History of Hire Purchase Trading

• Hire-purchase trading is believed to have started in England in 1846.
• Hire-purchase as a commercial transaction is said to have begun in the 19th century, the practice of selling goods on credit with the price being payable in installments is of very early origin.
• Popularity of Hire Purchase Trading increased in England with introduction of the Singer Sewing Machine.
• The Singer Manufacturing Co. let its machines to customers under hiring agreements which included an option to purchase.
• Sums paid by way of hire rent were entered as part of the purchase price where the purchaser exercised the option to purchase.
• Hire purchase transactions then extended to cover wagons, furniture, motor vehicles and other commodities.
• Hire-purchase became a very popular means of obtaining goods on credit and was available for the acquisition of a wide range of consumer goods.
• When hire-purchase trading was in force, rights, duties and obligations of parties were governed by the common law (general contract law).

Abuses of the hire purchase contract

• Sometimes, hirers were made to sign blank hire purchase forms, owners later inserted more onerous terms without their knowledge.
• It is a prevalent practice of hire purchase owners.
• Unscrupulous owners encouraged customers to take on hire purchase commitments beyond their means.
• Dealers aimed to allow hirers fall into arrears towards the end of the hiring period; most of the installments had already been paid so the owner could quickly repossess the goods upon the hirer’s default.
• Read the case of Cramer v. Giles (1883) 1 Cab & El 151 in relation to recovery of goods
• Widely drawn clauses were included by the owners in the agreement to exclude all conditions or warranties regarding the quality or fitness of goods.
• Hirers had goods foisted which were totally unfit for the intended purpose, but for which they were still obliged to pay the price.
• Hirers are not legally bound to complete the payments to the end of the hiring period and can elect to return the goods to the owner and terminate the hire purchase agreement.
• Owners of goods inserted "minimum payment clauses" in HPAs, requiring exorbitant charges for depreciation of goods etc. upon termination.
• Charges were payable on termination and so prohibitive that most hirers were discouraged from attempting to terminate the agreement.
• It was difficult for hirers to ascertain how much they were paying in finance charges or interest for the credit facility.
• Owners weren't obligated to inform the hirer how much the goods would cost if purchased for cash.
• As a result, owners could charge an excessive rate of interest without the hirer being aware.
• The aforementioned abuses led to the introduction of Hire purchase legislation in the UK.
• In 1938, the Hire Purchase Act was introduced in the UK which has influenced the Ghanaian law on hire purchase.

Common Law Definition of Hire Purchase

• Common law defines it as an agreement where an owner delivers goods on hire to the hirer in return for periodic payments.
• The hirer may return the goods and terminate the hiring, or elect to purchase the goods at the end of the hiring period.
• A hire purchase agreement involves delivering goods to the hirer on a rental basis.
• The hirer makes regular payments to the owner.
• There's the option to buy the goods at their discretion, without obligation.
• A hire-purchase arrangement is compared to a bailment transaction: the owner is the bailor, and the hirer is the bailee.
• Upon fulfillment of the agreement, the hirer gains physical possession and utilization rights over the rented goods.

History of Law of Hire Purchase in Ghana

• Before 1962, the law relating to all kinds of sale transactions were governed by the common law, and English statutes of General Application, which include:
  • The Factors Act of 1823, 1825 and 1842
  • The Mercantile Law (Amendment) Act 1856
• After 1962, Hire Purchase contract was dealt with in Part VIII of the Sale of Goods Act 1962 (Act 137) from sections 66 to 75.
• Section 81 defined a hire-purchase contract as a contract of sale of goods in which the price is to be paid in five or more installments.
• The definition of Hire Purchase under section 81 of Act 137 was held to be unsatisfactory in Tradomex v. Baah Ltd and Halaby v. Wiredu.
• Sections 66 to 75 and the definition of hire purchase per section 81 of Act 137 is repealed by NRCD 292.
• The Hire Purchase Act, 1974 (NRCD 292) was enacted to deal with hire purchase agreements and Conditional sale agreement.
• There was an amendment of the NRCD 292 in 1978 by SMCD 155.

Statutory Definition of Hire Purchase

• Section 24 N.R.C.D. 292 of The Hire Purchase Act defines a hire-purchase agreement as:
  • Agreement for the bailment of goods under which the bailee may buy the goods or under which the property in the goods will or may pass to the bailee, and where by virtue of two or more agreement, 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 in them will or may pass to the bailee the agreements shall be treated for the purposes of this Act as a single hire purchase agreement made at the time when the last of the agreements was made.

Features of Hire Agreement under Common Law

• In a hire-purchase agreement, the individual renting the goods obtains tangible possession and usage rights, provided they make specified rental payments to the owner of the goods.
• Rental payments are made in installments.
• While the hirer has possession of the goods, the property remains with the seller.
• Possession of the goods is given to the hirer while the absolute property remains throughout in the owner of the goods.
• The property resides in the owner until the hirer exercises their option to purchase the goods.
• Prior to the hirer exercising the option to purchase, they are not legally allowed to transfer full ownership rights to a third party on their own authority.
• Cramer v. Giles (1883) 1 Cab & El 151 relates to a hirer not being able to sell hire purchased goods
• The property retained by the owner is not absolute in practice, doesn't entitle them to dispose of the goods in any way without the hirer's knowledge.
• The hirer is not forced to purchase the goods, but if the hirer decides to complete the installment payment then it means that they have elected to purchase the goods from the seller.
• Helby v. Mathews [1895] А.С. 471 : agreement, the hirer was under no legal obligation to buy, but an option either to return the piano or become its owner by paying the hiring price in full; since the hirer had not exercised his option to purchase he was not a buyer of the goods, and could not pass a valid title to the third party, the Pawnbroker.

Formation of Hire Purchase Contract Under the Hire Purchase Act 1974

• Certain requirements must be fulfilled for the creation of a valid and enforceable high purchase contract.
• Before a high purchase agreement or a conditional sale agreement is made, the owner or seller must state orally and in writing to the prospective hirer or buyer:
  • The cash price
  • The hire purchase price / total purchase price
• The hire-purchase agreement / Conditional Sale Agreement to be enforceable must be in writing and signed by the hirer/buyer, and by/on behalf of all the other parties to agreement.
• The hirer is required to sign the HPA agreement personally.
• For a HPA to be valid and enforceable, according to section 3 of the Act, it must contain the following:
  • A statement of the cash price and the Hire -purchase price of the goods to which the agreement relates.
    • A statement of the amount of each instalment to be paid by the hirer and the dates / the mode of determining the dates on which each instalment becomes payable.
    • A description or list of the goods to which the agreement relates sufficient to identify the goods
    • A notice which is at least as prominent as the rest of the contents of the agreement, in the terms set out in the First or Second Schedule.
• Section 3(2) stipulates that the owner is required to deliver a copy of the hire purchase agreement to the hirer within fourteen days after the making of the agreement.
• According to section 3(3) where the parties fail to comply with the requirements in section 3(1) (b) and (c) and section 3(2), the court can exercise its discretion and still hold the agreement enforceable if it considers it just and equitable to do so.
• The discretion of the court can be exercised only when the parties fail to comply with the specific provisions mentioned in section 3(3), namely sections 3(1)(b) (c) and 3(2)
• Read Ekuona Construction Co. Ltd v. Bank For Housing And construction [1992] 2 GLR 222.

Prohibited Clauses

• Section 4 of the Hire Purchase Act says that certain clauses if found in the hire purchase agreement will be deemed to be void and of no effect.
• Section 4(a): any provision which confers on owner the right/authority enter into private land/premises take possession of goods which let under HPA/sold CSA / any provision which relieves the owner from liability for such entry.
• Section 4 (b): any provision which restricts/excludes the hirer's right to terminate the HPA which is conferred on the hirer by section 5 is also void and of no effect.
• Section 4(c): any provision which imposes on the hirer a liability upon termination which is greater than that stated in section 6 is also void and of no effect.

The Hirer's Right of Termination

• A hire purchase contract may be terminated in any of the ways allowed by the rules of general contract law.
• Therefore, factors which entitle a party to avoid a contract such as mistake, misrepresentation, undue influence, duress, illegality etc. apply equally to hire purchase contracts.
• Every hire-purchase agreement by definition confers on the hirer power to terminate the agreement if they wish based on general contract law.
• Section 5(1) says at any time before the final payment is due, the hirer is entitled to terminate the hire -purchase agreement by tendering a written notice of termination to any person entitled to receive payment under the agreement.

Liability of the Hirer Upon Termination

• According to section 6, after the hirer/buyer has terminated the HPA/CSA, they shall be liable to do the following:
• The hirer/buyer terminates agreement by virtue of section 5 and is liable to pay difference between total sums paid & one half (50%) of the hire-purchase/total purchase price, or if agreement specifies a lesser amount, the buyer is liable to pay that amount (Section 6(1)).
• If they pay more than 50%, they won't be liable to pay any additional sum upon termination but won't be entitled to a refund.
• Section 6(2) provides that after the termination of the agreement by the hirer or buyer under section 5, they shall return the goods at their own expense to the premises from which they were originally supplied.
• Where the owner/seller requires the hirer/buyer to return the goods to other premises, the owner shall be responsible for any additional expense incurred by the hirer/buyer in returning the goods to those premises.
• Section 6(3) says that the hirer is liable for loss/damage caused to the goods if they fails to take reasonable care of the goods, liability is similar to Section 27(4) of the Sales of Goods Act.
• Section 6(4) says if the hirer wrongfully retains goods after termination, the owner can bring an action to recover goods; the court will order the hirer return the goods to the owner without giving them the option for pay.
• Section 7 of the Hire Purchase Act allows the hirer to turn the HPA into an outright sale before the end of the hiring period by notifying the owner in writing of their intention to purchase.
• The hirer must then tender to the owner on a specified date the Net Balance Due, which is different between the HPP and the amounts paid.
• Section 7 (3) (b): an owner/seller recovering possession of the goods from the hirer/buyer, with right so to do, isn't entitled to dispose of goods till after 28 days.
• Within those 28 days, the hirer/buyer can complete agreement by:
• Tendering to the owner or seller the net balance due; being all the reasonable costs incurred by the owner.
• Any amount properly expended by the owner on the storage, repair and or maintenance of the goods.

Restriction on the Right of an Owner to Recover Protected Goods

• Section 8 deals with an important limitation on the owner's right of recovery of the goods upon the hirer's default.
• Section 8(1) says generally goods become protected as result the hirer having paid at least one-half of HPP, the owner cannot enforce their right recover possession on default except by court action.
• Section 8(4) defines protected goods as goods which have been let/sold under a HPA in respect which one-half / 50% of HPP has been paid / tendered by the hirer/buyer.

Consequences of Owner's Recovery of Goods

• Section 8(2) states when owner recovers possession of protected goods otherwise than by court action, the following consequences will follow.
• First of all, the HPA (if not previously terminated) shall be terminated; the HPA shall automatically come to an end.
• The hirer shall be released from liability under the agreement, and be entitled to recover from the owner/seller in an action for money had & received -- all sums paid by them under the agreement.
• They shall be also be entitled recover security given by them to the owner in respect of monies payable, as seen in Danso v. Taylor (1966) CC 152.
• Section 8(3) says instead allowing the owner/keep goods/suffer consequences, the hirer can apply/court for order for returns the goods to him/rescheduling the payments.
• U.T.C. v. Johnson Okoro: the court held plaintiff’s seizure vehicle without court's order released defendant from contract liabilities under hire purchase agreement, goods protected as more than 50% purchase price was paid.

Recovery Of Protected Goods

• Section 9(1)(a): court’s empowered to make appropriate orders upon it's own motion or upon a party's application to protect the goods from damage/depreciation pending the action's hearing.
• Such orders include the order to the hirer prohibiting the use/restricting the use the goods.
• Normally, the goods would be in the possession of the buyer.
• Section 9(1)(b)(i): The court may order the specific delivery of the goods to the owner, subject to the condition that the owner refunds to the hirer or buyer as specified by the court.
• This is to prevent an unjust enrichment of the ower.
• According to section 9(2), an order for specific delivery is an order for the delivery of the goods to the owner without giving the hirer or buyer the option to pay their value.
• An order for specific delivery amounts to the court terminating the agreement and trying to restore the parties to their original position (restitutio in integrum).

Implied Terms

• Section 13(1)(a): is a term implied in every HPA that the hirer or buyer will have quiet possession of the goods.
• This means owner to leave the hirer in peaceful possession during the agreement's pendency (in addition putting the hirer into possession) and is ONLY breached where hirer's enjoyment of possession is interfered BY owner themselves or by lawful acts of third parties.
• Niblett Ltd v Confectioners Materials Co. Ltd 1921] 3 Κ.Β. 387 highlights the quiet possession element.
• Section 13(1)(b) states implied term that goods shall free from charge/encumbrance/favour any third party @ the time when property has to pass.
• Encumbrance any claim/charge/lien/liability attached/binding the property.
• This term's doesnt operate til the time when property is to pass, so if there is an encumbrance binding goods at delivery to the hirer, the owner would not be in breach if he procures a discharge of the encumbrance before time fixed for the hirer's exercise to purchase.
• Section 13(1)(c) states owner's right to sell goods when prop. has to pass.
• Section 13(2)(a, b): Where seller/owner's aware of particular good's purpose b/c hirer told them or negotiation made known good’s purpose, term implied goods fit for purpose (subject section 14).
• Under section 13(3), a breach of any of the above implied terms by the owner gives damages.
• Section 14(1) says term implied in hire-purchase agreement the goods are merchantable quality @ delivery time.
• Goods must be such which rsnable, acting reasonably, offer to buy them after full examination & accept performance their offer (merchantable quality).
  • Bristol Tramways & Carriages Co. Ltd .v. Fiat Motors Ltd [1910] 2 KB 831, 840-1 highlights the conditions needed for goods being merchantable - being that reasonable buyers may buy them.
  • Bartlett v. Sidney Marcus Ltd [1965] 2 All E.R. 753 also highlights merchantable quality.

Exceptions Under Merchantable Quality

• Where the hirer has examined the goods before delivery, there are no implied terms as merchantable that ought reveal on examination (Section 14(2)).
• Where sold second-hand/described like that, parties have expressly excluded the merchantable terms (Section 14(3)).
• The implied term doesnt' apply where they specify defect terms contain provision excluding implied merchantable quality terms (s 14(4)).

Exclusion Clauses and Breach of Implied Terms

• Section 14(5) provides that an exclusion clause relating to the defect is effective, if the owner proves the defect in the goods was brought to the notice of the hirer.
• Section 14(6) provides for implied terms shall give the hirer a right rescind.
• Where goods are sold/let by reference to sample
• HPA if let goods by reference to a sample implied: the bulk must correspond exactly with the sample and hirer must reasonably compare (section 15(1)).
• Where under the HPA by description : The term implied that in the 15(20) they will corresponds exactly with the description
• If agree a sample along with a description, with implied corresponding terms 15(3). (e) Breach 15(4) ( owner/seller of a term gives right to a party to rescind.

Third Parties - Key Factors

• The general rule under common law is that a person cannot transfer a better title than they possess.
• It is if hirer sells (party w lack title) wont obtain valid rights unless exceptions nemo dat quod non habet.
• S. 16 describes conditions when a third party can obtain good title Hirer did have the title for them & Exceptions don’t apply by fulfilling the conditions.
• S.16 provides First w/where the the the the H contravenes the third.
• Third parties have to retain the possession of goods sold in over over (over of 60 days),
• Where the owned possession had written possession possession 60. of goods over (with written In days)

What Must the Third Party Do

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Liability of The Hirer -Key Facts

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