IN May 2009, the Parliament of Uganda enacted legislation that is supposed to govern all trade transactions under hire purchase arrangement.
Uganda did not have specific laws relating to hire purchase trade. Instead, there has been reliance to other laws, most of which were received from Britain under the 1902 Order in Council, like the Sales of Goods Act, Contract Act and the common law which evolves through court decisions.
Various commercial laws are currently undergoing reform.
The Hire Purchase Act 2009 is among these laws. The key objective of this Act is to provide for the regulation and registration of hire purchase agreements and the licensing of persons carrying out hire purchase business and for related purposes.
However, it has not been in operation because of lack of accompanying regulations.
The trade ministry is working in conjunction with the Uganda Law Reform Commission to spearhead the exercise.
The Act: Hire purchase, in simple terms, is a system in which something hired becomes the property of the person hiring it after an agreed payment has been made.
Goods bought under such arrangement include, houses, vehicles, furniture, land and ‘industrial growing crops’ and other things attached to or forming part of it. Before payment is complete, the seller of the goods is still the owner, though they could be in the possession of the hirer (who in the long run becomes the buyer).
When all agreed payments are over, the ownership is then transferred. In between the hirer and the owner is another party, the guarantor.
He is supposed to perform the hirer’s obligations in case of default by the hirer.
Hire purchase prices are normally higher than the actual if one paid cash. This is because the payment in instalment attracts interest, charges, deposit and other administrative costs.
Terms governing this transaction must be written and clearly stipulated in a hire purchase agreement, signed by the hirer, guarantor and owner.
For any person or company to carry out hire purchase business, the law stipulates that they have to be duly licensed by the trade minister.
The Act also stipulates that goods bought under hire purchase must be of satisfactory quality.
In other words, they must be fit for the purposes for which such goods are normally supplied, safe to the consumer and durable.
The hirer is expected to carefully inspect the goods to establish the price, model or make and other important details pertaining to them.
The owner, on the other hand, must also disclose all the relevant information about the goods before the hire purchase agreement is signed.
The agreement then shall spell out details about the commencement date, hire purchase price and the cash price, amounts and frequency of instalments to be made, a clear description of the goods and late payment charges, if any.
Reactions to the regulations Once the Hire Purchase Regulations 2010 are in place, the salaried employees are likely to benefit most.
According to Eng. Gaggawala Wambuzi, the trade state minister, “A teacher earning sh300,000 monthly can’t buy even a motorcycle unless it is under hire purchase.”
An officer at the Private Sector Foundation Uganda believes that hire purchase should be made more accessible and beneficial to the consumers, while at the same time it must be safe and protective to the operators.
Faisal Mukasa, an advocate, observed: “It addresses poorly packaged, inappropriately priced and badly delivered hire purchase products in Uganda.
Exploitation of the public by leasing houses and big car importers is part of the mischief the Hire Purchase Law should solve.”
