Case Summary
Suka Jual Sdn Bhd sells sewing machines on both cash terms and on hire-purchase. Tina, a fashion designer student at Good College bought a new sewing machine from Suka Jual Sdn Bhd on hire purchase. However, after she had signed the document and paid RM200 as deposit, Tina did not get any document from Suka Jual Sdn Bhd as the sales person told her that the hire purchase agreement will be posted to her. Upon reaching home, Tina used the new machine to sew a new silk shirt for her college’s project. However, instead of sewing the pieces of silk cloth together, the sewing machine merely made holes in the cloth.
Returning the sewing machine and claiming back the deposit
A hire purchase agreement is defined under Section 2(1) of the Hire-Purchase Act, 1967. According to the mentioned section, hire purchase means that goods are given to the party that is hiring, who is given an option to purchase them. The payment of the goods is made in installments. The title passes to the party that is hiring when they exercise the option to purchase. However, any agreement that suggests that property in the form of goods is to pass upon delivery is considered unlawful. Secondly, an agreement whereby the person who is letting out the goods deals with the same class of goods is considered unlawful. The First Schedule to the Hire Purchase Act gives the classes of goods that can lawfully form part of the hire purchase agreement. All consumer goods and types of vehicles are mainly goods that form part of the hire purchase agreement. The common law classification of goods supplements the list if the hire purchases goods that do not fall under the First Schedule to the Hire Purchase Act. This also emphasizes the fact that the principles of common law are important in the interpretation of hire purchase agreements. Under common law, the definition of hire purchase is to the effect that the buyer hires the goods for a price with an option of purchasing the goods or terminating the agreement. The agreement is treated as terminated upon the return of the goods. However, the purchaser becomes the lawful owner and not a hirer if he exercises the option of buying.
A hire purchase agreement has several clauses that make it valid before the law. These clauses are in respect to the conditions and warranties that govern the transaction. It is upon the parties in the agreement to agree on the specific forms of agreements that form part of the warranty and the conditions. The making of the hire purchase agreement entails a post-contractual agreement, as well as pre-contractual conditions. The pre-contractual obligations are in regard to the hire purchase contracts. Section 4(1) of the Hire Purchase Act, 1967 stipulates that the owner of the goods is under an obligation to give a prospective hirer a written statement that must comply with the Act. The statement must contain a clear description of the goods as well as a summary of the financial obligations of the hirer. Section 4(3) provides that the preparation of the statement must be from the owner of the goods and not the hirer because the hirer is not obliged to enter into a transaction. Failure to observe the above requirements leads to the agreement being void before the eyes of the law. The hirer must be clearly notified about the obligations that he is expected to adhere to. The hirer must choose to enter into the agreement upon being clearly informed about the several obligations that are expected of him. There are post-contractual agreements that the owner and the hirer are expected to enter into. The agreements are provided under Section 5(1) of the Hire Purchase Act 1967. The section requires that a copy of the hire purchase agreement should be sent to the hirer and the guarantors. This should be done within fourteen days upon the making of the contract. Failure to observe the said clause leads to the contract being unenforceable by the owner. It is clear that the Hire Purchase Act protects the hirers by giving them some of the rights that they ought to exercise. This is premised on the notion that many hire purchase companies are powerful (Tomasic, 2006).
There are conditions that are considered important by law and must be stipulated in the contract in the Hire Purchase agreement. They include the implied and the express conditions. The owner of the goods has the right to sell the goods under Section 7(1) (b). This should be done at the time when the property passes hands. This is common during the completion of the hire agreement when the hirer exercises the right to buy the goods. Under Section 7(2) of the Hire Purchase Act, the goods let must be of merchantable quality. However, the limitation to implied merchantable quality is provided where the hirer has had an opportunity to examine the goods. This could be the goods or any other sample that ought to have disclosed certain defects. The implied condition does not apply if the hirer is aware that the goods in the transaction are second-hand. Lastly, the limitation is applicable if the hirer acknowledges that the statement in writing was brought to his attention. Under Section 7(3) of the Hire Purchase Act, the goods must be fit for the purpose that the hirer intended (Venardos, 2012). This is the case in all agreements of hire purchase, except where the two parties expressly choose to exclude some of the implied conditions. The exclusion of the terms is a matter of the exercise of contractual freedom. On the other hand, there are implied warranties that the two parties ought to observe. To start with, the hirer must enjoy quiet possession of the goods. Under Section 7(1) (a), the hirer of the goods enjoys quiet possession without any interference from both lawful and unlawful acts of third parties. Secondly, the goods should be free from encumbrances (Sundaram & Wong, 2008).
The main distinction between warranties and conditions in the above discussion is established in connection to the effects upon breach. A breach of a warrant entitles one to damages, while the breach of a condition may lead to the repudiation of the contract by the innocent party since it goes to the root of the contract. In the given facts, Tina has entered into a hire purchase agreement of a sewing machine with Suka Jual Sdn Bhd. However, the sewing machine is defective in the sense that it is not fit for the purpose she desired. She hired the machine to sew, but it was making holes in the clothes. The machine was new. Thus, the owner is in breach of a condition since the machine is not fit for purpose. Failure of the owner of the goods to give her a document that she executed the purchase does not defeat her rights. Tina is entitled to the deposit that she paid since the machine does not serve the purpose she intended. She can further sue for damages. Under Section 7(3) of the Hire Purchase Act, she has a right to get goods that are of merchantable quality. In some instances, the hirer may treat the contract as repudiated or the breach of a condition as a breach of a warranty. In the strict sense, a breach of a condition terminates the contract. In this case, Tina is entitled to her deposit.
References
Sundaram, J. K., & Wong, N. S. (2008). Law, institutions, and Malaysian economic development. Arts Link, Singapore: NUS Press.
Tomasic, R. (2006). Insolvency law in East Asia. Aldershot, England: Ashgate.
Venardos, A. M. (2012). Islamic banking and finance in South-East Asia: Its development & future. Toh Tuck Link, Singapore: World Scientific Publishing Co. Pte. Ltd.