming v MBF Finance [2002] 2 CLJ 307
• Section 4(1), Hire-Purchase Act 1967 provides that before any hire-
purchase agreement is entered into in respect of any goods:
a) in a case where negotiations leading to the making of the hire-
purchase agreement are carried out by any person who would
be the owner under the hire-purchase agreement to be
entered into, or by any person, other than the dealer, acting on
his behalf, such a person shall serve on the intending hirer a
written statement duly completed and signed by him in
accordance with the form set out in Part I of the Second
Schedule
b) in a case where negotiations leading to the making of the hire-
purchase agreement is carried out by a dealer, such dealer
shall:

7. Part I of the Second Schedule
- it is provides for a short description of the goods comprised in the hire-purchase
agreement and a summary of the hirer’s financial obligation under the proposed
hire-purchase agreement.
Part II of the Second Schedule
- is a form to be filled in by the prospective owner agreeing to be a party as owner in
the proposed hire-purchase agreement.
 Section 4A (1) - A hire-purchase agreement shall be in writing
 Section 4A (2) - A hire-purchase agreement which is not in writing shall be void.
 Section 4A (3) -the owner shall be guilty of an offence under the Act.
 Section 4B (2)-The hire-purchase agreement or other forms or documents must be duly
completed before the intending hirer of his agent is required to sign thereon
 Section 4B (1) – Every hire-purchase agreement shall be signed by or on behalf of all
parties to agreement
 Section 4B (3)- that provides a hire-purchase agreement that is not properly signed or
completed shall be void.
 Section 4C of the Hire-purchases Act 1967 provides for the contents of a hire-purchase
agreement.
Requirements:

8. • Section 4D (1), hire-purchase act 1967 requires a separate hire-purchase
agreement in respect of every item of goods purchased. Section 4D (2) and
(3) respectively provide that a hire-purchase agreement that does not
comply to this requirement shall be void and the owner shall be guilty of an
offence under this Act. However, goods which are essentially similar to
each other and sold as a set shall be regarded as an item in Section 4D (4).
• Section 5(1) of the said Act provides that the owner must serve a copy of
hire purchase agreement on the hirer and guarantors within fourteen days
after the making of the agreement. Failure to do so will render the hire-
purchase agreement unenforceable by the owner in Section 5(1A).
• Section 5(3) in Hire-Purchase Act 1967, provides that where any part of the
total amount payable consists of an amount paid or to be paid under a
policy of insurance in respect of the goods, the owner shall serve or cause
to be served on the hirer forthwith a copy of the insurance payment receipt.

9. WARRANTIES AND
CONDITIONS
• On the other hand, a breach of warranty is
a less serious breach and it does not
entitle the party not in breach to repudiate
the contract but to sue for damages only.
In part III of the Hire-Purchase Act 1967 list
down the several of warranties and
conditions which is to protect hirer and
guarantors. The implied conditions are:

10. i. Rights to sell
– The owner should have the right to sell the goods at the time
when the property is to pass (section 7(1)(b), Hire-Purchase
Act 1967) .
ii. Merchantable quality
- the goods shall be of merchantable quality (section 7(2),
Hire-Purchase Act 1967)
- However no such condition will be implied in the following
circumstances :
• when the hirer has examined the goods as regards
defects which the examination ought to have revealed (
section 7 (2)(a), Hire-Purchase Act 1967)
• if the goods are second-hand and the agreement
contains a statement to the effect that :
i. the good are second-hand
ii. all the conditions and warranties as to quality are
expressly negative, and the owner proves that the
hirer has acknowledged in writing that the
statement was brought to his notice (section 7
(2)(b), Hire-Purchase Act 1967).

11. STATUTORY RIGHTS OF HIRERS
Section 9 to 15 of the Hire-Purchase Act 1967 provide for the rights of hirers. The hirer has
the following rights:
1. To be supplied documents and information in section 9, Hire-Purchase Act 1967. A
hirer is entitled to request the owner for a written statement pertaining to following
information:
a) The amount paid to the owner by hirer or his agent
b) The amount which has become due under the agreement but remains unpaid
c) The amount which is to become payable under the agreement
d) The amount derived from interest on overdue instalments
2. To require the owner to appropriate payments made in hire-purchase agreement in
Section10.
3. Section 11, to apply to the Magistrate’s Court for an order approving the removal of the
goods to another place
4. To assign his right, title and interest under the hire-purchase agreement in Section 12
5. To have his right, title and interest passed on by operation of law in Section 13
6. Section 14, it is to complete the purchase of the goods earlier than due date
7. To terminate the hiring in Section 15.

12. The Hire-Purchase Act lays down various restrictions on the power of the owner when
recovering possession:
1. Notices must be given to the hirer when goods are to be repossessed in
Section 16.
2. After repossession the owner must not sell or dispose of the goods for
21days in Section 17.
3. Hirers rights and immunities when the goods are repossessed in Section 18
4. Hirer can regain possession of the goods in certain circumstances in Section
19
If a hirer defaults in two successive payments or if he defaults in the final payment, the
owner can only repossess the goods after following certain procedures which as
follows:
a) He must serve on the hirer a notice in writing of his intention to retake
possession
b) The period fixed by notices must have expired and this must not be less than
21 days
c) The owner must serve on the hirer and guarantors, if any, a notice in writing in
the form set out in the Fifth Schedule of the said Act, within 21 days after he
has taken possession of the goods. The owner cannot sell or dispose of the
goods without the written consents of the hirer until the expiration of twenty-
one days after the date of service of the said notice in section 16

13. REPOSSESSION
BY OWNERS
The Hire-Purchase Act lays down various restrictions on the
power of the owner when recovering possession:
1. Notices must be given to the hirer when goods are to be
repossessed in Section 16.
2. After repossession the owner must not sell or dispose of
the goods for 21days in Section 17.
3. Hirers rights and immunities when the goods are
repossessed in Section 18.
4. Hirer can regain possession of the goods in certain
circumstances in Section 19.

14. • Facts: A car was taken by the respondent on hire-purchase with the
appellant. The respondent failed to pay the instalments due and the
appellant issued a notice under section 16 (1) was in fact served.
• Held : Section 16 clearly specifies that the period before which the seizure
can take place shall be not less than twenty-one days after the service of
the notice. However, the date specified in the notice was two days short of
the statutory minimum and the notice was therefore bad in law even if
served and its effect was therefore null and void.
• Section 16A provide that a hirer who returns goods comprised in a hire-
purchase agreement within 21 days after the service on him of the notice in
the form set out in the Fourth Schedule shall not be liable to pay:
a) The cost of repossession
b) The cost incidental to taking possession and
c) he cost storage.
CASE : PANG BROTHERS MOTORS
SDN BHD V LEE AIK SENG [1978] 1 MLJ
179

15. INSURANCE
• An owner shall cause to be insured in the name of the hirer against any risk
he thinks fit in respect of the following:
a) motor vehicles comprised in a hire- purchase agreement, for the first
year only, and
b) all others goods comprised in a hire-purchase agreement, for the
duration of time that the goods remain under hire purchase-section 26
(1)
• Then in section 26 (2), it requires the hirer to insure the vehicle in respect of
the second and all subsequent years that the vehicles remains under hire-
purchases.
• Next is section 26 (3) of the same Act provides that an owner shall not
require a hirer to insure any risks with any particular registered insurer.
Further, section 26 (4), Hire-Purchase Act 1967 states that an owner who
fails to comply with section 26 (1) of the said Act and a hirer who fails to
comply with section 26 (2) of the same Act shall be guilty of an offence
under this Act.

16. FRAUDULENT SALE OF
GOODS BY HIRER
• For information, when the hirer fraudulently
disposes of or sells any goods comprised
in a hire-purchase agreement or attempt to
defraud the owner by such means, he will
be guilty of an offence punishable on
conviction to a fine up to RM10,000 or
imprisonment for a term not more 3 years
or both fine and imprisonment.

17. CONSUMER PROTECTION
ACT 1999
• The Consumer Protection Act 1999 provides specially for consumer
protection in relation to supply of goods and services and by establishing
the National Consumer Advisory Council and the Tribunal for Consumer
Claims.
• It also by providing in Section 6 that notwithstanding anything to the
contrary in any agreement, the provisions of this Act shall have effect.
• The underlying objective is to prevent or reduce losses and injuries that
consumers might suffer from unfair trade practice and unsafe products.
• The consumer protection act 1999 is divided into 14 parts and consists of
150 sections.
Scope of Application of the Act
• Application of this Act is supplemental, this Act does not affect the liability
arising under any other law such as the Sale of Good Act 1957 or the
Contract Act 1950. By an amendment in 2007, transactions effected by
electronics means are now also covered by the Consumer Protection Act
1999.

18. Application of Hire-purchase
Agreement in Malaysia
In the case of Tractors Malaysia Bhd v. Kumpulan Pembinaan
Malaysia SdnBhd (1979) 1 M.L.J 129,
 the issue before the court is wether there has been a hire-purchase
agreement. It was held by the court that on the construction of the
agreement between the parties, it is argument that the property in
the vehicles was not to pass to the respondent until full payment
had been made. Thus, the agreement was a hire-purchase
agreement. Therefore, the appellant has the right to repossess the
vehicle on breach of its term by the respondent.
The case of Ka Yin Credit & Leasing Sdn Bhd v. Peng Kim Cha Bros
(1982) 2 M.L.J. 61
 the court held that the specific clause in the hire-purchases
agreement stipulating liability to pay rental despite damage or
destruction is effective.