Question

(WomenPower Ltd (WPL) sells sewing machines on hire-purchase. Mrs. Siti, a
housewife bought a brand-new sewing machine from WPL on hire-purchase. Upon
receiving the machine, Mrs. Siti tried sewing a dress for her daughter. The machine
actually made holes on the cotton cloth and she could not continue sewing the
dress.)

1. (Advise Mrs. Siti as to her rights under the hire-purchase law.)

2. (Define a hire-purchase agreement and the formation of the agreement under the
Malaysian hire-purchase law.)

3. (Analyse the fundamental differences between a hire-purchase sale and conditional
sale under the hire purchase law.)

Answer 1

1) Rights under the hire-purchase law of Mrs. Siti

• To receive a copy of Hire purchase agreement
• To obtain any information regarding the account
• To request statement of outstanding balance
• to terminate the agreement any time
• to settle early the full outstanding amount.

2)LAWS OF MALAYSIA

Act 212

HIRE-PURCHASE ACT 1967

An Act to regulate the form and contents of hire-purchase agreements and the rights and duties of parties to such agreements. [11 April 1968, P.U. (B) 150/1968]

FORMATION AND CONTENTS OF HIRE-PURCHASE

AGREEMENTS

Requirements relating to hire-purchase agreements

4. (1) Before any hire-purchase agreement is entered into in respect of any goods--

(a) in a case where negotiations leading to the making of the hire-purchase agreement is carried out by any person who would be the owner under the hire-purchase agreement to be entered into, or by any person, other than the dealer, acting on his behalf, such person shall serve on the intending hirer a written statement duly completed and signed by him in accordance with the form set out in Part I of the Second Schedule;

(b) in a case where negotiations leading to the making of the hire-purchase agreement is carried out by a dealer, such dealer shall--

(i) serve on the intending hirer a written statement duly completed and signed by him in accordance

with the form set out in Part I of the Second Schedule; and

(ii) at any time after the service of the written statement referred to in subparagraph (i) but before the hire- purchase agreement is entered into, serve on the

intending hirer a written statement duly completed and signed both by him and the prospective owner

in accordance with the form set out in Part II of the Second Schedule.

(2) The written statements referred to in subsection (1) shall be served by delivering it in person to the intending hirer or his agent who shall acknowledge receipt of the same by signing under his hand at the appropriate column contained therein. (3) Any person who has been served with the written statement or statements referred to in subsection (1) shall not be under any obligation to enter into any hire-purchase agreement and no payment or other consideration shall be required from him in respect of the preparation or service of such statement or statements, as the case may be.

Laws of Malaysia ACT 21212

(4) A hire-purchase agreement entered into in contravention of subsection (1) shall be void.

(5) An owner who enters into a hire-purchase agreement and a dealer who carries out negotiations leading to the making of a hire- purchase agreement that does not comply with subsection (1), irrespective of whether such hire-purchase agreement is void or otherwise, shall be guilty of an offence under this Act. (6) Where a person upon whom a written statement or statements referred to in subsection (1) have been served is subject to any obligation to enter into any hire-purchase agreement to which such written statement or statements relate or is required to make any payment or other consideration in respect of the preparation or service of such statement or statements, as the case may be, any person who imposed such obligation or requirement shall be guilty of an offence under this Act.

(7) The Minister may, by order, amend, vary, delete from, or add to, Part I and Part II of the Second Schedule. Hire-purchase agreement to be in writing

4A. (1) A hire-purchase agreement in respect of any goods specified in the First Schedule shall be in writing.

(2) A hire-purchase agreement that does not comply with subsection (1) shall be void.

(3) An owner who enters into a hire-purchase agreement that does not comply with subsection (1) shall, notwithstanding that the hire-purchase agreement is void, be guilty of an offence under this Act.

Hire-purchase agreement to be signed, etc.

4B. (1) Every hire-purchase agreement shall be signed by or on behalf of all parties to the agreement.

(2) No owner, dealer, agent or person acting on behalf of the owner shall require or cause any intending hirer or his agent to sign a hire-purchase agreement or any other form or document relating to a hire-purchase agreement unless such hire-purchase agreement, form or document has been duly completed. Hire-Purchase 13

(3) A hire-purchase agreement that does not comply with subsections (1) and (2) shall be void.

(4) An owner, dealer, agent or person acting on behalf of the owner who--

(a) enters into a hire-purchase agreement in contravention of subsection (1); or

(b) requires or causes an intending hirer or his agent to sign a hire-purchase agreement in contravention of

subsection (2),

shall, notwithstanding that the hire-purchase agreement is void, be guilty of an offence under this Act.

Contents of hire-purchase agreement

4C. (1) Every hire-purchase agreement--

(a) shall--

(i) specify a date on which the hiring shall be deemed to have commenced;

(ii) specify the number of instalments to be paid under the agreement by the hirer;

(iii) specify the amounts of each of these instalments and the person to whom and the place at which the payments of these instalments are to be made;

(iv) specify the time for the payment of each of those instalments;

(v) contain a description of the goods sufficient to identify them;

(vi) specify the address where the goods under the hire- purchase agreement are;

(b) where any part of the consideration is or is to be provided otherwise than in cash, shall contain a description of that part of the consideration;

(c) shall set out in a tabular form--

(i) the price at which at the time of signing the agreement the hirer might have purchased the goods for cash (in this Act referred to and in the agreement to be described as "cash price");

Laws of Malaysia ACT 21214

(ii) the amount paid or provided by way of deposit (in this Act referred to and in the agreement to be

described as "deposit") showing separately the

amount paid in cash and the amount provided by

any consideration other than cash;

(iii) any amount included in the total amount payable to cover the expenses of delivering the goods or

any of them or to the order of the hirer (in this Act referred to and in the agreement to be described as "freight");

(iv) any amount included in the total amount payable to cover vehicle registration fees in respect of the goods (in the agreement to be described as "vehicle registration fees");

(v) any amount included in the total amount, payable for insurance in respect of the goods or any of

them;

(vi) the total of the amounts referred to in subparagraphs (i), (iii), (iv) and (v) less the deposit;

(vii) the amount of any other charges included in the total amount payable (in this Act referred to and in the agreement to be described as "terms charges"); (viii) the annual percentage rate for terms charges which shall be calculated in accordance with the formula set out in the Seventh Schedule;

(ix) the total of the amounts referred to in subparagraphs (vi) and (vii) of this paragraph (in this Act referred to as "the balance originally payable under the

agreement"); and

(x) the total amount payable;

(d) shall not contain any particulars which differ in any material way from the particulars contained in the written statement or statements served on the hirer pursuant to paragraph 4(1)(a) or 4(1)(b), as the case may be.

(1A) Paragraph (1)(d) shall not apply where in the hire-purchase agreement the terms charges are at a variable rate. Hire-Purchase 15

(1B) Where in a hire-purchase agreement the terms charges are at a variable rate, the following items shall be specified in the hire- purchase agreement based on the terms charges calculated in accordance with the base lending rate applicable at the time the hire-purchase agreement is entered into:

(a) the number of instalments to be paid under the agreement by the hirer;

(b) the amount of each of these instalments;

(c) the annual percentage rate of terms charges which shall be calculated in accordance with the formula set out in the Seventh Schedule; and

(d) the balance originally payable under the agreement. (2) A hire-purchase agreement that contravenes subsection (1) shall be void.

(3) An owner who enters into a hire-purchase agreement in contravention of subsection (1) shall, notwithstanding that the hire-purchase agreement is void, be guilty of an offence under this Act.

Separate agreement for every item of goods

4D. (1) There shall be a separate hire-purchase agreement in respect of every item of goods purchased under this Act.

(2) A hire-purchase agreement that does not comply with subsection (1) shall be void.

(3) An owner who enters into a hire-purchase agreement that does not comply with subsection (1) shall, notwithstanding that the hire-purchase agreement is void, be guilty of an offence under this Act.

(4) For the purposes of this section, any goods which are essentially similar or complementary to each other and sold as a set shall be regarded as an item.

Copy of documents to be served on hirer

5. (1) Within fourteen days after the making of a hire-purchase agreement, the owner shall serve or cause to be served on the hirer and the guarantors a copy of the agreement each.

3)Differences between a hire-purchase sale and conditionalsale under the hire purchase law.

Hire Purchse

Hire purchase (HP) is a type of borrowing. It is different from other types of borrowing because you don’t own the goods until you have paid in full. Under an HP agreement, you hire the goods and then pay an agreed amount by instalments. While you are still making payments, you aren’t allowed to sell or dispose of the goods without the lender’s permission. If you do, you’ll be committing a criminal offence.

The lender may be able to repossess (take back) the goods if you fall behind with payments.

Conditional sale

Conditional sale is similar to hire purchase. The agreement usually includes the condition that the goods don’t belong to you until you’ve paid the final instalment and the lender may be able to repossess (take back) the goods if you fall behind with payments.

At the beginning of the agreement

Once you have found the car you would like to buy, you should agree the amount you want to borrow from the lender, based on the price of the vehicle less any deposit required. Most people part-exchange their old car to help cover this, and some car finance companies may also have special promotions running under which they will contribute to customers’ deposits.

Once the actual sum to be borrowed is confirmed, the dealer will contact the finance company or finance broker and complete an application on your behalf.

At the end of the agreement

When all the repayments have been made in an HP agreement, you will be given the option to buy the car and gain outright ownership. This means paying an ‘Option to Purchase’ fee which covers the administrative cost to the finance company of transferring ownership of the car to you. If you wish to settle a Hire Purchase agreement – either partially or in full – before the end of the agreement, then you are entitled to make early repayments to your finance company. You should speak to your finance company for advice on how best to do this.

Under a Conditional Sale agreement, ownership passes to you automatically once the finance is repaid in full.