Analyzing the Legality of 'Continue to Pay' Arrangement in Hire Purchase Agreements
Added on 2023-06-15
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Business Law Assignment
Question based assignment
07-Feb-18
(Student Details: )
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Business Law Assignment
Question based assignment
07-Feb-18
(Student Details: )
Business Law Assignment
Question 1
Often it happens that a person wants to purchase a car, but the price of the car holds the
person back. Conventionally, the hire purchase financing is deemed as a type of financial facility
which is looked at in such situations and in order to get the car, the instalments are made where
the lump sum payment is not possible. Hire purchase arrangements commonly are deemed as car
loan (iMoney Editorial, 2012). When an individual takes up the hire purchase financing, the
individual becomes the hirer and the party which lends the money becomes the owner. The hire
purchase transactions in the nation are governed through the Hire Purchase Act, 1967 (HP Act)
(Denning, 2015). This act is relevant in terms of establishing the lawful duties and rights of the
hirer and the owner. Based on this act, both the hirer and owner are bound by the hire purchase
agreement and also to the procedures which are stated under the governing act. Though, there
have been cases where the hirer, upon becoming incapable in financial manner, often seeks help
from a third party for covering for them in arrangements known as “continue to pay”. This
discussion analyses the legality of this practice, and aims at providing better solutions in such
situations to the hirers.
Under the HP Act, hire purchase has been defined as letting of the goods where the
option is given to purchase and the agreement for buying the goods through the instalments is
given. However, this does not include the property in which the goods pass the time of
agreement or at any time before the goods are delivered. This also does not include the
agreements through which the individual through whom the goods are purchased or hired is an
individual who is engaged in business or trade of making sale of goods of similar description or
nature as the goods covered under the agreement. Through these provisions, the outright sale is
Page 2
Question 1
Often it happens that a person wants to purchase a car, but the price of the car holds the
person back. Conventionally, the hire purchase financing is deemed as a type of financial facility
which is looked at in such situations and in order to get the car, the instalments are made where
the lump sum payment is not possible. Hire purchase arrangements commonly are deemed as car
loan (iMoney Editorial, 2012). When an individual takes up the hire purchase financing, the
individual becomes the hirer and the party which lends the money becomes the owner. The hire
purchase transactions in the nation are governed through the Hire Purchase Act, 1967 (HP Act)
(Denning, 2015). This act is relevant in terms of establishing the lawful duties and rights of the
hirer and the owner. Based on this act, both the hirer and owner are bound by the hire purchase
agreement and also to the procedures which are stated under the governing act. Though, there
have been cases where the hirer, upon becoming incapable in financial manner, often seeks help
from a third party for covering for them in arrangements known as “continue to pay”. This
discussion analyses the legality of this practice, and aims at providing better solutions in such
situations to the hirers.
Under the HP Act, hire purchase has been defined as letting of the goods where the
option is given to purchase and the agreement for buying the goods through the instalments is
given. However, this does not include the property in which the goods pass the time of
agreement or at any time before the goods are delivered. This also does not include the
agreements through which the individual through whom the goods are purchased or hired is an
individual who is engaged in business or trade of making sale of goods of similar description or
nature as the goods covered under the agreement. Through these provisions, the outright sale is
Page 2
Business Law Assignment
excluded as the ownership is transferred to the buyer only after sale, and the dealer/ seller cannot
be the very same party. Thus, in the simplest of terms a hire purchase agreement covers letting
go of goods by owner to “hirer” with the option of making the purchase given to hiring party,
and the agreement to this person for buying the goods through instalments (IIUM Repository,
2010)..
In the normal contract of purchase and sale, once the contract is completed the property
which is held in such goods, would be passed on to the purchasing party. Though, when it comes
to the contract of hire purchase of property, the ownership of goods or the goods are not passed
on delivery of goods or at the time of arrangement. The reason for this is due to the presence, in
these agreements, of the dealer or the seller who undertake the deal with purchasing party.
Where an agreement is attained with the purchaser for purchasing of the goods, the seller or the
dealer would require the purchasing party to approach financier. As a result of this, the dealer or
seller would make sale of the goods to financier. The financier is the owner of goods who hires
the goods under the terms of hire purchase to the purchaser. Hence, when it comes to the hire
purchase transactions, there is involvement of three key parties, the hirer, the dealer and the
financier, who is the owner (IIUM Repository, 2010).
A recent trend has been seen in the hire purchase agreements is that when the hiring party
becomes incapable in financial terms, to pay the instalments, they undergo an arrangement with a
third party, for covering the arrangement, and this is generally referred to as continue to pay.
However, this is not the right approach. This is because the hire purchase agreement takes place
between the hiring party and the owner. Each party has been given certain rights. And where
these rights are not fulfilled, the aggrieved party gets the option of making the claim against the
other party for not fulfilling the terms of the hire purchase agreement. To put it more clearly, the
Page 3
excluded as the ownership is transferred to the buyer only after sale, and the dealer/ seller cannot
be the very same party. Thus, in the simplest of terms a hire purchase agreement covers letting
go of goods by owner to “hirer” with the option of making the purchase given to hiring party,
and the agreement to this person for buying the goods through instalments (IIUM Repository,
2010)..
In the normal contract of purchase and sale, once the contract is completed the property
which is held in such goods, would be passed on to the purchasing party. Though, when it comes
to the contract of hire purchase of property, the ownership of goods or the goods are not passed
on delivery of goods or at the time of arrangement. The reason for this is due to the presence, in
these agreements, of the dealer or the seller who undertake the deal with purchasing party.
Where an agreement is attained with the purchaser for purchasing of the goods, the seller or the
dealer would require the purchasing party to approach financier. As a result of this, the dealer or
seller would make sale of the goods to financier. The financier is the owner of goods who hires
the goods under the terms of hire purchase to the purchaser. Hence, when it comes to the hire
purchase transactions, there is involvement of three key parties, the hirer, the dealer and the
financier, who is the owner (IIUM Repository, 2010).
A recent trend has been seen in the hire purchase agreements is that when the hiring party
becomes incapable in financial terms, to pay the instalments, they undergo an arrangement with a
third party, for covering the arrangement, and this is generally referred to as continue to pay.
However, this is not the right approach. This is because the hire purchase agreement takes place
between the hiring party and the owner. Each party has been given certain rights. And where
these rights are not fulfilled, the aggrieved party gets the option of making the claim against the
other party for not fulfilling the terms of the hire purchase agreement. To put it more clearly, the
Page 3
Business Law Assignment
owner is given the right that where the hirer makes a default in the payment of the instalment
amount, the owner gets some rights in such situations. These rights are provided through the HP
Act.
Under section 19 of this act, the owner has been given the right to end the hire purchase
agreement where a default in payment of the hire is made or where there is an unauthorized act,
or where the express conditions are breached. As soon as the hirer defaults in one payment of the
hire, as was covered under the hire purchase agreement, then based on provisions covered under
section 21, and after providing the notice in writing to the hirer of a week, where the hire
becomes payable in weekly manner or for lesser duration, and in any other case of two weeks,
the owner gets the entitlement to terminate the hire purchase agreement by giving a notice of
termination to the hirer in writing (CommonLii, 2006a). Under section 20 of the HP Act, the
owner is given the right of termination. This provides that when the hire purchase agreement is
terminated, the owner becomes entitled to retaining of hire which is already paid and for
recovering the arrears of hire due (Global Law, 2018).
Now, where the hirer takes help of a third party, for making the payments to the owner,
the rights of the owner given under the HP Act are not fulfilled. This not only breaches the rights
of the owner, but also is a breach of the obligations of the hirer. The hirer, under the HP Act, is
under the obligation of complying with the hire purchase agreement. Where this is not done, the
consequences covered under the hire purchase have to be applied for breaching the obligation of
the hirer. There is also an obligation on the hirer of taking care of the goods and where this is not
done, again the consequences stated under the hire purchase agreement are applicable. The use of
the goods also results in obligations being raised for the hirer, where the same is not done based
on the hire purchase goods. There is also the need for the hirer to give the information regarding
Page 4
owner is given the right that where the hirer makes a default in the payment of the instalment
amount, the owner gets some rights in such situations. These rights are provided through the HP
Act.
Under section 19 of this act, the owner has been given the right to end the hire purchase
agreement where a default in payment of the hire is made or where there is an unauthorized act,
or where the express conditions are breached. As soon as the hirer defaults in one payment of the
hire, as was covered under the hire purchase agreement, then based on provisions covered under
section 21, and after providing the notice in writing to the hirer of a week, where the hire
becomes payable in weekly manner or for lesser duration, and in any other case of two weeks,
the owner gets the entitlement to terminate the hire purchase agreement by giving a notice of
termination to the hirer in writing (CommonLii, 2006a). Under section 20 of the HP Act, the
owner is given the right of termination. This provides that when the hire purchase agreement is
terminated, the owner becomes entitled to retaining of hire which is already paid and for
recovering the arrears of hire due (Global Law, 2018).
Now, where the hirer takes help of a third party, for making the payments to the owner,
the rights of the owner given under the HP Act are not fulfilled. This not only breaches the rights
of the owner, but also is a breach of the obligations of the hirer. The hirer, under the HP Act, is
under the obligation of complying with the hire purchase agreement. Where this is not done, the
consequences covered under the hire purchase have to be applied for breaching the obligation of
the hirer. There is also an obligation on the hirer of taking care of the goods and where this is not
done, again the consequences stated under the hire purchase agreement are applicable. The use of
the goods also results in obligations being raised for the hirer, where the same is not done based
on the hire purchase goods. There is also the need for the hirer to give the information regarding
Page 4
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