Hire Purchase Law

Topics: Contract, Contract law, Hire purchase Pages: 12 (3631 words) Published: May 14, 2012


Hire Purchase Agreements under which Hire-purchase price does not exceed the sum of four million shillings (4,000,000/=) or such other higher or lower sum as the Minister may, after taking into account market forces from time to time prevailing, prescribe". -

A person who wants to buy goods, but does not have sufficient monetary consideration as the price may enter into an agreement with the owner of goods, so that the owner may hire the goods to him with a view of finally purchasing them. In this case, the owner allows the hirer to take immediate possession and custody of the goods after which the hirer pays periodic instalments. At common law a hire purchase agreement is defined as a contract for the delivery of goods under which the Hirer is granted an option to purchase the goods. The agreement is a hybrid form of contract in that it is neither a simple bailment nor a contract of sale but combines elements of both. The Kenyan Hire Purchase Law is governed by the principles of the English common law as modified by the Hire Purchase Act Cap. 507 of the Laws of Kenya. The late J. M. Kariuki sponsored this bill as a private member bill in 1968. It however came into operation from the 2nd November 1970. It was based on the English Hire Purchase Act 1965. The preamble of Cap. 507 states that it is ’ an Act of Parliament to make provisions for the regulation of certain hire-purchase agreements, and for the licensing of hire-purchase concerns, and for the purposes connected herewith’ These ‘certain hire-purchase agreements’ are stated in Section 3 to include:- Hire-purchase agreements entered into after the commencement of the Act.

Where the hirer is not a body corporate. An agreement which is not a scheme controlled, managed or guaranteed by the Government for the purpose of providing loans to any persons for the purchase of motor vehicles.

Owner: - This is a person who lets or has let goods to a hirer under a hire-purchase agreement. Hirer: - This is a person who has taken goods from an owner under a hire purchase agreement. Odiwuor Kelly – B.Com (Acc. & Aud. Option), L.L.B (Crim., Ban. & Ins. Option), Dip-Law (KSL) Advocate/Lecturer – 0721 438511 / 0734 438511 / 020 2242206 / http://www.oakadvocates.co.ke / odiwuork@oakadvocates.co.ke


Contract of Guarantee: - This is a contact made at the express or implied request of the hirer to guarantee the hirer’s performance of his obligations under a hire-purchase agreement. Hire-Purchase Price: - This is the total amount payable by the hirer for property in the goods to pass to him. It includes any deposit paid. Hire-purchase agreement: - this is ‘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’. A hire-purchase agreement therefore means an agreement under which goods are let on hire and hirer has option to purchase them according to the conditions of the contract. It includes an agreement under which possession of goods is delivered to hirer and the hirer can use the goods and terminate the agreement at any time.

Like every other contract the hire-purchase agreement is regulated by general principles of law of contract e.g. there must be an offer and acceptance, the parties must have capacity to contract, there must be valuable consideration etc. Under a hire-purchase agreement, the hirer agrees to pay for the goods in instalments. On signing the agreement the hirer can take possession of the goods and use them. However, ownership of the goods remains with the owner until the hirer pays final instalment. Hire purchase is therefore a bailment compounded with an option to purchase. If the hirer fails to pay any instalment, the owner has a right to repossess the goods and the hirer will have no right to claim the instalment already paid. Such instalments paid will...
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