A Written Opinion on the Malaysian Hire Purchase Act 1967


The Hire Purchase Act 1967 (herein after referred to as “HPA”) is commonly used for the purpose of sale and purchase of motor cycle and car. Hire Purchase is the hiring of goods with the option to buy the goods at the end of the hire purchase term.

According to Section 2(1) of the HPA, a “hire-purchase agreement” includes a letting of goods with an option to purchase and an agreement for the purchase of goods by instalments (whether the agreement describes the instalments as rent or hire or otherwise), but does not include any agreement:

(a)       whereby the property in the goods comprised therein passes at the time of the agreement or upon or at any time before delivery of the goods; or

(b)       under which the person by whom the goods are being hired or purchased is a person who is engaged in the trade or business of selling goods of the same nature or description as the goods comprised in the agreement.

Therefore, it can be simplified that a hire purchase agreement consists of the following elements:

(i)        a letting of goods by the owner to the hirer with an option to purchase is given to the hirer; and

(ii)       an agreement for the hirer to purchase the goods by way of instalments.


“Goods” under the Hire Purchase Act 1967

Under the First Schedule of the HPA, the type of goods that fall within the coverage of Hire Purchase Act 1967 are (i) all consumer goods and (ii) motor vehicles including invalid carriages, motor cycles, motor cars including taxi cabs and hire cars, goods vehicles (the maximum permissible laden weight does not exceed 2540 kilograms), and buses including stage buses. “Consumer goods” refers to goods purchased for personal, family or household purpose. This means that the HPA covers a limited range of consumer goods and that the hirer should be a natural person who does not purchase the goods for business purposes.


Formation of the Hire-Purchase Agreement

The formation of a hire-purchase agreement can generally be divided into three stages which are;

(i)         pre-contractual obligations;

(ii)        construction of hire-purchase agreement; and

(iii)       post-contractual obligations.

Pre-contractual obligations

Before entering into agreement, Section 4(1)(a) of the HPA states that it is a duty of the owner to give a prospective hirer a written statement in accordance with the form set out in the Second Schedule of the HPA. This schedule requires information on the description of goods and a summary of the financial obligations of the prospective hirer. The prospective hirer however is not obliged to enter into a hire purchase transaction and is not bound to make any payment for the preparation or service of the above-mentioned statement. A hire-purchase agreement entered into in contravention of subsection (1) shall be void as according to Section 4(4) of the HPA.

Construction of hire-purchase agreement

The hire-purchase agreement has to be in writing as stated in Section 4A(1) of the HPA. Furthermore, it is illustrated in Section 4B(1) of the HPA that the agreement has to be signed by or on behalf of all parties to the agreement. The HPA also states that no owner, dealer, agent or person acting on behalf of the owners shall require or cause any intending hirer or his agent to sign a hire-purchase agreement or any other form or document relating to a hire-purchase agreement unless such agreement, form or document has been duly completed.

According to Section 4C of the HPA, the contents of the hire purchase agreement shall comprise of a date on which the hiring shall be deemed to have commenced, the number of instalments to be paid under the agreement by the hirer, the amounts of each of these instalments and to whom, and the place at which the payments of these instalments are to be made. It must also include the time for the payment of each of those instalments, a description of the goods sufficient to identify them and the address of where the goods under the hire-purchase agreement are.

Apart from these particulars, the agreement shall specifically describe the cash price of the goods, amount of deposit paid in cash and other type of consideration given (if it is other than cash money), delivery cost; payment for vehicle (if any); insurance; total amount to be paid (after deducting any deposit paid); term charges; annual percentage rate for term charges and total amount to be paid.  If one fails to comply with the requirements above, the agreement shall be void.

Rights of the hirers and owners

The rights and protections of hirers according to the HPA are available once the hire-purchase agreement has been concluded in accordance with the requirements imposed by the HPA. Those rights and protections are derived from the implied conditions and warranties laid out in Section 7 of the HPA, which are given to the goods hired. This includes the right of hirer to enjoy quiet possession of the goods and the goods hired should be free from any charge or encumbrances created by the owner in favour of any third party. The rights and protections for the owner relates to the right to repossess the goods hired once the hirer default in making scheduled payment.

Rights of repossession by the owner

According to Section 16(1) of the Hire Purchase Act, the owner must first assure that the balance of loan to be paid by the hirer must be more than one-third (1/3) of the purchase price of the goods hired before the owner seek to exercise its right to repossess the goods. Only then the owner must comply with the requirement that the hirer has defaulted two (2) successive months and a written notice under Schedule Four of the SPA has been served to the hirer and the notice has expired. Furthermore, Section 16(1A) states that an order of court must be obtained by the owner before repossessing the hired goods if the balance of loan is less than one-third (1/3) of the purchase price of the goods.



A hire-purchase agreement is similar to other types of contracts and must fulfil the requirements to form a valid contract. If the agreement fails to fulfil the provisions of the Hire Purchase Act, then the agreement may be rendered void.