Debtor’s Liability Under Hire-Purchase
Agreements
The normal consequences of termination are that the debtor has no right to retain the
goods and that he is unable to recover any payments he has already paid.
The most common cause is the debtor’s inability or failure to keep up his payments.
Measure of creditor’s damages
Where the agreement is not a regulated one, the creditor can either;
o Claim damages for the debtor’s breach of contract, or
o Claim the amount stipulated in the agreement as being payable upon termination
(i.e. minimum payment).
The amount of damages will depend upon whether the debtor repudiated the contract or
whether he simply got into arrears, in which case it will depend upon whether punctual
payment was of the essence of the contract.
Damages for non-repudiation
Where D gets into arrears but does NOT repudiate the contract, C has the right of
termination.
But C cannot claim for loss of future payments as damages, as he is limited to a claim for
arrears of instalments due before termination.
[Financings v Baldock]
The total HP price was £772, payable by a deposit of £100, and 24 monthly instalments of
£28.
The agreement was signed in January, but the first instalment due on February was not paid.
D told C that he was unable to pay at that moment, but he hopes to do so later.
C terminated the agreement in April.
Held: A mere failure to pay 2 instalments did NOT amount to repudiation.
D was liable only for arrears of instalments up to the date of termination, since at the time
of termination D could not be said to have repudiated the contract.
C was only able to recover the arrears of instalments due at the date of termination: £56
(£28 x 2).
But there may be added to that amount a sum equal to the creditor’s loss caused by the D’s
failure, if any, to take reasonable care of the goods.
, Damages for repudiation
These are assessed according to the following rule;
[Yeoman Credit Ltd v Waragowski]
The total HP price was £434, payable by a deposit of £72, and 36 monthly instalments of £10.
D paid the deposit, but did not pay any instalments.
When D was 6 months in arrears, C terminated the agreement.
After termination, the car was worth £205.
Held: D had repudiated the agreement.
C is to be put in the same position as if the whole transaction had gone through as
originally contemplated.
The damages were calculated as follows;
a) Arrears of instalments due before termination = £60 (£10 x 6).
b) Total HP purchase price = £434.
c) Certain items;
a. Payments already made = £72
b. The amount awarded under (a) = £60
c. The option money in the agreement = £1
d. The value of the goods recovered = £205.
d) HP – certain items (£434 - £205) = £96.
e) Total (£60 + £96) = £156.
[Overstone Ltd v Shipway]
Held: Where C receives payment earlier than he would have when the termination
occurred early on, the court will make a deduction from the award of damages to take
account of that earlier payment.
Damages for breach of condition
[Lombard North Central v Butterworth]
The contract provided that punctual payment of instalments under the contract was of the
essence of the agreement.
Thus punctual payment was a condition (as opposed to warranty).
Held: Any lateness in payment, even if it did not amount to repudiation by D, could
nevertheless be treated by C as if it were such repudiation.
Agreements
The normal consequences of termination are that the debtor has no right to retain the
goods and that he is unable to recover any payments he has already paid.
The most common cause is the debtor’s inability or failure to keep up his payments.
Measure of creditor’s damages
Where the agreement is not a regulated one, the creditor can either;
o Claim damages for the debtor’s breach of contract, or
o Claim the amount stipulated in the agreement as being payable upon termination
(i.e. minimum payment).
The amount of damages will depend upon whether the debtor repudiated the contract or
whether he simply got into arrears, in which case it will depend upon whether punctual
payment was of the essence of the contract.
Damages for non-repudiation
Where D gets into arrears but does NOT repudiate the contract, C has the right of
termination.
But C cannot claim for loss of future payments as damages, as he is limited to a claim for
arrears of instalments due before termination.
[Financings v Baldock]
The total HP price was £772, payable by a deposit of £100, and 24 monthly instalments of
£28.
The agreement was signed in January, but the first instalment due on February was not paid.
D told C that he was unable to pay at that moment, but he hopes to do so later.
C terminated the agreement in April.
Held: A mere failure to pay 2 instalments did NOT amount to repudiation.
D was liable only for arrears of instalments up to the date of termination, since at the time
of termination D could not be said to have repudiated the contract.
C was only able to recover the arrears of instalments due at the date of termination: £56
(£28 x 2).
But there may be added to that amount a sum equal to the creditor’s loss caused by the D’s
failure, if any, to take reasonable care of the goods.
, Damages for repudiation
These are assessed according to the following rule;
[Yeoman Credit Ltd v Waragowski]
The total HP price was £434, payable by a deposit of £72, and 36 monthly instalments of £10.
D paid the deposit, but did not pay any instalments.
When D was 6 months in arrears, C terminated the agreement.
After termination, the car was worth £205.
Held: D had repudiated the agreement.
C is to be put in the same position as if the whole transaction had gone through as
originally contemplated.
The damages were calculated as follows;
a) Arrears of instalments due before termination = £60 (£10 x 6).
b) Total HP purchase price = £434.
c) Certain items;
a. Payments already made = £72
b. The amount awarded under (a) = £60
c. The option money in the agreement = £1
d. The value of the goods recovered = £205.
d) HP – certain items (£434 - £205) = £96.
e) Total (£60 + £96) = £156.
[Overstone Ltd v Shipway]
Held: Where C receives payment earlier than he would have when the termination
occurred early on, the court will make a deduction from the award of damages to take
account of that earlier payment.
Damages for breach of condition
[Lombard North Central v Butterworth]
The contract provided that punctual payment of instalments under the contract was of the
essence of the agreement.
Thus punctual payment was a condition (as opposed to warranty).
Held: Any lateness in payment, even if it did not amount to repudiation by D, could
nevertheless be treated by C as if it were such repudiation.
