Sunday, April 21, 2024

EVERYDAY LAW: Hire purchase agreement

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HIRE PURCHASE TRANSACTIONS in Barbados are governed principally by the Hire Purchase Act, CAP 328 of the Laws of Barbados.

Section 2 defines a hire-purchase agreement as “an agreement for the bailment of goods under which the bailee may buy the goods or under which the property in the goods will or may pass to the bailee . . .”.

Bailment refers to the act of delivering goods to another without the transfer of ownership. In the hire purchase transaction, possession of the goods is transferred to the hirer while the title to the goods remains with the owner.

It is only where the hirer exercises his option to purchase the goods by paying the full hire purchase price that ownership passes to the hirer.

Initially hire purchase arrangements were entirely regulated at common law under the wider law of contract.

As would be expected, they would contain conditions other than a strict agreement for hire purchase. These provisions would often be onerous on the hirer and favourable to the owner. Legislation was therefore required to ensure that the interest of the hirer was protected in this expanding area of consumer credit.

The Hire Purchase Act, which first came into effect in 1959, made certain provisions to regulate such agreements, among other things. For a hire purchase agreement to be effective it must comply with certain formal requirements set out in Section 4 of that act. Some of these conditions are discussed below.

Before a hire purchase agreement is entered into, the owner must state in writing to the prospective hirer the cash price. This provision is sufficiently complied with if the hirer has inspected the goods and the cash price is displayed by a label attached to the goods or displayed with the goods.

An owner cannot enforce a hire purchase agreement unless a note or memorandum of the agreement is signed by the hirer and by or on behalf of all parties to the agreement.

Moreover, for an agreement to be enforceable under Section 4 of the act, it must contain the following:

(a) a statement of the cash price and the hire purchase price of the goods;

(b) a statement of the amount of each instalment to be paid by the hirer and the date, or the mode of determining the date upon which each instalment is payable.

(c) a list of the goods to which the agreement applies, sufficient to identify them.

(d) a notice prominently displayed on the note or memorandum of agreement relating to the goods as required by the schedule to the Hire Purchase Act.

Right of hirer

The notice deals with the right of the hirer to terminate the agreement and the restriction of the owner’s right to recover goods where 66 2/3 per cent of the hire purchase price has been paid.

Under Section 13 of the Hire Purchase Act where 66 2.3 per cent of the hire purchase price has been paid, the owner is prohibited from enforcing the hire purchase agreement other than by court action.

Under the act the owner is also required to deliver or send a copy of the hire purchase agreement to the hirer at the address contained in the agreement within seven days of making of the agreement.

It should be noted, however, that under Section 4, where the parties fail to comply with certain of the above requirements and the hirer has not been prejudiced thereby, the court can still uphold the agreement if it considers it just and equitable.

The court’s discretion does not extend to the requirement of the statutory notice, the statement of the cash price and the hire purchase price, or the requirement that the hire purchase agreement be in writing.

A failure to comply with any of the above would render the agreement unenforceable by the owner.

• Cecil McCarthy is a Queen’s Counsel. Send your letters to Everyday Law, Nation House, Fontabelle, St Michael. Send emails to cnmcc@caribsurf.com.

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