What is Hire Purchase Act of Nigeria?

Whether you’re a buyer, seller, or investor if you’re considering a hire purchase agreement in Nigeria, it’s crucial to understand your legal rights and responsibilities. One key part of the Hire Purchase Act of Nigeria is Section 9, which plays a major role in protecting consumers who enter into these types of agreements. In this blog post, we’ll explain what Section 9 of the Hire Purchase Act is, how it affects both the buyer and the owner (seller or financier), and why it’s important for anyone involved in hire purchase deals in Nigeria.

What is Hire Purchase?

A hire purchase is a type of payment agreement where a buyer takes possession of goods (like a car or generator) and pays for them in instalments. However, the ownership of the goods does not pass to the buyer until the final payment is made.

This payment method is common in Nigeria, especially in the automobile, electronics, and equipment sectors. It’s popular among people who can’t afford to pay the full amount upfront but still need to use the item immediately.

Hire Purchase Act in Nigeria

The Hire Purchase Act of Nigeria (1965) was created to regulate and protect the rights of both parties in a hire purchase agreement. It covers everything from how agreements should be documented to what happens when payments are missed. Section 9 is one of the most consumer-protective parts of the law.

What does Section 9 state?

Section 9(5) provides for the right of removal of the Hire Purchase goods by the owner. “Where one-half or more of the hire-purchase price has been paid or tendered by the hirer, the owner shall not enforce any right to recover possession of the goods otherwise than by action.” This means that if the buyer (hirer) has paid relevant proportion (at least 50%) of the total hire purchase price, the owner (seller/financier) cannot just come and seize the goods, they must go to court first to get approval before repossessing the item.

At first glance at section 9 of the Act, one may see the section as having relaxed the restricted right of repossession of goods after the payment of the relevant proportion, but a closer examination, especially the judgement handed down in Tabansi (Agencies) Ltd. v. Incar Nigeria Ltd (CCHJ//7/74), shows that it has not done away with the necessity of an owner to institute an action in such circumstances as a condition precedent for embarking upon the exercise of the right to repossess.

Quite apart from complying with this mandatory provision, an owner who is desirous of invoking section 9(5) in a situation where the hirer after paying the relevant proportion of the Hire Purchase price, decides to breach the agreement, is saddled yet with the following duties:

  1. He must keep the removed goods in his possession and protect them from damage or depreciation;
  1. Retain it pending the determination of any action; and
  2. He shall be liable to the hirer for any damage or loss which may be caused by the removal.
  3. Before an owner can exercise the right of repossession under section 9(5) of the Act or even file for an action against the hirer in court, the hirer must have defaulted in payment for the third time or any other conditions of the contract.

The owner has a right under the Act to recover possession without any restriction in the following circumstances;

  1. Where the hirer exercises his right to terminate the agreement;
  2. Where less than the relevant proportion of the Hire Purchase price has been paid; and
  3. Where the goods are in possession of any other person other than the hirer, this is because the common law rule Nemo dat quod non habet also applies in the Hire Purchase agreement.
  4. Section 9(2) of the Act provides for wrongful termination by the owner. Termination by the owner without complying with section 9 gives the hirer the right to terminate the contract and claim back his deposit and all his instalments payment.

Why is Section 9 Important?

Section 9 exists to protect buyers from being unfairly treated, especially after they’ve made some significant payments on a product.

1. It prevents Harassment

2. It encourages Fair Dispute Resolution

3. It protects Investments

In conclusion it should be noted that hire purchase contracts are both valid in common law and the act. Every hirer has a right to repossession as well as the owner.

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