Commercial Law in Nigeria: Hire-Purchase and Equipment Leasing

Vocabulary flashcards covering key concepts, terms, and distinctions in Nigerian hire-purchase, credit sales, and related transactions.

Hire-Purchase (Common Law)

Bailment of goods with an option to purchase; ownership remains with the owner until the last instalment is paid; default allows the owner to repossess.

Hire-Purchase (Act Definition - Section 20)

Under the Hire-Purchase Act, a hire-purchase is the bailment of goods in pursuance of an agreement where the bailee may buy the goods or where the property in the goods will or may pass to the bailee.

Credit Sale

Sale of goods where the price is paid by instalments (five or more under the Act); ownership passes to the buyer upon contract, who cannot terminate; remedy is to sue for the balance.

Bailment

Delivery of goods by a bailor to a bailee with an obligation to redeliver; the bailee has a duty of care and liability for loss or damage, even independent of contract.

Option to Purchase

A feature in hire-purchase allowing the hirer to buy the goods or terminate the agreement; distinguishes HP from a plain sale.

Repossession

Right of the owner to retake possession of goods when the hirer defaults on instalments under a hire-purchase agreement.

Guarantor

A person who guarantees the hirer’s or buyer’s obligations; secondary liability activated if the hirer defaults; defined under the Hire-Purchase Act.

Finance Company

A financial intermediary that funds the purchase; may buy from the dealer and lease to the hirer; can have recourse arrangements with the dealer.

Owner/Hirer/Finance Company (Tripartite)

A common structure where the owner/dealer sells to the finance company, which then hires the goods to the hirer; the dealer may remain liable only for certain breaches.

Motor Vehicle (HP Act Definition)

Under the Act, a motor vehicle is broadly defined as a mechanically propelled vehicle for road or agricultural use; the rig case extended this to specialized vehicles.

Scope of the Hire-Purchase Act

The Act covers HP and credit sales where non-motor goods price ≤ N2,000 and all motor vehicles; outside these limits, common law applies.

Note or Memorandum (Section 2(2)(a))

A written note or memorandum of the agreement, signed by the hirer and other parties, required for enforcement under the Act.

“May” vs “Will or May” (HP Definition)

The term indicates the purchase is optional; property passes only if the option is exercised, not automatically.

Passing of Property – HP vs Credit Sale vs Conditional Sale

HP: title stays with the owner until full payment; Credit Sale: title passes at contract; Conditional Sale: title passes upon fulfilment of conditions.

Conditional Sale

Sale where ownership transfers only when certain conditions are fulfilled; possession may be given, but there is no right to return; seller may sue for price.

Equipment Leasing

A lease where the lessor retains title during the lease period; lessee uses the equipment for a rent; ownership may or may not be transferable at end of term.

Equipment Leasing vs Hire-Purchase

Leasing keeps ownership with the lessor; hire-purchase transfers ownership after full payment (subject to any option to purchase).

Loan on Security of Goods

A loan secured by goods where the owner retains title and the borrower has use; ownership only passes on default or fulfilment of conditions.

Bailment vs Sale

Bailment: possession without transfer of ownership; sale: transfer of ownership in exchange for money.

Tripartite Hire-Purchase Relationships

Common arrangement involving owner/dealer, finance company, and hirer; ownership and liability flow through the parties as arranged.

Remedies under HP vs Credit Sale

HP: repossession rights on default; Credit Sale: remedy is to sue for the balance; conditional sale may involve lien or other remedies.

Helby v Matthews (Illustrative Principle)

House of Lords case illustrating that property did not pass to the hirer under certain installment arrangements.

Yakassai v Incar Motors (Nig) Ltd (Credit Sale vs HP)

Case distinguishing a credit sale from hire-purchase; valuable for understanding when ownership passes and rights on default.

Andrews v Hopkinson (Dealer Liability)

Principal that a motor dealer can be liable for negligence if the vehicle sold is dangerous and could have been discovered with reasonable diligence.

Afrotec Technical Services v MIA & Sons Ltd

Case illustrating lien rights in a conditional sale context where the seller retains a lien until full payment.

Five Instalments Requirement (Credit Sale)

Under the Act, a credit sale requires five or more instalments; fewer instalments fall outside the Act and are governed by common law.