Hire Purchase (LAW299) PDF

CHAPTER ON HIRE PURCHASE 1  CONTENT Definition of HPA Characteristics of HPA Parties and Goods in HPA Formation of HPA Liabilities of Owner and Dealer for Misrepresentation Statutory Rights of Hirer Repossession Procedure...

CHAPTER ON HIRE PURCHASE 1  CONTENT Definition of HPA Characteristics of HPA Parties and Goods in HPA Formation of HPA Liabilities of Owner and Dealer for Misrepresentation Statutory Rights of Hirer Repossession Procedure 2  INTRODUCTION The law relating to hire-purchase agreements in Malaysia is found in the Hire-Purchase Act 1967 and Hire-Purchase (Amendment) Act 2010 3  DEFINITION OF HPA Section 2 (1) of the Hire-Purchase Act 1967 states that a hire-purchase agreement is one which: “…includes a letting of goods with an option to purchase and an agreement for the purchase of goods by instalments…” 2 limbs of definition: 1. It covers the letting of goods with an option to purchase 2. It also covers an agreement for the purchase of goods by installments 4  CHARACTERISTICS OF HPA A contract between hirer and owner Owner let the goods to hirer for an agreed period Hirer pays the deposit and monthly installments Possession is given to hirer however ownership of the goods remains with owner until full payment Owner can repossess the goods upon failure to pay installments 5  Characteristics of HPA The effect of a hire-purchase agreement is the hirer will have OR the possession of the goods but the title of the goods will remain with the owner b) The hirer a) The hirer has fully paid has purchased the the goods after installment letting it; The hirer will only acquire the due title of the goods if: 6 PARTIES AND GOODS IN HPA HIRE PURCHASE GUARANTOR OWNER HIRER (If so required) 7  Parties and Goods in HPA Words Definition Owner “a person who lets or has let goods to a hirer under a hire-purchase agreement...” → S.2 (1) Hirer “the person who takes or has taken goods from an owner under a hire-purchase agreement…” → S.2 (1) Goods (1) All consumer goods → S.2 (1) (2) Motor vehicles → 1st Schedule of HPA 1967 8  Parties and Goods in HPA The Act only covers two types of goods, which are as follows: (a) All consumer goods Section 2 defines consumer goods as follows: “Consumer goods” means goods purchased for personal, family or household purposes It means that the hirer is a natural person who does not purchase goods for business purpose 9 Parties and Goods in HPA (b) Motor vehicles Under 1st Schedule, the motor vehicle includes: ✓ Invalid carriages ✓ Motor cycles ✓ Motor cars (including taxis, cabs, hire cars) ✓ Goods vehicles ✓ Buses 10  FORMATION OF HPA In order to form a valid and binding hire-purchase agreement, several formalities have to be observed by the parties: 11  FORMATION OF HPA 1. Before entering into HPA, the owner or dealer (as the case may be) must serve 2nd Schedule notice(s) to the prospective hirer → S.4 (1) HPA by Owner HPA by Dealer Owner to serve on the  Dealer must serve on the intending hirer a notice in the Form set out in intending hirer a notice in Part I of 2nd Schedule duly completed the Form set out in Part I of and signed by the dealer 2nd Schedule duly completed and signed by the owner  Then, dealer must serve on the intending hirer a notice in the form set out in Part II of 2nd Schedule duly completed and signed by the dealer and the prospective owner 12 o Content of notice in Part 1 of 2nd Schedule: ✓ Description of the goods comprised in the HPA ✓ Summary of financial obligation of the intended hirer under the HPA o Purpose of this notice: To protect the prospective hirer by enabling him or her to make an informed decision as to his or her likely financial commitments o Method of service: Notice must be served in person by the owner or dealer AND intending hirer must acknowledge receipt by signing at the appropriate column → S.4 (2) o Once notice is received, intending hirer is not under any obligation to enter into any HPA with the owner/dealer nor is he required to pay or give any consideration to the owner/dealer for the preparation or service of such notice 13 ❖ HPA made without serving the notices will be void → S.4 (4) ❖ CASE: Affin Credit (Malaysia) S.B v Yap Yuen Fui 1 MLJ 169 Held: Failure to give a written statement under the 2nd Schedule shall render the contract void 14  Besides that, the owner or dealer shall be guilty of an offence under HPA 1967 → S.4 (5) Penalty → S.46 (1) a) Against body corporate (bank/finance company/dealer): 1st Offence: Fine ≤ RM100,000 2nd Offence or more: Fine ≤ RM250,000 b) Against any person who is not a body corporate: 1st Offence: Fine ≤ RM25,000 or imprisonment ≤ 3 years or both 2nd Offence or more: Fine ≤ RM50,000 or imprisonment ≤ 5 years or both 15 2. The HPA must be in writing → S.4A (1) Otherwise, the HPA shall be void → S.4A (2) Owner who does not comply this shall be guilty of an offence under HPA 1967 → S.4A (3) If found guilty shall be subjected to penalty under S.46 (1) referred earlier HPA shall be in the national language or English language → S.4A (1A) Otherwise, the HPA shall be void → S.4A (2) Owner who does not comply this shall be guilty of an offence under HPA 1967 → S.4A (3) S.45 – HPA will be considered NOT IN WRITING if: handwriting not clear and legible; printed in type of a size smaller than the type known as ten-point Times; or that is not printed in black 16 3. The HPA must be signed → S.4B Must be signed by all parties → S.4B(1) Can only be signed by the hirer after the agreement or all forms or documents has been duly completed by the owner. Signing blank form by the hirer shall be invalid → S.4B (2) Owner shall not deliver to any dealer or his agent a HPA which has not been completed → S.4B (2A) If the agreement is not completed and signed, the agreement shall be void → S.4B (3) Owner or dealer who does not comply this formality shall be guilty of an offence under HPA 1967 → S.4B (4) Penalty → S.46 (1) 17 4. Contents of the HPA NUMBER OF INSTALMENT TO BE PAID DATE OF COMMENCEMENT OF HIRING AMOUNT OF EACH MONTHLY INSTALMENT S.4 (C) - A valid HPA must contain: TIME FOR PAYMENT OF EACH INSTALMENT DESCRIPTION OF THE GOODS ADDRESS OF WHERE THE GOODS TO BE KEPT 18  1. The cash price of the goods; 2. The deposit showing separately the amount paid in cash and the amount provided by consideration other than cash; 3. Delivery of freight charges, if any; ❖ The hire purchase 4. Vehicle registration fees, if applicable; agreement must also 5. Insurance; include a table containing 6. The total amount referred to above less than the the following information: deposit; 7. Term charges; 8. The annual percentage rate for term charges; 9. The total amount in items (6) and (7) above; 10. The total amount payable. 19 Failure to comply with the requirements may result: a) The HPA is void→ S.4C (2) b) The owner who enters into such HPA is guilty of an offence→ S.4C (3) 20 5. Alterations to HPA No addition or alterations can be made to a HPA containing the terms and conditions of the agreement as set out in the pre-contractual document Any addition or alteration will have no effect, unless the hirer (or his/her agent) has consented by signing or initialing the agreement in the margin opposite the change Section 39 21 6. Separate Agreement for Every Item of Goods S.4 D – If there is more than 1 items being hired at the same time from the same owner, there must be a separate HPA for every item S.4 (D)(2) - If not separate the HPA is void S.4 (D)(3) – The owner will be guilty of an offence 22 7. Motor vehicle registration certificate S.4E - Where the goods comprised in a HPA is a motor vehicle, a hirer may make a request in writing to an owner to keep the registration certificate of the motor vehicle Upon request, the owner shall furnish. Otherwise, the owner shall be guilty of an offence 23 8. Altered or modified motor vehicle S.4F - A HPA shall not be entered into where the goods comprised in the hire-purchase agreement is a motor vehicle which has been altered or modified in its construction and structure A HPA that contravenes subsection (1) shall be void 24 9. Declaration on a second-hand motor vehicle S.4G (1) – Where goods to be comprised in a HPA is a second-hand motor vehicle, the person who intends to enter into the hire-purchase agreement in respect of such second-hand motor vehicle shall declare in writing any defects of the second-hand motor vehicle in accordance with the inspection report by the relevant authority Otherwise, the owner shall be guilty of an offence and subjected to penalty 25 10. SERVICE OF DOCUMENTS ON THE HIRER Owner must serve the hirer and the guarantor a copy of the HPA within 21 days after it is made → S.5 (1) If the total amount payable under HPA consists of payment for insurance, the owner shall serve: A copy of the insurance payment receipt; and Within 7 days after receiving the policy from the insurance company, a copy of insurance policy on the hirer → S.5 (3) Any person contravene S.5 shall be guilty of an offence under HPA 1967 → S.5 (4), and the penalty → S.46 (1) 26 11. Deposit Owner must obtain from the hirer a deposit in cash or in goods or partly in cash and partly in goods, to a value not less than one- tenth (1/10) of the cash price of the goods → S.31 (1) 27  LIABILITY OF OWNER & DEALER FOR MISREPRESENTATION Meaning of misrepresentation: Incorrect or false statement, representation or warranty, either orally or in writing, made to the hirer by the owner or dealer or their agents during negotiations which induced the hirer to make a HPA – S.8 (1) As against the owner, the hirer has the right to terminate the HPA and sue for damages - S.8 (1)(a) As against the person who made such misrepresentation, the hirer has the right to sue for damages – S.8 (1)(b) 28  Liability of Owner & Dealer For Misrepresentation Lau Hee Teah v Hargill Engineering Sdn Bhd 1 MLJ 145 Held: If any fraudulent representation was made to the hirer by any employee of the owner (i.e. dealer), and the hirer was induced to enter the agreement, the hirer has the right as against the owner to terminate the agreement and as against the dealer, the right to claim for damages 29  Section 8 (1): Owner or dealer or their agents Made misrepresentation to the hirer during negotiations Orally or in writing Which induced the hirer to enter HPA 30 ❖Examples of misrepresentation: “ The car is 100% free from accident” “The 2nd hand car is a brand new car” 31  Liability of Owner & Dealer For Misrepresentation Section 8 (2): “Any terms of the agreement purporting to exclude/limit/modify the rights of hirer conferred by subsection (1) is void” Based on the above section, the parties to HPA cannot contract out S.8 (1) This means that the owner and the hirer cannot agree with each other that S.8 (1) does not apply to them If these terms exist in the HPA, the terms will be void Section 8 (3): An innocent owner who suffers any damages as a result of the misrepresentation of the dealer is entitled to be indemnified by the dealer 32  STATUTORY RIGHTS OF HIRER 1. Right of hirer to request a statement of current position (Section 9) The statement must contain the followings: ✓The amount paid to the owner by the hirer; ✓The amount which has become due under the agreement; ✓The amount which is to become payable under the agreement; and ✓The amount derived from interest on overdue installment. 33  The request must be made in writing at any time before the final payment The owner must produce the statement within 14 days upon request. If not, the owner is not entitled to enforce: a) the agreement against the hirer; b) any right to recover the goods from the hirer; c) any contract of guarantee relating to the agreement The request can be made once in 3 months 34 2. Right to appropriation of payment (Section 10) If hirer enters into more than one hire-purchase agreements with the same owner, and the payment made by the hirer is insufficient to settle the total amount due under all agreements, the hirer has the right to ask the owner to appropriate the payment: a) To any one of the agreements; b) To any two or more of the agreements; or c) To appropriate the payment according to the sequence of the agreement Ex: You have two hire-purchase agreements with a same bank. The total amount due under both agreements is RM1000 but you only have RM800. So you have the right to divide or appropriate the payment to both agreements 35 3. Right to apply for order for goods to be removed (Section 11) The hirer has right to apply to the court to remove goods to a new place This right derived from the fact that under certain hire purchase agreement, hirer must keep the goods in a place stated in the agreement 36 4. Right to assign hirer’s right (Section 12) The hirer may assign the right, title and interest under a hire purchase agreement to another person with the consent of the owner – S.12 (1) If the owner unreasonably withhold the consent, then the hirer may assign his right, title and interest without the consent of the owner – S.12 (1) However, the hirer must first apply to High Court for an order declaring that the owner had unreasonably withheld consent - S.12 (3) “Consent unreasonably withheld’ means: a) the owner fails to give consent without sufficient reason; or b) the owner requires payment for his consent 37  In granting the consent to the assignment, the owner may impose condition that all the overdue installments and interest must first be settled by the hirer – S.12 (4) S.12 (4) - The owner may also require the assignor (hirer) and assignee to sign the assignment agreement where the assignee agrees: a) to pay the instalments remaining unpaid; b) to perform and observe the hire-purchase agreement; c) to pay the reasonable stamping and registration cost of the assignment agreement 38 5. Right by operation of law (Section 13) Right, title and interest of a hirer under hire-purchase agreement can be passed by operation of law to the personal representative of the hirer. This happens when the hirer died or made bankrupt If the hirer is a company, to the liquidator The personal representative shall then comply with provisions of the hire- purchase agreement 39 6. Right to early completion of agreement (Section 14) The hirer has right to complete the hire-purchase agreement earlier than the actual term of the hire-purchase agreement In order to exercise the right, the hirer needs to give written notice to the owner indicating his intention and before the date specified for that purpose in the notice, pay to the owner the balance due under the agreement 40  Section 14 (1) - Procedures for early completion: a) Give written notice to owner; b) Notify the owner on the hirer’s intention to make an early completion; c) Stipulates the date for the early completion; and d) Pay to the owner the net balance due on or before the stipulated date 41  Section 14 (3) - Early completion may be exercised in 3 situations: a) Early completion during the continuance of agreement – hirer is required to pay net balance due only a) Early completion after repossession of goods - hirer is required to pay net balance due AND cost incurred by owner for repossession b) Early completion after the service of 4th Schedule Notice and hirer has returned the goods to owner within 21 days from the Notice – hirer is required to pay net balance due only 42 7. Right to terminate the agreement (Section 15) Section 15 (1) - The hirer has the right to terminate the hire-purchase agreement at any time by returning the goods to the owner during ordinary business hours at the place which the owner ordinarily carries on business or to the place specified under the hire purchase agreement Section 15 (5)(a) – Upon termination, the hirer may require the owner to sell the goods to any person introduced by hirer who is prepared to buy the goods for cash at a price agreeable to the owner Section 15 (5)(b) - If the value of the goods at the time when it is returned to the owner is more than the balance outstanding under the hire purchase agreement, the hirer is entitled to the difference Section 15 (5)(c) - If the value of the goods is less than the balance outstanding, the owner is entitled to the difference 43  REPOSSESSION PROCEDURE Repossessions takes place when the goods are taken back by the owner form the hirer when there is a default by the hirer It usually happens when the hirer does not pay the installment due The statute upholds this right but the procedures in Sections 16 to 18 must be complied with 44  Repossession Procedures Procedure Procedure During Procedure After Before Repossession Repossession Repossession 45  Procedure Before Repossession (1) When the owner can repossess? – S.16 (1) The owner can repossess the goods from the hirer only if: a) The hirer defaulted to pay two (2) successive installments; AND b) The total payment of the installments already paid by the hirer amounts to not more than 75% of the total cash price of the goods If more than 75%, the owner must obtain an order from the court to repossess the goods As for the deceased hirer, the owner can only repossess if there are four (4) successive default of installments 46 (2) Service of 4th Schedule Notice – Section 16 (1) Before repossession, owner must serve on the hirer 4th Schedule Notice in writing This notice is to show the owner’s intention to repossess and the reminder for hirer to pay arrears in installments The hirer is given 21 days from the date of the service of the notice, to pay the arrears of installments and any interest due before repossession The notice must be served to the hirer personally OR posting it by registered post - Section 43 47 (3) After 21 days from the date of service of the 4th Schedule Notice, owner can repossess the goods – Section 16 (1) The period fixed for the notice must not less than 21 days. Otherwise, the notice is NOT VALID Pang Bros. Motor Bhd v. Lee Aik Seng 1 MLJ 179 Facts: The respondent failed to pay the instalments due and the appellant issued a notice under Section 16 (1) Held: The repossession is illegal if the repossession took place before the expiration of 21 days after the service of 4th Schedule Notice. In this case, the date specified in the notice was 2 days short of the statutory minimum. The notice therefore was void 48  However, there is no time limit within which an owner must repossess after 21 days from the date of service of the 4th Schedule Notice United Manufacturers Sdn Bhd v. Sulaiman Ahmaad & Ors. 1 MLJ 21 ✓ Facts: The repossession of a 2nd hand tractor by the plaintiff took place more than 2 years after the service of 4th Schedule Notice ✓ Held: The repossession was lawful because the 4th Schedule Notice has been given to the hirer and 21 days has expired 49  Procedure During Repossession (1) Permits for repossession Repossession can only be made by person who holds a written permit. Otherwise, the person will be guilty of an offence – S.17A Therefore, owner must only appoint a person who has permit as his agent to take the repossession. Otherwise, the owner will be guilty of an offence – S.17 (B) 50 (2) Manner of taking repossession If the repossession is carried out by the owner personally, the owner must produce and show his identity card and provide the name and address of the company he belongs to the hirer If carried out by the servant or agent of the owner, the agent must show his identity card and his authority card Failure to comply this, will be guilty of an offence 51  Procedure After Repossession (1) Owner must serve document acknowledging receipt of the goods Immediately after repossession, owner must serve to the hirer personally a document acknowledging receipt of the goods – S.16 (4) This documents contain a short description of the goods, the date, time and place where the owner took possession of the good – S.16 (5) 52 (2) Service of 5th Schedule Notice – Section 16 (3) After repossession, owner must serve this notice to hirer and every guarantor (if any) Must be served within 21 days after repossession Purpose of notice is to give the option to the hirer either: a) to require the owner to return the goods and pay the arrears installments, interest due and cost for repossession and redelivery; OR b) to finalize or complete the agreement by paying the balance due under the agreement and cost for repossession Failure to serve the 5th Schedule Notice, owner’s right shall be ceased 53 (3) Owner to retain possession of the goods for 21 days – Section 17 (1) The owner cannot sell or dispose of the goods without the written consent of the hirer before the expiration of 21 days after the date of service of 5th Schedule Notice If owner sell the goods, the owner shall be guilty of an offence 54 THANK YOU 55