Those aspects of the law of consumer credit which have been discussed seem to be concerned with innocent hirers suffering at the hands of unscrupulous dealers and finance companies in the tangled jungle of the common law. Then in 1968 the Act of 1965 came into force with the object of protecting the hirer and shielding him from the abuses then current. Presently we will discuss whether this jungle has indeed been tamed, but firstly a few inevitable misconceptions must be dispelled. The principal of these is that although the Act protects the hirer from the worst practices of finance companies and dealers, it is not implied that such practices are common. The policy of the Act, and the facts of certain cases, indicate that instances of aggressive profiteering do occur, but this does not suggest that low standards are general in the credit industry. In fact the majority of large dealers and finance companies appear to conduct their business in accordance with high commercial standards and the hirer who plays the game should be well satisfied. Nor does it mean that a finance company or dealer which often appears as a litigant in the Law Reports is necessarily a sophisticated manipulator of the small man. Perhaps to the contrary, the owner who refers a dispute to be decided by due process of law, who is prepared to submit to public scrutiny, and who will abide by the impartial decision of the court, whether favourable or not, is the party who deserves praise not censure. Intimidation of the hirer and swift repossession might have been an easier alternative for him.
The problems for a business disposing of goods on credit should not therefore be underestimated. It is no easy task to persuade the ordinary man to abide by the rigid discipline of periodic repayment, and to appreciate the consequences of his default. Nor should the courts allow the hire to take advantage of his own weak position and argue that the owner by his very nature as a capitalist profiteer must be at fault. The owner wants prompt payment and will not usually repossess or go to law unless that is his only alternative. Many a case in court is the result of a long process of disillusion and loss of patience on the part of the owner as the hirer persistently fails to pay. With relations thus soured, repossession or court action may be the only way left open to the owner. The hirer who pays his way will probably have no trouble and the owner will be content with his usual profit. One hopes, therefore, that standards of commercial practice in the credit industry are reasonably high, and that in most cases the hirer will not need the protection of the Act.
A much neglected person who also needs consideration is the third-party who buys the goods from the hirer not knowing that they are subject to a hire-purchase agreement. The very object of the hire-purchase agreement is to ensure that when this happens, the third party does not take a good title to the goods and that the owner can then recover them from him. A person may, therefore, pay the full market price for a car only to discover later that the seller had it on hire-purchase arid was not empowered to sell it. The owner may then repossess the car from the innocent buyer or demand that he pays the unpaid balance of the hire-purchase price.’ While there are few reported cases in Nigeria of actions for recovery from such third_parties,2 it is very probable that hardship may be suffered by innocent purchasers on a considerable number of occasions. Although in Nigeria nothing has yet been done to assist the innocent purchaser of hired goods, the English legislature in 1964 made an important move to protect innocent purchasers of motor-vehicles. By sections 27 to 29 of the Hire-Purchase Act 1964, where a motor-vehicle subject to a hire-purchase or “conditional sale agreement” is sold to a private purchaser who takes it in good faith and without notice of the agreement, the purchaser takes a good title to the motor-vehicle. This does not apply in the case of goods other than motor-vehicles, nor in the case of a “trade or finance purchaser” of a motor-vehicle. As trade and finance purchasers are not thus protected, they have set up a voluntary registration scheme called H.P. Information Ltd., which will inform them on request whether or not a particular vehicle they intend to buy is subject to a hire-purchase agreement. This digression, shows that third-party purchasers are also at risk and should not be forgotten.
Returning to the Nigerian Act itself, it may be argued that its attempt to assist the hirer has not been entirely successful. Clearly the Act has improved the position of the hirer, and the law can in any event only go part of the way towards protecting the weaker party to an agreement. Nevertheless there are obvious defects in the Act, many of which have been mentioned above, and which require attention by the legislature. For instance conditional credit- sale agreements, and the device of omitting the option to purchase from a hire agreement, are used by owners to circumvent the operation of the Act, there by frustrating its purpose. Constant reform making fundamental changes therefore seems to be necessary to close new loopholes as they appear. This has been done in England where major reform of hire-purchase law has been enacted twice since 1938, firstly in ‘964 and 1965, and again in 1974 in the Consumer Credit Act. The formalistic technique of modern statutory drafting, however, creates complexity, so that reform may close some loopholes but open others, thus necessitating further amendment. This system of progressive reform as it works at present may therefore make the law more tangled, and unworkable than it was before. The Crowther Committee in its Report on Consumer Credit, which led to the English Act of 1974, highlighted another aspect of the problem by criticising the “regulation of transactions according to their form instead of according to their substance and function”. This defect is in the very roots of the law, because the essential nature of hire-purchase as a contract of hire and not sale is entirely artificial,
The law originally developed not in the guiding hand of government policy, but as a method by which sellers of goods on credit may avoid the disadvantages of the Moneylenders Ordinance, Bills of Sale, and Sale of Goods Acts. Statute law has perpetuated this fiction and has failed to avoid the pitfalls of a formalistic and over-technical approach. Thus a conditional credit-sale is the same as a hire-purchase agreement for all practical purposes, but the statutory restrictions on repossession of the goods sold do not apply to it. The law has looked to the form of the agreement and not to its substance and function and has therefore run into difficulties.
The common law and the 1965 Act and its Regulations, as amended, constitute a body of law which is formidable for its sheer bulk and intricacy, The way ahead seems to be an inevitable process of constant statutory reform which will create further complexity and may make the law increasingly unmanageable and inaccessible to the very people it is intended to protect.
Re-enactment of the whole of the English Act of 1965 is not a complete answer, though reform which takes a lead from the English reformists is a possibility. The attempt of the Crowther Committee to escape the formalism of the law is particularly worthy of consideration though it has clearly not simplified the law in England. One hopes that the creativity of Nigerian lawyers will bring about a home-grown solution to the Nigerian problem, both as to the substance and the form of the legislation. In many ways the needs of Nigerian society are similar to those of England, though different aspects may require special attention in Nigeria.
While it is impossible to do more than indicate areas in need of reform in a book such as this, one possible solution will now be briefly canvassed. This proposal is that legislation should be enacted requiring the compulsory use of standard forms of credit agreement throughout the credit industry, in the following way. In consultation with interested parties, a selection of a small number of agreements would be drawn up. Alternatively a single agreement with a choice of certain optional clauses, or a skeleton agreement of compulsory clauses, leaving the parties free to draft the rest of the agreement, might be settled upon. The forms thus prepared would then be enacted as a schedule to legislation which would make the use of this drafting compulsory in hire-
purchase agreements. Failure to use the standard forms in such a case would result in the agreement being unenforceable by the owner. This provision might be based upon section 2(2) of the Act, also giving the court the discretion (but perhaps a wider discretion) to allow the owner to enforce an agreement where it would be just and equitable to do so. The legislation should define the type of agreement in which use of the forms would be compulsory by reference to the substance and function of the transaction rather than to its form. It would thus be possible to apply the legislation to agreements for the disposal of goods transferring or leading to the possible transfer of ownership to the buyer, in which the seller reserves a right to retake possession of the goods.
