FORMATION AND NATURE OF HIRE PURCHASE AGREEMENT

3. FORMATION AND NATURE OF HIRE PURCHASE AGREEMENT

Formation

Before a hire purchase effected agreement, the Act imposed a number of legal obligations on the owner and dealer

S.4 (1) 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 is carried out by any person who would be the owner under the hire-purchase agreement to be entered into, such 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—

(i) 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; and

(ii) at any time after the service of the written statement referred to in subparagraph (i) but before the hire purchase agreement is entered into, serve on the intending hirer a written statement duly completed and signed both by him and the prospective owner in accordance with the form set out in Part II of the Second Schedule.

Part I of the Second Schedule

A summary of the hirer financial obligations; and must set out the following;

• Short description of the goods
• New/second hand
• Address the goods will be kept
• Cash price
• Deposit
• Freight charges, if any
• Insurance and registration (motor vehicle)
• Terms charges (rate per annum, total amount of the terms charges)
• Different between cash price and total amount payable
• The instalment payments

During Agreement

Hire-purchase agreement to be in writing

A hire-purchase agreement in respect of any goods specified in the First Schedule shall be in writing - section 4A (1), if not the agreement be void and owner will be guilty of an offence under this Act.

Hire-purchase agreement to be signed

Every hire-purchase agreement shall be signed by or on behalf of all parties to the agreement – Section 4B (1). No owner, dealer, agent or person acting on behalf of the owner shall require to sign a hire-purchase agreement unless such hire-purchase agreement, form or document has been duly completed – Section 4B (2)

Effect if not follow this proviso: the agreement void and guilty of an offence

MING LIAN CORPORATION SDN BHD v HAJI NORDIN [1974] 1 MLJ 52

The court gave a decision that the enforceability of a hire-purchase agreement was not affected if the hirer signed an agreement with blank spaces which were later filled in by the owner provided that the hirer was aware of the terms and knew what he was signing. The defendant in this case had signed an agreement with a certain portion of it were blank. The particulars were filled in after the agreement was signed.

Contents of Hire-Purchase Agreement

Every hire-purchase agreement shall

  (i) specify a date on which the hiring shall be deemed to have commenced;

  (ii) specify the number of instalments to be paid under the agreement by the hirer;

  (iii) specify the amounts of each of these instalments and the person to whom and the place at  which the payments of these instalments are to be made;

  (iv) specify the time for the payment of each of those instalments;

  (v) contain a description of the goods sufficient to identify them;

  (vi) specify the address where the goods under the hire purchase agreement are- S.4C(1) (a)

Where any part of the consideration is or is to be provided otherwise than in cash, shall contain a description of that part of the consideration - S.4C(1) (b)

S.4C(1) (c) instructed to set out in a tabular form these particulars:

 (i) the price at which at the time of signing the agreement the hirer might have purchased the goods for cash (“cash price”);

 (ii) the amount paid or provided by way of deposit (showing separately the amount paid in cash and the amount provided by any consideration other than cash;

 (iii) any amount included in the total amount payable to cover the expenses of delivering the goods or any of them or to the order of the hirer (in this Act referred to and in the agreement to be described as “freight”);

 (iv) any amount included in the total amount payable to cover vehicle registration fees in respect of the goods (in the agreement to be described as “vehicle registration fees”);

 (v) any amount included in the total amount, payable for insurance in respect of the goods or any of them;

 (vi) the total of the amounts referred to in subparagraphs (i), (iii), (iv) and (v) less the deposit;

 (vii) the amount of any other charges included in the total amount payable (in this Act referred to and in the agreement to be described as “terms charges”);

 (viii) the annual percentage rate for terms charges which shall be calculated in accordance with the formula set out in the Seventh Schedule;

 (ix) the total of the amounts referred to in subparagraphs

 (vi) and (vii) of this paragraph (in this Act referred to as “the balance originally payable under the agreement”); and

 (x) the total amount payable;

Separate Agreement for every item of goods

There shall be a separate hire-purchase agreement in respect of every item of goods purchased under this Act – S.4D (1). If not, the agreement is void and the owner shall be guilty of an offence.

After Agreement

Copy of Documents to be served on hirer

Within fourteen days after the making of a hire-purchase agreement, the owner shall serve on the hirer and the guarantors a copy of the agreement each –S.5(1)