LAW 299

CONTRACT, HIRE PURCHASE , LEGAL AGENCY

1.Which of the following is an invitation to treat?

A.A "Buy 2 Free 1" promotion in a clothing store

B.An advertisement for reward on information relating to a kidnapping incident

C.A brochure for a spa service

D.A notice saying, "Mystery gift with every purchase over RM500"

11.Sofi tells Lim that she is Ashraf's agent and Ashraf does not deny this. In this situation, if Lim makes a contract with Sofi, would Ashraf be liable to Lim under the law of agency?

A.Yes, because he has expressly appointed Sofi as his agent

B.Yes, because he has held out Sofi as his agent

C. No, because Sofi was the one who claimed to be an agent

D. No, because he never authorised Sofi to contract with Lim on his behalf

17.Amara entered into a hire purchase agreement for a sewing machine, a vacuum cleaner, and a rice cooker from Senang Finance. The monthly instalment for each item is RM100. This month, Amara is only able to pay RM100 to Senang Finance and she wishes to pay for the sewing machine.

Which of the following describes the legal position in Amara's situation?

A.Amara has the right to choose which item she wishes to pay

B.Amara must obtain the consent of the owner on which item she has to pay

C. The owner has the right to choose which item Amara should pay

D. Amara must apply to the court for permission to choose which item she wishes to pay

20.Awang entered into a hire purchase agreement with Syarikat Senang Beli for a car. The price of the car in the hire purchase agreement is RM88,674.00. Awang has failed to pay the last two successive instalments. Syarikat Senang Beli wishes to repossess the car. However, Awang has already paid more than RM70,000 to Syarikat Senang Beli.

Can Syarikat Senang Beli repossess the car?

A.Yes, because Awang has defaulted in two successive payments

B.Yes, because it is the right of an owner to repossess goods after a hirer has defaulted in payment

C. No, because Awang has not defaulted in four successive payments

D. No, because the Hire Purchase Act 1967 does not allow direct repossession of goods by the owner in this situation

LAW OF HIRE PURCHASE TOPIC 5 1 INTRODUCTION Hire purchase is a contractual agreement where by the owner lets the goods out on hire and agree that the hire may either return the goods and terminate the contract or elect. There is Hire Purchase Act 1967 (Amendment 2010), sought to redress the imbalance to some extent by conferring rights and imposing obligations in respect of certain largely consumer transactions. DEFINITION OF HIRE PURCHASE AGREEMENT S. 2 (1) of HPA 1967 (Amendment 2010). CONTRACT that: Letting of goods with an option to purchase; OR purchase of goods by installments (whether the agreements describes the installments as rent or hire or otherwise The property in the goods is not transferred to the hirer at the time of the contract is made. Property Hirer only obtains possession over the goods. in goods REMAIN with the OWNER until the FULL PAYMENT of the installment or the HIRER Chooses to PURCHASE THE GOODS. Credit Corporation (M) Bhd v The Malaysian Industrial Finance Corp & Anor [1976] 1 MLJ 83 Held: Until the hirer had exercised his option to purchase by paying the total amount and fulfilling all his obligations under a hire purchase agreement, then only property in the car passed to the hirer TERMINOLOGIES IN HIRE PURCHASE AGREEMENT WHO IS THE OWNER? S.2 (1) A person who lets or has lets goods to a hire purchase agreement includes a person to whom the owner's rights and liabilities under the agreement have passed by assignment or by operation of law. Continue..... WHO IS THE HIRER? S. 2 (1) The person who takes or has taken goods from an owner under a hire purchase agreement and includes a person to whom the hirer's rights and liabilities under the agreement have passed by assignment or by operation of law Continue.... WHO IS DEALER? S.2(1) A person not being the hirer or the owner or a servant of the owner, by whom or on whose behalf negotiations leading to the making of a hire purchase agreement with the owner were carried out..... Continue.... What is hire purchase price? The total sum payable by the hirer under a hire purchase agreement in order to complete the purchase agreements....includes deposits... monthly installments and monthly interest.... What is goods? Categories Schedule) of goods in HPA (First All consumer goods Motor vehicles Includes any replacements or renewals by the hirer of any part or parts thereof and any accessories added or additions made thereto by the hirer during the period of hiring Continue.... Consumer goods Goods purchased for personal, family or household purposes Kesang Leasing Sdn Bhd v Mohd Yusof B. Ismail & Anor [1990] 1 MLJ 291 Facts: The goods involved are computers where the parties agreed to be bound by Hire Purchase Act. Held: Section 2 (1) of the Hire Purchase Act did not exclude the application of the provisions of the hire purchase Act to hire purchase agreement in respect of goods outside its coverage provided that the parties to an agreement consented to be bound by them In respect of goods not specified under the First Schedule the parties are free to contract outside the provisions of the Act if they do not agree to be bound by the Act. Even though an agreement may not fall within the ambit of the Hire-Purchase Act (not within the First Schedule) and is also not a bill of sale, it is a valid hirepurchase agreement under common law. A hire-purchase agreement at common law is regarded as a form of contract whereby the owner lets goods out on hire and agrees that the hirer may either return the goods and terminate the contract or elect to buy the goods on the completion of the required periodic payments. 14 MBF Finance Bhd. v. Low Ping Ming T/A Low Peng Enterprise [2005] 3 MLJ 208 CA 15 Credit Corporation (M) Sdn Bhd v. the Malaysian Industrial Finance Corp. & Anor [1976] 1 MLJ 83. 16 FORMATION OF A HIRE PURCHASE AGREEMENT Before a hire purchase agreement is entered into, the owner is required to give the prospective hirer a written statement duly completed and signed in accordance with the form set out in Part 1 of the Second Schedule. The statement provides a summary of the hirer's financial obligations under the proposed hire purchase agreement. This pre-contractual duty of disclosure is a mandatory obligation on the part of the owner - the noncompliance of which would render a hire-purchase agreement void - s. 4(4) and S. 66 CA applies. 17 Affin Credit (Malaysia) Sdn Bhd v. Yap Yuen Fui [1984] 1 MLJ 169 (FC); Public Bank Bhd v. Abdul Rashid bin Abd Majid [2012] 6 MLJ 348 (CA) The document contains a short description of the goods comprised in the hire purchase agreement. Particulars include:- cash price of the good, deposit, insurance, term charges, duration of payment of instalments, number of instalments, amount of each instalment, etc. 18 A hire purchase agreement has to be in writing and be either in the national language or the English Language - s. 4A(1) & (1A). Otherwise it is void - s. 4A(2). The agreement is deemed not to be in writing: if the handwriting is not clear and legible; or where it is printed and the print is of a size smaller than the type known as ten-point Times; or that is not printed in black - s. 45(1). The agreement must be signed by or on behalf of all parties to the agreement - s. 4B(1) It must be duly completed before it is signed by the hirer - s. 4B(2). It is void if it contravenes s. 4B(1) &(2). 19 s. 4C(1) lists the information that must be contained in every hire purchase agreement. The contents include:- the date of commencement of the hiring; the number of instalments; the amount of instalments, time of payment, to whom and where they are payable; the description of the goods sufficient to identify them; the address where goods are situated; consideration - where consideration is not cash such as an old car used for trade-in, then there has to be a description of the trade in; particulars on the cash, deposit, freight, vehicle registration fees, insurance, charges and the amount payable (all this has to be contained in a table); 20 There must be a separate HP agreement in respect of every item of goods purchased under the Act - s. 4D(1) Otherwise, the agreement is void - s. 4D(2) and the owner is guilty of an offence - s. 4D(3) Arab-Malaysian Finance Bhd v. Borneo Wood (Sabah) Sdn Bhd & Ors. [2008] 7 MLJ 834 where an agreement which listed three goods cumulatively instead of item by item was held by the High Court to be void. Where the good is a motor vehicle, the hirer may request in writing to the owner to keep the registration certificate of the motor vehicle and the owner must furnish the same to the hirer. Failing which, the owner commits an offence under the Act - s. 4E 21 A hire-purchase agreement relating to a motor vehicle is void if the motor vehicle has been altered or modified in its construction and structure - s. 4F. Where the good is a second-hand motor vehicle, the owner/dealer will have to declare in writing any defects of the second-hand motor vehicle in accordance with the inspection report by the relevant authority determined by the Controller of Hire-Purchase - s. 4G 22 If there is any alteration or addition in the hirepurchase agreement, the hirer must sign or initial the margin opposite to the alteration or addition to show his consent thereto. If not, the alteration or addition will have no effect - s. 39 The owner is required to serve on the hirer and the guarantors a copy of the hire purchase agreement within 21 days after it has been made - s. 5(1). 23 IMPLIED CONDITIONS AND WARRANTIES The law implies certain conditions and warranties in every hire purchase agreement - s. 7(1). These are:- (a) an implied warranty that the hirer shall have and enjoy quiet possession of the goods - s. 7(1)(a). (b) an implied warranty that the goods shall be free from any charge or encumbrance when the property in the goods is to pass- s. 7(1)(c). 24 (c) an implied condition that the owner has the right to sell the goods at the time when the property is to pass s. 7(1)(b). See: Krishnasamy a/l Supramany v. Arab-Malaysian Finance Bhd [2009] 7 MLJ 455 where the issue before the court was whether the defendant had a good title to the said car when the hire purchase agreement was entered into and whether they could give a good title to the plaintiff. (d) S. 7(2) provides that there shall be an implied condition that the goods shall be of merchantable quality. 25 Merchantable quality means that goods sold are reasonably fit for the purpose for which they are required - the hirer has made known to the owner or dealer the particular purpose for which the goods are required. Such condition shall not be implied :- where the hirer has examined the goods or a sample thereof, as regards defects which the examination ought to have revealed. if the goods are second-hand goods and the agreement contains a statement to the effect that - the goods are second-hand; all conditions and warranties as to quality are negatived; the hirer has acknowledged in writing that he had been notified - s. 7(2)(b). 26 LIABILITY OF OWNER AND DEALER FOR MISREPRESENTATION Where there is misrepresentation by the dealer, owner or its agents in the negotiations leading to the hire purchase agreement, the hirer is conferred a statutory right to claim against the owner and the person who making the representation Continue..... Section 8(1) Owner or the dealer or any person acting on behalf of the owner or the dealer made representation to the hirer or prospective hirer orally or in writing to negotiate that leads to entering into HP agreement. Continue.... Section 8(1)(a) As against the owner, the same right to rescind the agreement Section 8(1)(b) As against the person who made the representation, entitled for damages Continue..... Section 8(2) Any terms of the agreement purporting to exclude, limit or modify the rights of the hirer conferred by subsection (1) is 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 STATUTORY RIGHTS OF HIRERS - Sections 9-15 Right of hirer to a statement relating to his financial position. Owner to supply documents and information - s. 9 Right of owner to appropriation of payments made - s. 10 Right to apply to court for an Order for goods to be removed to some other place - s. 11 Right to assign right, title and interest with consent of owner - s. 12 Right to have right, title and interest passed by operation of the law to PR of hirer or liquidator, if a co. - s. 13 Right to complete the purchase of the goods earlier than the due date - s. 14 Right to terminate the Agreement by returning the goods - s. 15 31 Statutory Rights and Duties of Hirer DUTIES OF HIRERS The main duties of the hirer are as follows: Goods must be stored in the place specified in the hire purchase agreement. To pay his instalments regularly. Given that the hirer has no title to the goods comprised in the hire purchase agreement, he may not remove, sell or dispose of any of the goods so as to defraud the owner. 33 REPOSSESSION The owner is entitled to recover possession of the goods when the hirer has committed a breach of his contractual obligations relating to the payment of instalments under the hire purchase agreement:Provided: The payment of instalments by the hirer must not exceed 75% of the total cash price of the goods; The hirer has defaulted in 2 successive payment of instalments; The owner has served on the hirer a notice in writing in the form set out in the Fourth Schedule of his intention to retake possession (Fourth Schedule notice); and 34 The period fixed by the notice must have expired and this must not be less than 21 days after service of the notice . S. 16(1) Pang Bros. Motor Sdn Bhd v. Lee Aik Seng [1978] 1 MLJ 179 In addition to sending out the Fourth Schedule notice and before repossession, the owner must send another notice by registered post to the hirer not earlier than 14 days after the service of the Fourth Schedule Notice to inform the hirer that the owner intends to take possession of the goods. Regulation 15, Hire-Purchase (Application of Permit and Procedure of Repossession) Regulations 2011 35 If the payment of instalments by the hirer amounts to more than 75% of the total cash price of the goods and there has been 2 successive defaults of payment, the owner is required to obtain an order of the court before taking possession of the goods - s. 16(1A) Where the owner has obtained an order of the court and he has served on the hirer the Fourth Schedule Notice and after the expiry of twenty-one days from the service of the notice, the owner may exercise the power of taking possession of goods - s. 16(1B) Where the hirer is deceased, there has to be 4 successive defaults of payment of instalments before the owner takes possession of the goods - s.16(1C) 36 The person who undertakes repossession of the goods must obtain a written permit issued by the Controller of Hire-Purchase - s. 17A & B After taking possession of the goods, the owner must then personally deliver to the hirer a document acknowledging receipt of the goods after having taken possession of the goods- s. 16(4) & (5). Within 21 days after the owner had taken possession of the goods, he must serve on the hirer and guarantors a notice in writing in the form set out in the Fifth Schedule of the Act - s. 16(3). 37 Owner to retain goods for 21 days - s. 17 Where the owner has taken possession of the goods under s. 16, he cannot sell or dispose of the goods before the expiration of 21 days after the date of service on the hirer of the Fifth Schedule Notice under s. 16(3) - s. 17(1) The owner must get the written consent of the hirer if he wants to sell the goods before the expiration of the 21 days. 38 Hirer's Rights and Immunities when Goods are Repossessed - s. 18 Upon receipt of the Fifth Schedule Notice under s. 16 (3), the hirer may within 21 days give notice to the owner requiring the owner to:(a) Redeliver to him the goods that have been repossessed (subject to compliance by the hirer of the provisions of s. 19); or (b) Sell the goods to any person introduced by the hirer who is prepared to buy for cash at a price not less than the estimated value of the goods set out in the notice - s. 18(1)(a) 39 Hirer to Regain Possession of the Goods - s. 19 The owner shall return the goods to the hirer if within 21 days after the hirer gives notice to the owner under s. 18(1)(a), the hirer :- pays to the owner any amount due in respect of the period of hiring up to the date of the payment- s. 19(1) (a); remedies any breach of the agreement - s. 19(1)(b); or where the owner has taken possession of the goods, pays to the owner reasonable costs and expenses incurred by the owner in taking possession and of returning them to the hirer - s. 19(1)(c). 40 INSURANCE An owner is responsible to take insurance against any risks he thinks fit in the name of the hirer : for motor vehicles - for the first year only, and for all other goods - for the duration of the hirepurchase agreement - s. 26(1) For motor vehicles, the hirer is responsible to insure the vehicle for the subsequent years - s. 26(2) An owner cannot force the hirer to buy insurance from one particular insurer - s. 26(3) The hirer shall inform the owner at least 14 days before the expiry of the insurance policy that he had renewed the said policy - s. 26(5). If he fails to do it, the owner is at liberty to insure the vehicle and the costs incurred shall be borne by the hirer - s. 26(6) 41 SPECIFIC TERMS & CONDITIONS Term charges - shall not exceed the rate fixed by the Act. The maximum limit for term charges at a fixed rate is currently 10% per annum and for term charges at a variable rate is 17% p.a. (Hire-Purchase (Terms Charges) Regulations 2005) The hirer shall have an option for the term charges to be at a fixed rate or at a variable rate where the charges will be quoted at a margin percentage above the base lending rate - S. 6A 42 Booking Fee - S. 30A No owner or dealer shall collect a booking fee from an intending hirer before receipt of the duly completed form set out in Form II of the Second Schedule by the hirer. The booking fee shall not exceed 1% of the cash price of the goods and it shall form part of the deposit in respect of the goods. Upon withdrawal of the booking, the owner shall refund 90% of the booking fee to the intending hirer. 43 Minimum deposits - The minimum deposit in cash and/or in goods shall not be less than 10% of the cash price of the goods. The maximum financing under hire-purchase is therefore 90% of the cash price of the goods - s. 31 Interest on overdue loan instalments - currently interest is charged at a rate of 8% per annum for term charges at a fixed rate or 2 % above the prevailing rate for term charges at a variable rate at simple interest calculated on a daily basis - s. 34(c) 44