Kenya’s experience with asset leasing

by Lawyer Wanz

Kenya’s experience with asset leasing, on the one hand, is largely confined to agriculture, manufacturing, building and construction, property, buses, trucks and lorries, tankers, long haulage, tourism to name but a few.

On the other hand, Kenya’s experience with hire purchase is with domestic goods and personal as well as small commercial vehicles which we have nicknamed “matatus”.

Kenya’s Hire Purchase Act is drawn from the English Statute of 1964. That The English Act repealed and re-enacted the Hire Purchase Act 1938, 1954 and 1964. It applies to all such agreements where the hire-purchase price does not exceed £2000, except where the hirer or buyer is a body corporate. The Act came into force in 1965.

For the English lawyer, therefore, the most important initial question which confronts him in any installment transaction is whether or not the agreement falls within statutory control. Although the Act came into force in 1965, it applies to all agreements made after January 1965 [ the date in which the Hire Purchase Act 1964, came into effect ] if any problem arises concerning an agreement made before October, , 1965, it will be necessary to consider the transitional provision contained in Section 59 (3) and Part I of the schedule to the 1965 Act.

Though the provisions of the 1965 Act have supplanted much of the law on Hire Purchase, there are still considerable areas in which the common law is left untouched, even when a transaction falls within the statutory control it will be necessary to consider the common law in conjunction with the Acts’ provision. Where the hirer is a body corporate, the common law will, of course apply without any consideration of the statute.

In  Kenya, the Hire Purchase Act came into force on 2nd November 1970. The preamble to the Act states:

“ An Act of parliament to make provisions for the regulation of certain hire-purchase agreements, and for the licensing of hire-purchase concerns, and for purposes connected herewith.”

The Act was meant to protect, as it should, the small man or woman who enters into transaction relating to household goods, that is the “ raison d’etre” for Section 3 which provides,

“ 1. This Act applies to and in respect of all hire-purchase agreements entered into after the commencement of this Act under which the hire-purchase price does not exceed the sum of three hundred thousand other than a hire purchase agreement in which the hirer is a body corporate, wherever incorporated.

3(2) Notwithstanding subsection(1), nothing in this Act shall apply to any scheme controlled, managed or guaranteed by the Government for the purpose of providing loans to any person.”

The English Act provides, inter-alia that it does not apply to agreements where the hirer is a body corporate. Kenya’s Act replicates the same. It appears to me that the reason for this is that a body corporate is deemed to have substantial bargaining power in comparison to an individual. The Act is tailored to provide statutory protection to hirers who are individual traders from exploitation by hire-purchase companies.

See DIAMOND TRUST BANK KENYA LTD V

JASWINDER SINGH ENTERPRISES

See CFC BANK LTD V KEINAN INVESTMENT COMPANY LTD & 4 OTHERS

See JOSEPH GICHERE KIMANI V REGAL HIRE PURCHASE LTD.

Though the provisions of the Kenya Hire Purchase Act 1970 have supplanted much of the law on Hire Purchase, there are still considerable areas in which the common law is left untouched, and even when a transaction falls within the statutory control, it will be necessary to consider the common law in conjunction with the Acts’ provision. Where the hirer is a body corporate, the common law will, of course apply without any consideration of the statute.

Section 4 of the Act makes it mandatory for every agreement of hire purchase to be registered.

Section 5 of the Act provides that unless the hire-purchase agreement has been registered, no person shall be entitled to enforce the agreement against the hire, or to enforce a contract of the hirer, or to enforce a contract of guaranteed relating to the agreements, and the owner shall not be entitled to enforce any right to recover the goods from the hirer. No security given by the hirer in respect of money payable under the agreement, or given by a guarantor in respect of money payable under the agreement, or given by a guarantor in respect of money payable under the guarantee relating to the agreement shall be enforceable against the hirer or the guarantor.

Section 6 of the Act gives provision which must be in every hire purchase agreement e.g.

 i) It shall be in writing in a prescribed form

 ii) Price of the goods

 iii)Amount of installments

 iv) Description of the goods

 v) Notice in the prescribed form relating to the rights of the hirer

 vi)Within 21 days a copy of the agreement be delivered to the hirer.

Section 7 of the Act provides for an evidence of certain provisions on the agreement. Any provisions in the hire purchase agreement enumerated (a) – (c) make the contract void.

Section 8 of the Act embodies conditions and warranties implied in the agreement of hire purchase.

Section 9 of the Act deals with instances of change of address and removal of goods.

Section 10 of the Act deals with situations in which removal of goods under hire-purchase from Kenya is prohibited. It provides penal consequences; a fine of Sh. 10,000/= or to imprisonment for a term of not exceeding one year.

Section 11 of the Act gives the Court jurisdiction to adjudicate over instances where hire-purchase agreement restricts possession of hired goods at a particular place. The Court can approve by an order, the removal.

Section 12 of the Act provides conditions under which the hirer may terminate the agreement.

Section 13 of the Act provides conditions under which the hirer may complete the agreement.

Section 14-17 of the Act deals with recovery of hirer-purchase goods by suit.

Section 18-23 of the Act provide for licensing of hire purchase business.

Section 24-35 of the Act encompasses miscellaneous provisions.

By Hon Mr Justice Nicholas R.O Ombija, Retired Judge Of The High Court Of Kenya.


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