Hire purchase agreements
Definition
Hire purchase agreements are
agreements whereby an owner of goods allows a person, the hirer, to hire goods
from him for a period of time by paying installments. The hirer has an option
to buy the goods at the end of the agreement if all installments are being
paid. This is not a contract of sale but contract of bailment as the hirer
merely has an option to buy the goods. Although the hirer has the right of
using the goods, he is not the legal owner during the term of the agreement.
Regulated agreement
Jasmine entered into a three-year
hire purchase contract (“the HPA”) with Dodgy Finance Limited (“DF”) to acquire
a new Mazda car (“the Car”) from Kwan’s Garage. Given that Jasmine is an
individual and DF is a creditor which provides Jasmine with a credit of
£25,000, the HPA is considered as a consumer credit agreement under section
8(1which provides a fixed-sum credit under section 10(1)(b] . It is also a
restricted-use credit agreement which falls under section 11(1)(a] . A
consumer credit agreement is a regulated agreement within the meaning of
section 189(1).
As the HPA falls within section
11(1)(a), it is a Debtor-creditor-supplier agreement under s12(a) ] .
It can be further categorized as a two-party debtor-creditor-supplier
agreement. DF bought the Car then hired it to Jasmine under the HPA. DF acts
both as the suppliers of the credit and Car. Therefore, there are in reality
only two parties, namely, Jasmine being the debtor and DF being the suppliers
of the credit and Car.
Improper execution
We will look into the scenario and
elaborate the relevant issues which may lead to any potential improper
execution of the HPA.
DF shall give Jasmine a copy of the
HPA in accordance to section] , together with a statement signed by or on
behalf of him, showing the payment details under the agreement, whether paid or
unpaid. Jasmine requested for a settlement figure and a copy of the original
HPA and DF refused to do so. DF is in breach of section 77(1) which would not
be entitled to enforce the HPA while the default in payment continues according
to section 77(4)(a). Jasmine should be noted that DF is entitled to inform the
credit reference agencies of the breach of such provision and the HPA would
become enforceable again once DF complies with such provision.
Jasmine did not remember whether she
had received a copy of the HPA when it was made. If the HPA was presented
personally to Jasmine unexecuted for her signature, a copy should be given to
her according to section 62(1) and a further copy of the executed HPA shall be
delivered to her within seven days after such agreement was made under section
63(2). If the HPA was sent to Jasmine unexecuted for her signature, a copy of
the same shall be sent to her at the same time according to section 62(2) but
no further copy is required under section 63(2)(b). On the other hand, if the
HPA had become executed when Jasmine signed it, a copy of the same must be
there and then delivered to her under section 63(1).
A failure to comply with the requirements
abovementioned would make the HPA an improperly-executed regulated agreement,
which would only be enforceable against the hirer on an order of the court
(section 65(1)). It is important to note that section 127(1)(a) stipulates that
an application for an enforcement order under section 65(1) shall be dismissed
unless the court considers it just to do so.
Jasmine’s breach of HPA
It can be assumed that DF relied on
sections 87(1)(b) and/or (c) to demand earlier payment and/or recover
possession of the Car. A default notice shall contain all of the
information as set out under the Consumer Credit (Enforcement, Default and
Termination Notices) Regulations 1983 to become effective.
Jasmine received a default notice
from DF which fails to include the necessary information. Such notice is,
therefore, likely to become ineffective (Woodchester Lease Management Services
Ltd v Swain & Co .Jasmine could accordingly disregard such notice.
Jasmine had paid to DF over
one-third of the total price of the Car given that she had managed to maintain
the monthly payments for the first two years of the three-year HPA. In addition
to the fact that the property of the Car remains in DF, this would have
fulfilled the requirements stated under section 90, which DF is not entitled to
recover possession of the Car from Jasmine except on an order of the court.
Therefore, if for any reasons DF recovered the Car from Jasmine, it would be in
contravention of section 90. The HPA shall be terminated and Jasmine shall be
released from all liability under the agreement and entitled to recover from DF
all sums paid by Jasmine under the HPA.
Remedies
Although the HPA is likely to be an
improper-executed agreement, Jasmine should still look at the alternatives to
remedy any defects of the HPA.
Early Settlement
Given that Jasmine’s wealthy brother
may be willing to settle the account for her, she may consider making the full
payment (an amount after deducting the rebate allowed under section 95) to DF
which would discharge her indebtedness under the agreement under section 94.
Time Order
The alternative way would be for
Jasmine to apply for a time order from the court under section 129. With a time
order, the court may allow more time for Jasmine to make payments to DF under
section 129(2)(a) or to remedy any breach of the HPA under section 129(2)(b).
One must be served with an enforcement order, default notice or notice of
arrears before she can apply for a time order. If the default notice sent to
Jasmine from DF is considered to be ineffective, and there are no enforcement
order or other notices of arrears applied by DF, Jasmine cannot apply for a
time order.
Termination of HPA
Jasmine may terminate the HPA
according to section 99 which governs the right to terminate hire-purchase etc.
agreements. This can be done at any time before the last installment is made
(section 99(1)) given that half of the total price of the Car has been paid
(section 100(1)). Jasmine would be allowed to terminate the HPA as she had
already paid for two-third of the Car price. The advantage of Jasmine
terminating the HPA is to limit the amount she owes. If DF terminates the HPA
at a later time, Jasmine may end up owing more. However, it is advised that
Jasmine should only terminate the HPA shall she be no longer available to
afford the payment of the Car as Jasmine would be unable to get refund for the
excess of one-half of the payment which she had already made.
Breach of implied terms
The HPA contains implied terms as to
the quality or fitness of goods under section 10 Sale of Goods (Implied Terms)
Act 1973. Given that the Car had never run properly which requires engine
repairs regularly, Jasmine may rely on the implied term to sue DF for the
breach of condition of the HPA. Should the claim be successful, Jasmine would
have the right to reject and claim damages from DF.
Unfair
relationship/misrepresentation
Section 140A(1) Consumer Credit Act
2006 provides that an unfair relationship may arise by virtue of the terms of
an agreement, the ways in which enforcement is being carried out, or anything
else. When an unfair relationship exists between a creditor and debtor arising
out of an agreement, the court may make an order under section 140B Consumer
Credit Act 2006.
If it is true that Jasmine had a
poor credit record, the court might not consider the APR at our present case to
be unfair to her. However, if what DF claimed (a high APR rate was given to
Jasmine due to her poor credit record) was for the purpose of inducing Jasmine
to enter into the HPA, it may amount to misrepresentation (See Horsfall v
Thomas .if it is a false statement of fact made by DF. A statement of
opinion by someone in a position to know the facts is regarded as a statement
of fact . The fact that DF is a finance company which requires knowledge
about the industry APR may indicate that it is making a misrepresentation when
it said “the best deal in town” to Jasmine if such statement is found to be
untrue rather than a mere puff. Jasmine may be able to claim damages as a
consequence of a fraudulent misrepresentation made.In relation to the
non-compliance of section 78; it is unlikely that Jasmine can make a claim for
an unfair relationship within the meaning of s.140A.
Definition
A conditional sale agreement usually
includes a condition which states that the property in the goods does not
belong to the buyer until the last payment of installment is made to the
seller. It is similar to hire purchase agreement, but the difference is that
the hirer has an option to buy the goods, whereas in a conditional agreement,
he has an obligation to buy the goods.
Regulated agreement
Jasmine acquired an in-car tracker
system from AX Limited, financed by way of a conditional sale agreement (the
“CSA”) through High Rate Finance Limited (“HR”) at a flat rate of 37%. Given
that Jasmine is an individual and HR is a creditor which provides Jasmine with
credit, the CSA is considered as a consumer credit agreement according to
section 8(1) which provides a fixed-sum credit according to section 10(1)(b).
It is further considered as a restricted-use credit agreement which is a
regulated consumer credit agreement under section 11(1)(a).
As the CSA falls within section
11(1)(a), it is a two-party Debtor-creditor-supplier agreement under section
12(a). HR bought the tracker system then sold it to Jasmine under the CSA. HR
acts both as the supplier of the credit and tracker system. Therefore, there
are only two existing parties, namely, Jasmine being the buyer and HR being the
suppliers of the credit and tracker system.
The sales person of AX Limited
confirmed with Jasmine that the tracker system was suitable for use in any
other European country which was found to be untrue. Jasmine could sue HR to
stop payments as AX Limited made such confirmation (statement made by the
salesperson of AX Limited) as the agent of HR according to section 56(2). In
the present case, should HR sues Jasmine for any default payment, Jasmine could
simply counterclaim.
Remedies to HR
Default Notice
HR is very likely to serve Jasmine
with a default notice under section 87(1) giving Jasmine fourteen days upon
receipt of the same to pay the arrears. Shall Jasmine fails to pay the arrears
within the stipulated period, HR is then permitted to terminate the CSA; demand
earlier payment of any sum; recover possession of the tracker system, etc.
Remedies to Jasmine
Early Settlement
Similar to the purchase of the Car,
Jasmine may consider making the full payment to HR which would discharge her
indebtedness under the CSA.
Time Order
Since Jasmine has received neither a
default notice nor notice of arrears from HR, she cannot apply for a time order
according to section 129 to make a request to extend the time of payment and/or
to remedy any breach of the CSA.
Termination of CSA
Jasmine would be allowed to
terminate the CSA if it is satisfied that the last installment is yet to be
made (section 99(1)) and that half of the total price of the tracker system has
already been paid (section 100(1)).
Unfair relationships
Lara McMurtry claimed that the
meaning of “unfairness” is vague and has not been elaborated. The court should
not look merely at the term which is of importance, but also the impact of the
term. Further information is required before further assumptions can be made as
the 37% flat rate of the tracker system under the CSA might not be unfair to
Jasmine. The court would take into consideration the terms of the agreement,
the way in which the claimant has exercised his rights under the agreement and
the other acts and omissions of the claiman
The concept of bailment generally
Introduction
The purpose of this paper is to explore the role that bailment plays in relation to carriage of goods matters. In the modern context, goods are required to be carried across jurisdictional borders and by various modes of transport. As a result a significant amount of legislation and international law has developed on this issue and, often, the concepts of choice of law and conflict of laws are often relevant. Bailment is a principle which has its roots firmly entrenched in English common law, and therefore can only be relied upon when the jurisdiction of the English court is invoked. The scope of this paper is, therefore, to explore the role that bailment plays in carriage of goods matters where the jurisdiction of the English courts is so invoked. In doing so, it is important to this paper to attempt to discuss the general concept of bailment, the general principles associated with carriage of goods, how these two issues tied together and finally whether this is consistent with jurisdictions outside of the United Kingdom.The Concept of Bailment Generally
Bailment is not a concept that is new to English common law. Rather it is a principle which is firmly entrenched in English property and contract law. It has been recorded as early as the seventeenth and eighteenth centuries in cases in these areas of law. The most significant and well-known of these cases would be the case of Coggs v Bernard , where Holt CJ sought to define the concept of bailment in arguably its most comprehensive form:And there are six sorts of bailments. The first sort of bailment is, a bare naked bailment of goods, delivered by one man to another to keep for the use of the bailor; and this I call a depositum, and it is that sort of bailment which I mentioned in Southcote's case (1601) Cro Eliz 815.
The second sort is, when goods or chattels that are useful, are lent to a friend gratis, to be used by him; and this is called commodatum , because the thing is to be restored in specie .
The third sort is, when goods are left with the bailee to be used by him for hire; this is called locatio et conductio, and the lender is called locator , and the borrower conductor .
The fourth sort is, when goods or chattels are delivered to another as a pawn, to be a security to him for money borrowed of him by the bailor; and this is called in Latin vadium, and in English a pawn or a pledge.
The fifth sort is when goods or chattels are delivered to be carried, or something is to be done about them for a reward to be paid by the person who delivers them to the bailee, who is to do the thing about them.
The sixth sort is when there is a delivery of goods or chattels to somebody, who is to carry them, or do something about them gratis, without any rewards for such his work or carriage, which is this present case. I mention these things, not so much that they are all of them so necessary in order to maintain the proposition which is to be proved, as to clear the reason of the obligation, which is upon persons in cases of trust.
In light of the above, it is clear
to see the concept of bailment can relate to everyday scenarios which one might
encounter whereby possession of property is transferred; however the ownership
of the property remains unchanged. Perhaps the most common illustrative example
of bailment operating would be when a person hands their car to a valet to park
it, naturally fully expecting to receive it back at some point. This differs
considerably from, for example, a car park where the person uses a particular
space in the car park under licence from the proprietor and on such terms and
conditions as may be agreed between the parties.
Not all academics and scholars tend
to agree that bailment is a useful concept in relation to contract and property
law. In fact one scholar has even gone as far as saying that bailment has done
more harm than good in a commercial sense. It has even been likened to
stultifying the development of a rational law of personal property, acting as
an unnecessary straitjacket, having no autonomous legal content, and that it is
a principle that is contextual rather than conceptual. However this may in fact
be incorrect, as there has been much case law on the concept of bailment and
its importance in a commercial environment. As such one particular academic has
sought to redefine bailment as:
A bailment occurs when a person (the
bailor), having the legal right to exclusive possession of a chattel, exercises
a legal power by performing an act or action prescribed by law thereby
intentionally (emphasis added) conferring the legal right to exclusive
possession of that chattel upon another person (the bailee) and concurrently
intentionally conferring upon itself the reversionary interest in that chattel.
It is important at this point to
isolate the key terms of the above definition, and recognise their importance
to the operation of the doctrine of bailment. First of all a bailor must have
the legal right to exclusive possession of the particular chattel in question
and also has the ability to confer the legal right of exclusive possession to
the bailee. Next a bailor must exercise a legal right by performing 'an act',
and the law generally prescribes what acts are legal and illegal to perform in
this regard. The bailor is also entitled to expect to receive the item back
from the bailee either after the effluxion of time or after the performance of
a contingency or conditions. Finally, and perhaps most importantly, the bailor
must have either a factual or apparent intention to confer such legal rights
upon the bailee, that is to have the "power and intent to ‘exclude
unauthorised interference'. That is effectively the English law concept of
possession".
The theory therefore is that once
the above tests have been satisfied, a bailment exists. The bailment which does
exist will generally take the form of one of the six types defined in the Coggs
case and, on face value, one can see how such an important doctrine in relation
to goods and chattels can apply in situations where legal principles applicable
to carriage of goods and the like. It is perhaps important now to discuss the
general scope of English law in relation to carriage of goods by sea and air,
so that this paper can appropriately discussed how the two issues interrelate
with one another.
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