WARRANTIES AND CONDITIONS

4. WARRANTIES AND CONDITIONS

There are certain terms which are implied in a hire purchase agreement. These terms may be warranties and conditions. Part III of the Act lay downs various conditions and warranties to protect hirers and guarantors.

a. Implied conditions

1. Right to sell

The owner shall have right to sell the goods at the time when the property is to pass – s.7(1) (b). PUBLIC FINANCE BHD v EHWAN BIN SARING [1996] 1 MLJ 331 – the Act does not differentiate between new and second hand goods as far as ownership is concerned.  The court also defines the meaning “at the time when the property is to pass” – it means at the time when a hirer decides to pay all sums due under a hire purchase agreement and not necessarily only upon payment of the last instalment when it become due – at the time when a hirer exercises his option to purchase.

2. Merchantable quality

The goods shall be of merchantable quality – s.7(2), but such a condition shall not be implied:

(a) where the hirer has examined the goods or a sample thereof, as regards defects which the examination ought to have revealed; or

(b) if the goods are second-hand goods and the agreement contains a statement to the effect that—

 (i) the goods are second-hand; and

 (ii) all conditions and warranties as to quality are expressly negatived, and the owner  proves that the hirer has acknowledged in writing that the statement was brought to his notice.

What is “merchantable quality”?

Lord Wright in GRANT v AUSTRALIA KNITTING MILLS LTD [1973] 50 CLR 387:

Merchantable does not mean that the thing is saleable in the market simply because it looks alright, it is not merchantable … if it has defects unfitting it for its only proper uses but not apparent on ordinary examination.

3. Fitness

S, 7(3)

Where the hirer expressly or by implication makes known to the owner the particular purpose for which the goods are required, there shall be implied in the hire-purchase agreement a condition that the goods shall be reasonably fit for that purpose, but such a condition shall not be implied if the goods are second hand goods and the agreement contains a statement to the effect—

(a) that the goods are second-hand; and

(b) that all conditions and warranties of fitness and suitability are expressly negatived, and the owner proves that the hirer has acknowledged in writing that the statement was brought to his notice.

b. Implied warranty

1. Quiet possession of the goods

The hirer shall have and enjoy quiet possession of the goods - s.7(1) (a)

2. Free from encumbrance

The goods shall be free from any charge or encumbrance in favour of any third party at the time when the property is to pass - s.7(1) (c)

5. LIABILITY OF OWNER AND DEALER FOR MISREPRESENTAION

s.8(1) (a)

Every representation, warranty or statement made to the hirer, whether orally or in writing, by the owner or the dealer in connection with or in the course of negotiations leading to the entering into of a hire-purchase agreement shall confer on the hirer as against the owner—the same right to rescind the agreement as the hirer would have had if the representation, warranty or statement had been by an agent of the owner;

6. STATUTORY RIGHTS OF HIRERS

Section 9 to 15 of HPA provide the rights of hirers.

1. Right to be supplied documents and information – s.9

At any time before the final payment has been made under a hire-purchase agreement the owner shall, within fourteen days after he has received a request in writing from the hirer, supply to the hirer a statement signed by the said person or his agent showing—

(a) the amount paid to the owner by or on behalf of the hirer;

(b) the amount which has become due under the agreement but remains unpaid;

(c) the amount which is to become payable under the agreement; and

(d) the amount derived from interest on overdue instalments:

An owner need not comply with such a request if he has sent the hirer a statement within a period of three months immediately preceding the receipt of the request.

2. Right to appropriation of payment (s.10)

A hirer who is liable to make payments in respect of two or more hire-purchase agreements to the same owner shall, be entitled, on making any payment in respect of the agreements which is not sufficient to discharge the total amount then due under all the agreements, to require the owner to appropriate the sum so paid by him in or towards the satisfaction of the sum due under any one of the agreements, or in or towards the satisfaction of the sums due under any two or more of the agreements in such proportions as he thinks fit, and, if he fails to make any such appropriation the payment shall be appropriated towards the satisfaction of the sums due under the respective hire purchase agreements in the order in which the agreements were entered into.

3. Right to apply an order for goods to be removed – s.11

Where, by virtue of a hire-purchase agreement, it is the duty of a hirer to keep the goods comprised in the agreement in his possession or control at a particular place or not to remove the goods from a particular place, a court of a Magistrate may, on the application of the hirer, make an order approving the removal of the goods to some other place, which place shall, for the purposes of the agreement, be substituted for the place mentioned in the agreement.

4. Right to assign – s.12

The right, title and interest of a hirer under a hire-purchase agreement may be assigned with the consent of the owner, or if his consent is unreasonably withheld, without his consent

5. Rights by operation of law- s.13

The right, title and interest of a hirer under a hire-purchase agreement shall be capable of passing by operation of law to the personal representative of the hirer and if the hirer is a company the liquidator may exercise the same right under the agreement as the company but nothing in this section shall relieve any personal representative or liquidator from compliance with the provisions of the agreement.

6. Right to early completion of agreement- s.14

The hirer under a hire-purchase agreement may, if he has given notice in writing to the owner of his intention to do so, on or before the day specified for that purpose in the notice, complete the purchase of the goods by paying or tendering to the owner the net balance due under the agreement.

7. Right to terminate agreement- s.15

The hirer of any goods comprised in a hire-purchase agreement may terminate the agreement by returning the goods to the owner during ordinary business hours at the place at which the owner ordinarily carries on business or to the place specified for that purpose in the agreement.

8. Right on repossession by owner- s.16