PREPARED BY:
MADAM NORAZLA
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.
Hirer only
obtains
possessi
on over
the
goods.
 Property 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 of goods in HPA (First Schedule)
 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
FORMATION OF
A HIRE
PURCHASE
AGREEMENT
Notice of the 2nd
Schedule before
entering HPA
Written
Agreement
Signatures of the
parties
Contents
Separate
Agreements
Every Item
No addition or
alteration
Service of
documents
Deposits
1. Notice of the 2nd Schedule before entering HPA
 Before a hire purchase agreement
 2nd Schedule Notice to serve on the hirer
Purpose
To inform the intending hire purchase concerning the
financial obligations which may be incurred
Negotiation between dealer and hirer….dealer shall
serve a complete 2nd Schedule sign by dealer and
the prospective owner
Continue….
Section 4 (2)
Notice delivered
To the person intended to be hirer
Acknowledge receipt of notice, signing the
appropriate column.
Continue….
Section 4(4)
If a HP contract is made without
serving/giving the notice as required by section
4(1), the agreement shall be void.
Continue….
Affin Credit (M) Sdn Bhd v Yap Yuen Fui [1984] 1
MLJ 169
Held:
The Pre contractual disclosure is required even if
the offer to enter into a hire purchase agreement
emanated from the hirer.
2. WRITTEN AGREEMENT
Section 4A
A hire purchase agreement to be in writing.
An agreement is deemed not to be in writing and thus
void if a handwriting (other than a signature or
initials) , “is not clear and legible and if the
agreements is printed, the print is of size smaller
than the type known as ten point Times”
Signature of parties
Section 4B(1)
A hire purchase agreement to be signed by or on
behalf of all parties to the agreement.
Section 4B(2)
………the hirer purchase agreement, form or document
has been duly completed…
NO COMPLIANCE OF SECTION 4B(1) and 4B(2) is
void
3. CONTENTS (s. 4c)
 A date on which the hiring starts
 The number of installments to be paid by hirer
 The amounts of each of installments and the
person to whom and the place at which the
payments are made.
 The time for the payment of each of those
instalments
 A description of goods sufficient to identify them
 The address where the goods are to kept
Continue…
The table of HP agreement:
 The cash price of the goods
 The deposit showing separately the amount paid in
cash and the amount provided by consideration other
than cash
 Delivery or freight charges, if any
 Vehicle registration fees, if applicable
 Insurance
 The total amount referred to above less deposit
 Term charges
 The annual percentage rate for term charges
(calculated in accordance with the formula set out in
the seventh schedule)
Continue….
 Section 4C2
 provides that any agreement which does not comply
with this requirement would render the HP agreement
void
 section 4C(3).
 If the owner enters into agreement without stating the
above contents, apart from the agreement being void,
the owner shall be guilty an offence as prescribed by
 section 46
 The penalty for the above offence is fine not more
than RM3,000 or imprisonment 6 months or both.
4. Separate Agreement
Section 4D(1)
There shall be a separate hire purchase agreement
in respect of every item of goods purchased under
this Act
Section 4D(2)
A hire purchase agreement that does not comply with
subsection (1) shall be void
Section 4D(3)
The owner would be liable for an offence under the
Act.
The penalty is under Section 46.
5. Alterations
No addition or alteration can be made to a hire
purchase agreement or written agreement or
written documents containing the terms and
conditions of the agreement in relation to any of the
matters state out in the pre contractual statement
required to be served on the prospective hirer
pursuant to
Section 4(1)(a) and (b) of the Act
6. Service of Documents
Section 5(1)
Requires the owner to serve on the hirer and the
guarantors a copy of the hire purchase
agreement within fourteen days (amendment:
21 days) after it is made
FAILURE TO COMPLY WITH
SECTION 5(1)
THE AGREEMENT IS UNENFORCEABLE
SECTION 5(1A)
If includes with insurance policy should be served
7. DEPOSITS
Section 31(1)
If there is no prescribed minimum deposit
required of a hirer,
an owner entering into a hire purchase agreement
must first obtain from the hirer a deposit in
cash or in goods, or partly in cash and partly in
goods, to a value of not less than one-tenth
(1/10) of the cash price of the goods
Issue: What if NO DEPOSIT require?
Protection of Hirers and Guarantors
Hirer and their guarantors are protected by way of
several implied conditions and warranties
 Implies a warranty that the hirer shall have and
enjoy quite possession of the goods.
Section 7(1)(a).
 An implied condition that the owner shall have
the right to sell the goods at the time when the
property is to pass.
Section 7(1)(b)
Continue….
 Public Finance Berhad v Ehwan Bin Saring
The respondent (hirer) entered into a hire purchase
agreement with the appellant(owner) in respect of the
vehicle.
The vehicle was subsequently seized by the Customs
authorities after the hire purchase agreement was
executed and the vehicle was not returned to either
party.
The respondent alleged that the appellant had
breached the implied condition and claimed for
damages.
Continue….
 Held:
The appellant represented themselves as owners in the
agreement and they were capable of giving a good title
to the respondent whenever they he might choose to
end by hiring by paying the balance due.
therefore, the owners had breached the implied
condition.
The Court also took a view that that section 7(4)
preserved the common law principle that the
owner had a good title when he entered the HP
and not when the final payment was made.
Continue….
 Implied warranty that the goods must free from
encumbrances.
Section 7(1)(c)
Continue….
 Implied condition that the goods shall be
of merchantable quality.
 Section 7(2)
EXCEPT
where the hirer has examined the
goods or sample, as regards defects which
the examination ought to reveal.
if the goods are second hand goods and
agreement contains a statement to the
effect thata. the goods are second hand; and
b. all conditions and warranties as to
quality are expressly negative, and
the owner proves that the hirer has
acknowledge in writing that the
statement was brought to his
notice.
Continue…
e. Section 7(3)
Where the hirer expressly or implication makes
known to the owner or dealer or to any servant or
agent of the owner or the dealer of the particular
purpose for which the goods are required
That there shall be implied in the HP agreement a
condition that the goods shall be reasonably fit
for the purpose,
BUT
Such condition shall not implied if the goods are
second hand goods and the agreement
contains a statement to the effect
Continue…
 Section 7(3)(a)
The goods are second hand car; and
• Section 7(3)(b)
That all conditions and warranties of fitness and
suitability are expressly negative, and the owner
proves that the hirer has acknowledged in
writing that the statement was brought to his
notice
Lau Hee Teah v Hargill Engineering Sdn Bhd
 The 1st respondent had breached the implied
condition as to fitness of the purpose as to
fitness for purpose.
An agent of the respondent had, in fact,
visited the mine and observed the work
carried out.
Continue…..
HELD:
The appellant had made known for the purpose
which the loader was required.
However the Court decided that
“they were no defects sufficiently serious to render
the loader useless for any purpose which it would
usually be used. And therefore it cannot be said
that the loader was unmerchantable quality or
unfit for the Plaintiff’s purpose.
Liability of Owner & 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 and Duties of
Hirer
Right to copy
statement
relating to his
financial position
Right to assign
Right to
appropriation of
payment
Right to apply for
an order for goods
to be removed
Right by
operation of law
Right to early
completion of
agreements
Right to
terminate
agreement
Right on
repossession by
owner
1. Right to copy Statement in Relating to his
Financial Statement
Section 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 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 due to the owner but remained unpaid
c. The amount that is become payable under the agreement
d. The amount derived from interest on overdue installment
Continue….
 Proviso in Section 9
However if the owner has sent to the hirer
with in the period of three months the
statements before the request, the owner
need not to comply
Continue….
Section 9(2)
If the owner defaults/ fails to supply the statement
without reasonable cause, the owner is not
entitled to enforce:i. The agreement against the hirer
ii. Any right to recover/repossess the goods from
the hirer
iii. Any contract of guarantee relating to the
agreement
Continue…..
Section 9(3)
If the default (to supply the statement) continue for
a period of 1 month, the owner shall be guilty of
an offence and shall be liable to a fine not
exceeding RM1,000.00
2. Right to appropriation of Payment
Section 10
When there is more than one agreement with same
owner and the payment is insufficient to discharge
the total amount due under all agreement,
the hirer may require the payment be
appropriated to a particular agreement or to
the satisfaction of the sums due in such
proportion.
Continue….
Alternatively, the hirer is entitled to
appropriate payment according to the
sequence of the agreements
If the hirer fails to make such
appropriation, the payment shall be
appropriated towards the satisfaction of the
sums due under the respective agreements
in order in which the agreements were
entered into.
3. Right to Apply for an Order for Goods
to be removed
Section 11
It is a duty of a hirer to keep the goods comprised in
the agreement in his possession or control at a
particular place and not to removed
On the application of the Hirer, a Court of a
magistrate may make an order approving the
removal of goods to some other place.
4. Right to assign hirer’s right
Section 12(1)
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 with held,
without his consent
Continue……
What is the consent is unreasonably withheld?
Section 12(2)
The owner request for extra payment or any other
consideration for the purpose of giving his consent
Section 12(5)
The owner requires other additional guarantors who
have guaranteed hirer’s obligation under hire
purchase agreement have agreed to guarantee the
assignee’s obligation under the agreement or
where the assignee has furnished the same
number of guarantors
Continue….
Section 12(5)
The refusal on the part of owner to give consent to
an assignment as in mentioned in subsection (1)
on the ground that he requires other additional
guarantors to guarantee the assignee’s obligation
shall be deemed unreasonable
Continue….
 The owner requires other additional
guarantors who have guaranteed hirer’s
obligation under hire purchase agreement
have agreed to guarantee the assignee’s
obligation under the agreement
 Where the assignee has furnished the same
number of guarantors
Section 12(5)(a) and (b)
Continue…
 If the owner refuses to give his consent to
an assignment by the hirer or his right, title
and interest under the agreement,
 the hirer may apply to the High Court for an
order declaring that the consent of the
owner to that assignment has unreasonably
been withheld.
Section 12(3)
5. Right by Operation of Law
 Section 13
The right, title and interest of a hirer under a hirepurchase agreement can pass by operation of law
to the personal representative of the hirer
If the hirer is a company, the liquidator may
exercise the same right under the agreement as the
company. In effect, the liquidators succeeds to the
hirer’s right and liabilities under a hire purchase
agreement.
5. Right to Early Completion of the
Agreements
 Section 14(1)
The hirer gives a notice in writing to the owner of
his intention to early completion of the
agreements,
 on or before the day specified for the purpose in
the notice, complete the purchase of the goods
by paying or tendering to the owner the net
balance due under the agreement
Continue…..
 Section 14(2)(a)
The term charges are at a fixed rate, the net
balance due is the balance originally payable under
the agreement LESS
i. any amounts (other than deposit) paid or
provided or on behalf of the hirer under the
agreement
ii. The statutory rebate for terms charges;
iii. If the hirer requires any contract of
insurance to be cancelled, the statutory rebate for
insurance;
Continue….
 Section 14(3)
Hirer can exercise the right to an early
completion in these situations:
a. at any time during the continuance of the
agreement; or
b. where the owner has taken possession of the
goods, upon payment to the owner (within 21 days
after the owner has served a noticed in the form
set out in the Fifth Schedule) in addition to the net
balance due together with the reasonable costs
including cost of storage, repair or maintenance.
Continue….
c.
where the hirer has returned the goods to the
owner within 21 days after the service on him
of the notice in the form set out in Fourth
Schedule due to FAILURE to pay 2 successive
installments or the last installment.
(the hirer may complete the hire purchase by paying
the net balance due within 21 days after receiving
the Fifth Schedule notice from the owner.
6. Right to Terminate the Agreement
Section 15(1)
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.
Statutory DUTIES / OBLIGATIONS
of Hirer
1. Continue
PAYMENT
2. Inform owner
the POSITION
of the Goods
1. Continue PAYMENT
 Hirer is under DUTY to pay the installments, even
the goods hired is destroyed.
Ka Yim Credit & Leasing Sdn
Bhd v Pang Kim Cha
 D hired a bulldozer from the P under a hire-purchase
agreement. The bulldozer then destroyed in fire. D
refused to continue payment of installment until his
claim from the insurance company has been settled.
 Court held:
The destruction of the goods did not discharged the
duties of the hirer to pay the whole amount
payable under the agreement.
Thus, the D must pay.
2. Inform owner the POSITION of
the Goods
 S. 37 of HPA
 Owner at any time , may serve a written notice to
the hirer, requiring the hirer to state in writing: The position of the goods;
 to whom the goods is delivered;
 The circumstances under which he lost possession
of them
 S. 37 (1) of HPA
 Within 14 days after receiving NOTICE, the
HIRER is under DUTY to give the OWNER
such statement.
 If the HIRER fails to do so, or gave false statement
to the owner, the HIRER shall be GUILTY of an
offence.
 Where;
 The hirer removes the goods from the address
specified in the agreement; or
 If the goods is lost; or
 If the goods are taken out from the hirer’s
possession
 The Hirer is under DUTY to inform the OWNER in
writing:
 The new address where the goods is kept;
 The date & circumstances in which the goods was lost;
 The date & circumstances in which the goods are taken
out from the hirer’s possession;
 If the HIRER fails to do so, within 14 days
 the HIRER shall be GUILTY of an offence.
 S. 37 (2) of HPA
 Fine Not exceeding RM 10,000 Or to be
IMPRISONMENT not exceeding 3 years or both.
 S. 37 (2) of HPA
Procedures for Repossession
Default in
payment
Service of 4th
Schedule Notice
Service of 5th
Schedule notice
and procedures
after repossession
Repossession
Selling on
repossession by
owners
1. Default in payment
 S. 16 (1) of HPA
 The owner may REPOSSESS the goods from Hirer
only if:
 A) The hirer DEFAULTED to pay 2 successive
installments; or
 B) The hirer DEFAULTED to pay the LAST
installment
2. Service of
th
4
Schedule Notice
 Owner would REPOSSESS the goods after the
EXPIRATION of the 21 days from the date of the
notice service
UNLESS
The hirer pays the arrears of installments &
interest due within 21 days .
 S. 16 (1A) of HPA
 The Hirer is dead, the OWNER SHALL NOT
REPOSSESS the goods UNLESS there is a
DEFAULT to pay 4 successive installments.
 S. 16 (2) of HPA
 The owner NEED NOT COMPLY with the
requirement of S. 16 (1), IF the Owner can prove
that there are reasonable grounds to believe that
the goods will be removed or concealed by the
hirer.
3. Repossession
 Regulations- Hire-Purchase (Recovery of
Possession and Maintenance of Records by
Owners) Regulations 1976.
Regulation 4
a. If the repossession is carried out by the owner
personally, the owner shall produce and show his
identity card & provide the name & address of the
company/ firm/ body of organization to which he
belongs to the hirer.
b. If the repossession is carried out by the servant
or agent of the owner
such servant or agent of the owner shall produce
and show his identity card & his authority card
 Failure to comply: OFFENCE
 Regulation 9
Repossession must be exercised in lawful manner.
( the owner or his agent is authorized to enter
into any premises in proper & lawful manner).
s. 34 (e) of HPA
 If the servant or agent of the owner commits
offence
the owner is deemed GUILTY and
liable for PUNISHMENT.
UNLESS
The act was not within the ordinary scope of agent’s
employment.
act done without the owner’s consent, owner has
exercised all diligence to prevent the commission of
the crime
Immediately after Repossession (s. 16 (4) )
the owner shall deliver to hirer personally a
document acknowledging receipt of the goods.
 Document (s. 16 (5) ) :
 Description of the goods
 Date, time & place where the owner took
possession of the goods.
4. Service of 5th Schedule notice and procedures
after repossession
 Within 21 days- after repossession – owner –
serve on the hirer + guarantor-the 5TH
Schedule Notice.
 (s. 16 (4))
5TH Schedule Notice
= option to the hirer:a. Pay arrears + interest + cost of delivery –
REDELIVER to Hirer
b. Pay the balance due + cost of repossessionREDELIVER to Hirer
 If owner fails to serve the 5th Schedule (S. 16 (6)
 Lose his right
 No remedy.
 If HIRER RETURNED THE GOOD, WITHIN 21
DAYS after the Hirer received the 4th Schedule
Notice (s.16A)
 Owner shall not impose:
 Cost of repossession
 Cost incidental to repossession
 Cost of storage
5. Selling on repossession by
owners
 After Repossession – owner shall not sell or
dispose of the goods without the written consent
of the hirer UNTIL : expiration of 21 days date of
service of 5th Schedule Notice or expiration of the
time for payment (the hirer has given notice to
owner to reinstate the agreement) (S. 17(1)).
 IF THE OWNER DISPOSE- CONTRAVENTION-
GUILTY (S. 17(2)).
RIGHTS OF HIRER AFTER REPOSSESSION
 1. WITHIN 21 DAYS- after receipt of 5th
Schedule
a) Require the owner to redeliver the goods.
 Hirer give a written notice to the owner
 Within 21 days- hirer may reinstate :
Pay arrears + interest (S. 19 (1) (a))
2) Pay remedy for breach of the agreement (S.19 (1) (b))
3) Pay any cost incurred by owner – repossession (S. 19
(1) (c))
4) Pay the cost of redelivery (s. 19 (1)(c))
1)
a) Require the owner to sell the goods to any
person introduced by the hirer who is
prepared to buy the goods for CASH..
 Sell by public auction:
a) The owner is required to serve the hirer a copy
of notice of such public auction not less than
14 days from the date of such public auction.
(s. 18 (4)(a)).
 Sell other than public auction:
a) The owner is required to serve the hirer an
OPTION to purchase the goods at the price he
intended to sell (s. 18 (4)(a)).
 Failure
 GUILTY