Business Law

Topics: Hire purchase, Contract, Closed-end leasing Pages: 7 (1911 words) Published: November 19, 2012

a) Sam is a successful second hand dealer. He decides to reward his staff buys buying a fridge and a microwave oven for their use. He wants to enter into a hire purchase agreement to help him finance the two goods. Advise Sam whether these goods will be covered by the Hire Purchase Act 1967?

The issue in this case was whether those goods fridge and microwave will be covered by the Hire Purchase Act 1967.

Hire purchase is a system of acquiring good on goods on credit whereby the seller of the goods is regarded as the dealer, the purchaser is regarded as the hirer and the financier as the owner. In this situation, Sam is the hirer that because decided to purchased goods under hire purchase.

The ownership of the goods bought on hire purchase does not pass to the hirer at the time of the hire purchase agreement or upon delivery of the goods. The ownership of the goods remains in the financier until the hirer has fully settled the price agreed upon in the hire purchase agreement.

Hire purchase is commonly carried out in the form of a triangular transaction. The dealer/seller/vendor sells the goods to the financier, which becomes the owner, in return for an immediate payment, which is the cash price less deposit paid by the buyer/consumer, known as the hirer. The owner then hires the goods to the hirer under a hire purchase agreement.

Hire Purchase Transaction

Hire Purchase Act 1967 is an act to regulate the form and contents of hire-purchase agreements and the rights and duties of parties to such documents. The act is under the jurisdiction of the Ministry of Domestic Trade and Consumer Affairs. It does not set down any licensing requirements but provides for the regulation of hire purchase activities relating to scheduled goods.

According to section 2 of the Hire Purchase Act, hire purchase includes a letting of goods with an option to purchase and an agreement for the purchase of goods by installments (whether the agreement describes the installment as rent or as hire or as otherwise), but does not include any agreement:

a) Whereby the property in the goods passes at the time of the agreement or upon or at anytime before delivery of the goods, or b) Under which the person by whom the goods are being hired or purchased is a person who is engaged in the trade or business of selling goods of the same nature or description as the goods comprised in the agreement.

Based on the above, subsection (a) seeks to exclude outright sale (ownership transfers to buyer upon sale). Likewise, a dealer cannot finance his stock under hire purchase as the owner and hirer cannot be the same person.

Only the following goods can be bough on hire purchase.

Definition of scheduled goods
Hire Purchase Act 1967 (Act Goods as per First Schedule of the Act)

• All consumer goods (goods purchased for personal, family and household purposes) and • Motor vehicle namely
➢ Invalid carriages
➢ Motor cycles
➢ Motors cars including taxi cabs and hire cars
➢ Goods vehicles where the maximum permissible laden weight does not exceed 2540 kilograms and ➢ Buses, including stage buses.

“Consumer goods” is defined in section 2(1) to mean “goods purchased for personal, family and house hold purposes”. In consequence, goods (other than motor vehicles) which would normally be regarded as consumer goods but purchased for business purposes or use, such as for consumption in the office, are excluded from the Act. However, these appear to be an inconsistency. While section 1(2) declares that the Act applies ‘in respect only of hire purchase agreement relating to goods specified in the First Schedule’, section 4(1) mentions hire purchase agreement’ in respect of any goods’. Is this an oversight in drifting or is section 4 intended to bind hire purchased agreement ‘in respect of any goods’? To avoid the inconsistency, one approach would be...

References: Beatrix Vohrah and Wu Min Aun, The Commercial Law of Malaysia, 2nd Edition, Longman
Lee Mei Phang, General Principle of Malaysian Law, 5th Edition, Oxford Fajar
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