HIRE PURCHASE

Hawera Star, Volume LIII, 26 August 1933, Page 12

HIRE PURCHASE

PITFALLS FOR UNWARY BUYING ENCUMBERED CARS. LITTLE LEGAL PROTECTION. Although not only motor-cars, but almost any class of goods, can now be bought under hire purchase agreement, laws on this matter are utterly obsolete and antiquated, writes an Australian correspondent. Buyers of sec-ond-hand cars cannot be too thorough, therefore, in making sure that they get clean titles for their purchases. The hire purchase agreement, under which a majority of motorists procure their cars, amounts simply to this: The vendor accepts part of the agreed purchase money in cash and enters into an agreement with the purchaser to allow him full use of the car daring the time he is paying off, at agreed intervals and over a stated period, the balance of the purchase money. As an additional, security against loss, the vendor almost invariably insists upon the balance of the purchase money outstanding being collaterally covered by promissory notes maturing from time to time during the period in which the car has to be paid for in full.

Until the car is actually paid for in full the title in it does not pass to the purchaser, but is still vested in tho vendor, who also, under the ordinary hire purchase agreement, can automatically repossess the car and retain all moneys paid up to date in the event of any default by the purchaser in his progressive payments. From this outline of the ordinary transaction it is easy to see how unscrupulous purchasers may palm off cars still encumbered under a hire purchase agreement. The possible complications are increased also by reason of the fact' that many vendors, particularly trading firms, discount their hire purchase agreements and promissory notes with finance companies to whom they pass over all their right in consideration of a cash payment by the finance company. Unless he is able to trace the whole history of the car he is buying, the most careful business man has not got anything like proper or reasonable protection against fraud. STATUTORY DECLARATION. With cautious dealers and purchasers it is customary to insist upon a statutory declaration of ownership by the vendor, but experience shows that where the seller has set out to commit a deliberate fraud, not even the risk of being indicted for perjury will deter him. Moreover, although it maybe an excellent thing in the public interest that such a criminal should be brought to book, the remedy of the; criminal law is very paltry consolation ! to the business man. who may find ' himself “stung” for a very large sum of money.

How .great is the need for extreme caution under the existing conditions tiiese examples show. In case number one a customei brought to a well-known Sydney firm of used car dealers, who had already had transactions with him, a car which he certified by declaration was his own unencumbered property. This car was duly sold for £l3O, the firm acting purely as agents. In due course" the purchase money was paid by the agents to the vendor. However, in a couple of months, during which time it happened that the vendor had died, a representative of a discount house came to the cardeaiing firm and disclosed that the discount company held an assigned hire purchase agreement and promissory notes over the car and that £9O was still owing upon it. The discount house was, of course, entitled to take possession of the car, in which case the last purchaser would, of course, have had cause for action against the vendor, and so it would seem from legal opinion, against the agents who sold the car also. However, the car had been removed to the country by the new purchaser, and the discount house elected to take recourse against the agents of the deceased vendor.

The agents, needless to say, obtained the advice of several independent solicitors and barristers, who were unanimous that not only was the agent who had sold the car in all innocence bound to pay the £9O due on the ear to the discount company, representing the amount of the promissory notes, but they were actually compelled to hand over the entire proceeds of the sale, namely, £l3O. It will be seen that the discount company came off very well, since it secured £4O more than it was morally entitled to. SUCCESSION OF PURCHASERS. The second case indicates how many transactions can take place before fraud is disclosed. In this case an intending vendor produced to the used car auctioneers a clear receipt for the car which he wished them to sell. The car was then sold at auction, and subsequently changed hands twice before tho question was raised. it was then discovered that a hire purchase agreement was held over it, anti but for a common sense and amicable settlement between all the parties there might 'have been interminable litigation, For the man from whom the car was re-possessed would naturally attack the man from whom he bought, and so on right through a whole succession of purchasers.