This is a contract by which goods are delivered to a person who agrees to make periodical payments by way of hire, with an option of buying the goods after the started hire installments have been paid.

The goods may be returned to the owner at any instance before the option is exercised, on payment of sum stated in the contract. Until the option is exercised there is no guarantee to buy the goods.


These contracts thus contain three parts;

  1. Contract of bailment- under which the hirer obtains possession of the goods yet the goods remain in the ownership of the owner
  2. Option which entitle the hirer to purchase the goods or hire them
  3. Contract of sale which makes the hirer the owner of goods already in his/her possession




Hire purchase differs from credit sale agreement and conditional sale in the following ways;


It is important to distinguish hire purchase from credit sale agreement and conditional sale. While all three involve payment via installments, they however differ from higher purchase in the following sense;


Credit sale agreement – This makes it the customer’s legal obligation to buy in that;


  1. It is a contract of sale
  2. The property in goods passes to the buyer as soon as the 1st installment is made


Conditional sale- This contract makes it the buyer’s obligation to buy but property in goods passes to the buyer only if the conditions that form the subject matter of the sales have been fulfilled.


Hire purchase and other instalment sales


The hire-purchase transaction is intended to protect the owners title to the goods should the hirer (the buyer) decide to sell them to a third party who buys in good faith before full installments is paid.


It is worth noting that this is differs from sale of goods act in which if the buyer is in possession of the goods, with the consent of the seller, sells them to a third party who buys in good faith them property passes to the third party.


Hire purchase therefore gives two options, i.e.

  1. purchase the goods or
  2. return


Helby v. Matthews (1895)

The owner of a piano agreed to let it on hire, the hirer to pay rent on monthly installments, on the terms that the hirer might terminate the hiring by returning the piano to the owner but remain liable for all arrears of hire. Also that the piano should remain property of the owner but if the hirer had paid punctual monthly installments, the piano should become his property. The hirer after having paid a few installments pledged the piano to a pawn broker.

Held; the hirer was under no legal obligation to buy but had an option to either return the piano or become its owner by payment in full. Therefore, he had not “bought it” and the owner could therefore recover it from the pawn broker.




  1. Before the Hire Purchase Agreement is entered into the owner is bound to notify the prospective Hirer the cash price of the

However, the owner is not bound to do so if:

  1. The Hirer has selected the goods or similar goods by reference to a catalogue stating the Cash Price
  2. The Hirer selected the goods or similar goods from a selection which stated the cash
  3. The Hire Purchase agreement must be



  1. A description of the
  2. A description of the
  3. The cash and Hire Purchase
  4. Number of
  5. Amount and when
  6. It must be signed by the Hirer and by or on behalf of the
  7. Rights of the



Sec.4 (1) of the Hire Purchase Act in Kenya establishes the Registry of Hire Purchase. This is a public office which may be held by the Registrar, Assistant or Deputy Registrar.

As per the Act every Hire Purchase agreement must be delivered to the Registrar for registration within 30 days of its execution. However the Registrar is empowered to at times extend the duration.

The Registrar may refuse to register a Hire Purchase Agreement if

  1. It is not in the English Language
  2. It is presented after 30 days of its execution
  3. Stamp duty or Registrar fee payable has not been paid


Registration of Hire purchase, serves two purposes:

  1. It protects 3rd party who may purport to buy the goods from the
  2. It is a revenue generation mechanism for the


In the event that the agreement is not registered the following will occur;

  1. The agreement cannot be enforced by any person against the
  2. Any contract of guarantee made in relation to the Hire Purchase Agreement is also unenforceable.
  3. The owner cannot enforce the right to repossess the goods from the Hirer.
  4. Any security given by the Hirer under the Hire Purchase Agreement or by the guarantor under the contract of guarantee is


The hire purchase act attempts to protect the hirer for exploitation through the following ways;

  1. Making some Contents of the agreement to be void if used
  2. Implied terms of the agreement
  3. Repossession of goods

Contents deemed void if inserted in the hire purchase agreement

  1. A provision which allows the owner or his agent to enter upon any premises to repossess the goods let under a higher purchase
  2. A provision whose effect is to relieve the owner from liability for such entry (stated in 1 above)
  3. A provision which excludes or limits the Hirer’s right to terminate the
  4. A provision which deems persons acting on behalf of the owner in the formation or conclusion of the Hire Purchase Agreement as agents of the
  5. A provision whose effect is to relieve the owner from liability for acts of person acting on his behalf in relation to the formation or conclusion of the Hire Purchase Agreement


The Hire Purchase Act implies both conditions and warranties in all Hire Purchase Agreements.


  1. Right to sell – an implied condition that the owner will have the right to sell the goods when the property is to pass
  2. Merchantable Quality – Unless the goods are second hand and the agreement so provides, there is an implied condition that they would be of merchantable
  3. Fitness for Purpose – Where the hirer expressly or by implication makes known to the owner the particular purpose for which the goods are, there is an implied condition that the goods would be reasonably fit for the
  4. A condition may be implied by any other


  1. Quiet Possession – There is an implied warranty that the hirer will have and enjoy quite possession of the
  2. Free from charge or encumbrance – Under sec8(1)(c) of the Act, there is an implied warranty that the goods shall be free from any charge or encumbrance in favour of a third party when property is to
  3. A warranty may be implied by any other


Under sec 15 (1) of the Act, if at any time 2/3 of the hire purchase price has been paid by  the hirer or any other person on his behalf, the owner cannot repossess the goods otherwise than by court action.

This provision was intended to protect the hirer from Common Law practice of “snatch back” under which the owner will reposes the goods at any time.

If the owners posses the good in contradiction to the act then;

  1. The agreement terminates
  2. The hirer is discharged from all liability under the agreement
  3. The hirer is entitled to recover all sums paid under the agreement or the contract of guarantee.
  4. The guarantor is entitled to recover any sum paid under the contract of guarantee or under the security

The section does not adequately protect the hirer in that:


  1. The hirer must pay too much to be protected by the
  2. Property in the goods does not pass to the hirer even after paying 2/3 of the hire purchase price
  3. The court may still order the repossession of the goods


Duties of the Owner

  1. Duty to notify the hirer of the cash price
  2. The owner must send a copy of the Hire Purchase Agreement, to the Hirer within 21 days of execution
  3. Duty to put the Hirer in possession of the goods let under a Hire
  4. Duty to compensate the hirer in the event of defective goods
  5. The owner is bound to disclose to the hirer any defects in the goods or in his title

Duties of the Hirer

  1. Reasonable care- It is the duty of the hirer to exercise reasonable care in relation to the goods let under a hire purchase agreement. However the hirer is not liable for ordinary wear and
  2. Take Delivery-The hirer is bound to take delivery of the goods under hire purchase agreement.

3.      Pay Installments

  1. Continue Hiring-It is the duty of the hirer to continue hiring the goods for the agreed duration. This obligation does not deny the hirer the right to terminate the agreement.
  2. Notice of change of location of goods-It’s the duty of the hirer to inform the owner any change in the location of the

Rights of the hirer

  1. He is entitled to be notified of the cash price of the
  2. He is entitled to a copy of the Hire Purchase Agreement within 21 days of the execution of the
  3. He is entitled to Indemnity for any loss or liability arising by reason of any defect in the goods or of
  4. He is entitled to quiet possession of the goods let under the Hire Purchase Agreement
  5. He is entitled to damages for any breach of contract by the owner
  6. He has the right to terminate the Hire Purchase Agreement at any time before the final instalment falls




The hirer before the final installment may terminate the agreement by;

  1. Giving a written notice of termination
  2. Returning the goods


Once this is done the depreciation clause or the minimum payment comes into play in which case the hirer has to pay;

  1. All installments due up to the termination day


  1. The amount by which one half of the hire purchase price exceeds the total amount paid or such lesser amounts as the agreement may


If the hirer has not taken reasonable care of the goods, he is reliable in damages, the hirer must at his own expense return the goods to the premises from which delivery was taken.

However if the goods are returned elsewhere by reason of the owners change of location, any additional expenses are recoverable from the owner.

Topic eight dispute resolution


Definition:  refers to the process through which differing parties come up with a solution that is agreeable to both parties it may involve compromises by both parties.

negotiations can also be defined as the process through which one is able to get what he/she wants.

Importance of negotiations

  1. coexistence through negotiation people accommodate each other desires and beliefs. they are also able to resolve their differences in a friendly way thus live in peace.
  2. conflict resolution- negotiations allows people to resolve their conflicts in a peaceful way without loss of live or damage to property. when there is conflict people engage in discussions and reach a peaceful compromise.
  3. enhances interpersonal relations. in our relationship with other people we often have differences concerning issues through negotiations. we come up with agreements or solutions that leave each party feeling satisfied.
  4. formation and maintenance of friendship. people who may not haver been friends may engage in negotiation to resolve some differences between them during these processes or after the individuals may discover they have some things in common and a friendship may develop.
  5. empathy enhanced- during negotiations the parties are given a chance to explain themselves this gives each party an opportunity to see the situation from the other point of view in therefore enables them to emphatize with each other.


  • Adjudication – This is a legal way of solving disputes, a judge listens to the views of both sides and makes a judgment that brings an end to the conflict the parties involved do not have much choice over who listens to the case. The judge has the authority to state the cause of action to be taken by the parties involved in the conflict.
  • Arbitration – The parties in conflict agree on a third party who listen to each side and then makes a decision. Both parties must agree on the third party before the conflict resolutions proceed. They must agree to participate in the process and abide by the verdict.
  • Mediation – It is a process in which the parties in conflict involve a third person whom they both consider to be impartial to help them reach an agreement. The mediation only facilitates discussions between the two parties.
  • Negotiation – It is the process through which the parties in conflict hold discussions in order to come to an agreement it involves marking offers and comprises by both parties until a common agreement is reached.
  • Resolution – In this method of conflict resolution discussion are held to establish the  cause of conflicts the parties concern then agree on a specific cause of action which is called RESOLUTION.
  • Reconciliation – This method (reconciliation) of conflict resolution places emphasis on abolishing or reestablishing good relation between those who are in conflict. This is done by encouraging conversation by violators and forgiveness by victims. It is the basis for the formation of tne and reconciliation commissions.
  • Transformation – Conflict transformation involves changing various aspects of society in order to solve conflicts and to prevent such conflicts from reoccurring. It involves going to the roots of the conflict and carrying out radical changes transforming relationships that led to the occurrence of the conflict of the first place.


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