buyer in turn promises to pay the agreed amount every month, say
sh.1,000. S/he legally becomes the ‘hirer’.
At the end of the 36 months, the hirer will have paid a total of sh.
36,000. As far as the owner of the goods is concerned, this amount
constitutes what s/he would have considered as the fair price of the
goods if the hirer had paid him/her that amount (or less) under a
contract for the sale of goods. S/he is therefore prepared to let the
hirer have ownership of the goods.
In order to e(ect the transfer of ownership to the hirer, the
owner of the goods has to sell the goods to him/her. S/he does this by
making an ‘o2er’ to sell them to the hirer at a nominal consideration,
of say sh. 20. The hirer is not bound to accept the o2er and, in the
event of him/her not doing so, no purchase takes place. If s/he
accepts the o2er, a sale takes place and s/he purchases the goods.
In practice, the o2er to sell is usually made at the time the hire
agreement is concluded. In such case, the o2er would legally
constitute an option to purchase the goods. Such an o2er is
irrevocable provided that the hirer performs his/her obligations under
the hire agreement. This type of agreement is covered by the 5rst part
of the statutory de5nition, namely, an agreement “under which the
bailee may buy the goods.”
The owner of the goods may agree that the goods will become the
property of the hirer on payment of the “nal or last instalment. In
such case, the option clause would not be incorporated into the
agreement. This sort of transaction is covered by the second part of
the statutory de5nition and is an agreement “under which the property
in the goods will or may pass to the bailee”.
Hire-Purchase and Sale
The hire-purchase transaction is not a sale because, according to the
(i) There is no seller or buyer. The parties are the ‘owner’ of the goods
and the ‘hirer’.
(ii) The hirer may buy the goods but s/he is not bound to buy
them. It is this aspect of the transaction which constitutes the legal
distinction between a hire-purchase agreement and a sale of goods,
as was explained in Helby v Mathews (90). In a sale of goods, the
buyer is bound to buy the goods and, as explained, can be sued for