When in the market to purchase high-value assets such as a home, car, furniture, and appliances, hire purchase is considered one of the best methods of payment. In Kenya, hire purchase is quickly becoming the preferred payment method. Most people purchase motorcycles, cars, TVs, refrigerators, and even smartphones using lipa mdogo mdogo or lipa pole pole payment plans. All these purchases are guided by the hire purchase act in Kenya.
What is a hire purchase act?
This is an Act of Parliament that we designed to offer provisions that regulate hire purchase agreements as well as licensing of hire purchase concerns. The act was first assented to in Kenya’s parliament in June 1968. However, its date of commencement was 2nd November 1970. There have been numerous amendments to this Act, the most recent one being in 2017.
Notes from the hire purchase act
A hire purchase agreement is defined by common law as a contract for the delivery of goods where the hirer has the option to purchase the goods. It is a hybrid of a contract of sale and simple bailment. There are no formal requirements for a hire purchase agreement. An oral agreement for the sale of goods is valid and binding. The law requires certainty and precision in the terms of the hire purchase agreement ad the parties to the agreement ought to reach a consensus ad idem.
The hire purchase act also aims at protecting the hirer from fraudulent dealers. In a case where the hirer signs a contract that is mispresented to him, they are allowed to plead non-est factum and escape liability. The contract will also not hold if the condition of the goods changes between the time of the offer and acceptance.
When a hire purchase agreement doesn’t involve the intervention of a finance company, the legally binding agreement comes into existence when the dealer delivers the goods after posting a letter of acceptance.
Contents of the hire purchase agreement
- Definitions or descriptions of the parties
- A description of the goods
- The cash and hire purchase prices
- Number of payable installments
- The amount and when to make payments
- Signature from the hirer and by or on behalf of the owner
- Rights of the hirer