CONTRACT LAW — Hire Purchase Agreement — Distinction from Credit Sale — Transfer of Property
Ratio Decidendi
Per Mukhtar, JSC, in Ajagbe v. Idowu (2011) NLC-123-271-2003(SC) at pp. 11—12; Paras E—A:
"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 Hire Purchase Agreement, the property in the vehicle still remain vested in the owner until payment is fully made. In other words, under a Hire Purchase Agreement it is always open to the owner of a vehicle to take possession of it on failure of the hirer to pay the installments. In an outright sale, the seller's remedy lies in an action to recover the balance of payment owed by the purchaser."
Explanation / Scope
This principle establishes the distinction between outright sale and hire purchase: in outright sale, property passes to the purchaser on contract; in hire purchase, property remains with the owner until full payment, allowing the owner to repossess on default. The principle applies in distinguishing between the two contracts. It ensures that the nature of the transaction is properly identified. The principle reflects the proprietary consequences of each contract. It determines the remedies available. The court must examine the substance of the agreement. The principle provides guidance on distinguishing credit sale from hire purchase.