Hire Purchase Agreement: When Chattel Passes To Hirer

Alhaji Jimoh Ajagbe  V  Layiwola Idowu

Supreme Court of Nigeria.

SC.271/2003

Aloma Mariam Mukhtar, J.S.C. (Presided and Read the Leading Judgment).

Walter Samuel Nkanu Onnoghen, J.S.C.

Ibrahim Tanko Muhammad, J.S.C.

John Afolabi Fabiyi, J.S.C

Bode Rhodes-Vivour, J.S.C.

Friday, 17 June, 2011

Appeal – Award of damages by trial court – Attitude of appellate court thereto – when will interfere to review – Relevant consideration.

Appeal- Finding of fact by trail court – Attitude of appellate court thereto – When will interfere therewith – Relevant considerations.

Commercial Law – Credit sale payable by instalments – Hire Purchase – Distinction between – Relevance of distinction.

Commercial Law- Credit sale payable by instalments – whether property passes thereunder – Where breached by buyer – Remedy available to seller.

Commercial Law – Hire purchase agreement – Agreement for credit sale payable by instalments – What constitutes each Distinction between – When property passes.

Commercial Law – Hire purchase agreement – Ingredients of – When ownership of chattel passes to hirer – Relevant considerations.

Contract – Agreement for credit sale payable be instalments –where breached by buyer- Remedy available to seller.

Contract – Contract between parties – Whether court can rewrite for them – Duty of court in respect thereof.

Contract – Formation of contract – Existence of agreement between parties – How established.

Contract – Hire purchase agreement – Agreement of credit sale payable by instalments – What constitutes each – Distinction between – When property passes.

Contract – Hire purchase agreement – Ingredients of – When ownership of chattel passes to hirer – Relevant considerations.

Court – Evaluation of evidence – Duty on court to consider every peace of evidence in line with surrounding factors.

Court – Evaluation of evidence – Undisputed evidence of relevant fact – When good and credible – Duty on court to make use of to determine issue in controversy. Court – Finding of fact by trail court – Attitude of appellate court thereto – When will interfere therewith – Relevant considerations.

Damages – Award of damages by trial court – Attitude of appellate court thereto – When will interfere to review – Relevant considerations.

Damages – Special damages – Claim therefor – Need to plead and strictly prove = Where not done – Effect.

Evidence – Evaluation of evidence – Undisputed evidence of relevant fact – Where good and credible – Duty on court to make use of to determine issue in controversy.

Evidence – Proof –  Existence of contract between parties – How proved – Nature of evidence court will consider.

Hire Purchase – Hire purchase agreement – Ingredients of – When ownerships of chattel passes to hirer – Relevant considerations.

Hire Purchase – Hire purchase agreement – Agreement for credit sale payable by instalments – What constitutes each – Distinction between – When property passes.

Practice and Procedure – Finding of fact by trial court – Attitude of appellate court thereto – When will interfere therewith – Relevant considerations.

Sale of Goods – Agreement for credit sale payable by instalments – What Constitutes – Distinction with hire purchase agreement – Where breached by buyer – Remedy available to seller.

Words and Phrases – ‘Total’ – What is signifies with respect to figures.

Issues:

Whether the Court of Appeal was right in law when it held that exhibit A was not a valid hire purchase agreement and that what transpired between the parties was a credit sale.

Whether the Court of Appeal was right in awarding the sum of N250,000 to the respondent as the sale value of the vehicle.

Whether the Court of Appeal was right in awarding special damages in favour of the respondent for the loss of use of the vehicle which was not predicated on any evidence as required by law.

Facts:

The respondent in this appeal who was the plaintiff at the trial court bought a Toyota Liteace bus from the appellant as a credit-sale in the sum of N250,000.00 for which he made an initial payment of N22,000.00 before taking delivery in June 1992. The respondent was to make a monthly payment of the sum of N6,000.00 and had paid a total sum of N39,000.00 when the appellant forcibly recovered the vehicle from the respondent on the 10th of December, 1992. As at the date the respondent had defaulted in paying a total sum of N18,330.00 which had become due.

The vehicle broke down in November, 1992 and when the appellant recovered possession of the vehicle he claimed that he spent the sum of N10,300.00 to repair the vehicle. He claimed that the proposed increasing the monthly installment payable by the respondent after the repairs but the respondent rejected it, so he sold the vehicle.

Following the sale, the respondent instituted an action against the appellant at the High Court claiming as follows:

The return of the Toyata Liteace Bus with registration number OS 68 GA Chasis No. 00194483 which the plaintiff bought on credit from the defendant, but which the defendant unlawfully seized from the plaintiff at Ifon-Osun on 4th December, 1992.

The sum of five hundred naira (N500.00) per day for loss of use of the vehicle from 4th December, 1992 till the vehicle is returned to the plaintiff.

The sum of Fifty Thousand Naira (N50,000.00) being general damages for the unlawful seizure of the vehicle.

In the alternative to claim I above.

The plaintiff claims the sum of three hundred thousand naira (300,000.00) being the current market value of the Toyota Liteace but with registration No. OS 68 GA Chasis No. 0019483 which the plaintiff bought on credit from the defendant, but which the defendant unlawfully seized from the plaintiff at Ifon-Osun on the 4th December, 1992.”

In his defence, the appellant contended that the contract between the parties was for hire purchase agreement executed in June, 1992. Following default by the respondent, he sold the vehicle.

The trial court found that there was a credit sale between the parties and not hire purchases and gave judgement in favour of the respondent awarding him the sum of N300,000.00 as the value of the vehicle. In addition, in ordered the appellant to pay the sum of N293,000.00 as general damages.

Upon appeal to the Court of Appeal, that court affirmed the finding of credit sale but reduced the sum awarded as the value of the vehicle to N250,000.00 and allowed the damages awarded by the trail court for loss of use to stand.

Being dissatisfied, the appellant further appealed to the Supreme Court contending that the transaction between the parties was a hire purchase and not credit sale. He also challenged the award of the sum of N250,000.00as market value of the vehicle and the sum of N293,000.00 awarded as damages for loss of use of the vehicle as not supported by the evidence.  Held (Unanimously allowing the appeal in part):

On what constitutes a hire purchase agreement-

The contract of hire purchase or, more accurately, the contract of hire with an option to purchase is one under which the owner of a chattel lets it out on hire and undertakes to sell it to or that it shall become the property of the hirer conditionally on his making a certain number of payments. Until to making of the last payment, no property in the chattel passes. However, where the contract between the parties amounts to an absolute agreement to sell and buy, whether the instrument be called a hire purchase agreement or not, the property in the chattel passes upon delivery, provided that such was the intention of the parties.

On Distinction between contract of hire purchase and contract of sale payable by instalments.

The difference between a contract of sale at a prince payable by instalment and a contract of hire purchase is that in the former, the purchaser has no option to terminating the contract and returning the chattel, whereas in the latter there is none. In each case, the substance of the transaction or the agreement must be looked at and not he mere words. On Distinction between contract of hire purchase and contract of sale payable by instalments.

In a credit sale agreement for the purchase of a vehicle, the buyer pays a deposit, followed by instalment payments. Once the agreement is entered into by the parties, ownership of the vehicle is transferred to the buyer.

If the buyer defaults or is unable to meet his financial obligations to the seller, the option open to the seller is an action to recover the balance of payment owed by the buyer.

On the other hand, in a hire-purchase agreement, ownership of the vehicle remains with the seller until payment is fully made. On the failure of the buyer / hirer to pay the instalments, the owner is at liberty to take possession of the vehicle.

In the instant case, the facts showed a credit sale of the vehicle and he seizure of the vehicle by the seller was wrong since ownership had passed to the buyer. (Yakassai v. Incar Motors (Nig.) Ltd. (1975) 5 SC 107 referred to.

On Distinction between contract of hire purchase and contract of sale payable by instalments –

The difference between an outright sale and a hire purchase agreement is that in the former, the property in the vehicle passes to the purchaser as soon as the contract is entered into, whereas in the hire purchase agreement, the property in the vehicle still remains vested in the owners until payment is fully made.

In other words, under a hire purchase agreement it is always open to the owner of a vehicle to the possession of it on failure of the hirer to pay the instalments. In an outright sale, the seller’s remedy lies in an action to recover the balance of payment owed the purchaser. (Yakassai v. Incar Motors (Nig.) Ltd. (1975) 5SC 107 referred to.