ASSIGNMENT 3

Prepared by:

Ahmad Fadhil Bin Mohamed (2013255306)

Nor Zarifah Binti Hazizan (2016101691)
Nurul Athirah Binti Muhammad Zin (2013872004)
Muhamad Amir Hafiz Bin Mohd Suhaimi (2013288334)

NBH2B

Prepared for:

Madam Nurul Shuhada Binti Suhaimi

Business Law (LAW416)

UiTM Puncak Alam

2017
 LAW 416 / INTRODUCTION TO COMMERCIAL LAW

ASSIGNMENT 3

QUESTION 1

“It is the right of owner to repossess the goods hired by the hirer for non-payment
of instalments as stipulated under the Hire Purchase Act 1967.”

Explain the above statement with reference to the Hire Purchase Act 1967.

(25 marks)

In a contract of hire purchase, property in goods or ownership is not transferred to

the hirer at the time when the contract is made. The hirer only obtains possession over
the goods, but not the ownership. Property in good or ownership remains with the owner
until the full payment of the installments by the hirer, and the hirer chooses to purchase
the goods. The Hire Purchase Act 1967 provides the procedures for repossession and
the right & duties of owner and hirer arising from such repossession.1

Before repossession, the owner may repossess the good from the hirer only if the
hirer defaulted to pay two (2) successive installments and the total payment of installment
paid by the heir amount to not more than 75% of the total cash price of the good as in the
hire-purchase agreement.2 Section 16(1A) of the Hire Purchase Act 1967 provides that if
the total payment of installments is more than 75%, the owner may not repossess unless
he has obtained an order of the court. Under Section 16(1C) of the Hire Purchase Act
1967, as for the deceased hirer, the owner shall not repossess the goods unless there is
a default to pay four (4) successive installments.

1
Hire-Purchase by Puan Zuramaznum Sainan, 2014
2
Section 16(1A) of the Hire Purchase Act 1967
 In order to repossess, the owner must first serve the Fourth Schedule notice on
the hirer. In this Fourth Schedule Notice, the hirer would be informed that the owner would
repossess the good after the expiration of the period of 21 days from the date of the
service of this notice, unless the hirer pays the arrears of installment & interest due within
that 21 days period. The period fixed must not be less than 21 days, otherwise the notice
not valid.3

The exception given when the owner need not comply the requirement under
Section 16(1) of the Hire Purchase Act 1967. For example, serving the fourth Schedule
notice, if the owner can prove that there are reasonable grounds to believe that the goods
will be removed or concealed by the hirer. If the hirer has returned the goods within 21
days after the hirer received the Fourth Schedule notice, the shall not impose on the hirer
any payment for cost of repossession, cost incidental to repossession, and cost of
storage.4

During repossession, the repossession process only permitted by a person who

holds a written permit issued by the Controller.5 Otherwise, the owner shall be guilty of
an offence.6 Therefore, the owner can only appoint a person who is a permit holder as
his agent to undertake the repossession.7 Otherwise, the owner shall be guilty of an
offence.8

Before and when making the repossession, the owner or his servant is required to
comply with any regulations relating to the manner of taking possession. The regulations
are given in the Hire Purchase (Recovery of Possession and Maintenance of Records by
the Owners) Regulation 1976. Under Regulation 4, if the repossession is carried out by
the owner shall produce and show his identity card and provide the name & address of
the company, firm or body of organization to which he belongs the hirer or if the
repossession is carried out by the servant or agent shall produce and show his identity

3
Section 16(1) of the Hire Purchase Act 1967
4
Section 16A of the Hire Purchase Act 1967.
5
Section 17A(1) of the Hire Purchase Act 1967.
6
Section 17A(2) of the Hire Purchase Act 1967.
7
Section 17B(1) of the Hire Purchase Act 1967.
8
Section 17B(2) of the Hire Purchase Act 1967.
card and his authority card. Failure to comply with this Regulation is an offence under
regulation.

The repossession must be exercised in a lawful manner. For the purpose of

repossession, the owner or his agent is authorized to enter into any premises in the proper
and lawful manner under Section 34(e) of the Hire Purchase Act 1967. If the servant or
the agent of the owner commits an offence during taking possession, the owner is
deemed guilty of the offence and be liable to punishment for the offence, unless the owner
can prove that the act complained of was not within the ordinary scope of the agent’s
employment or the act done without the owner’s consent or connivance, and the owner
has exercised all such diligence as he ought to have exercised having regard to all the
circumstances of the case to prevent the commission of such offence.9

After repossession, the owner shall deliver to the hirer personally a document
acknowledging receipt of the goods immediately after the repossession.10 This document
contains a short description of the goods, date, time and place where the owner took
possession of the goods.11 Within 21 days after the owner has repossessed the goods,
the owner shall serve on the hirer and every guarantor the Fifth Schedule notice.12 This
Fifth Schedule notice, gives the option to the hirer either to require the owner to redeliver
the goods to him and pay the arrears of installments, the interest due and the costs of
repossession and redelivery or to finalize (complete) the agreement by paying the
balance due under the agreement and the cost of repossession. If the owner fails to serve,
the owner will lose his rights under the hirer-purchase agreement and not entitle to get
any remedies.13

After repossession, the owner shall not sell or dispose of the goods without the
written consent of the hirer, until the expiration of 21 days after the service of the Fifth
Schedule notice, or until the expiration of the time for payment, in the situation where the

9
Section 48 of the Hire Purchase Act 1967.
10
Section 16(4) of the Hire Purchase Act 1967.
11
Section 16(5) of the Hire Purchase Act 1967.
12
Section 16(3) of the Hire Purchase Act 1967.
13
Section 16(6) of the Hire Purchase Act 1967.
hirer has given a notice to the owner to reinstate the agreement.14 If the owner sells or
dispose of the goods, in contravention of this rule, the owner shall be guilty of an offence. 15

If the owner intends to sell the goods by public auction, the owner is required to
serve the hirer a copy of the notice of such public auction not less than 14 days from the
date of such public auction.16 If the owner intends to sell the goods other than in the public
auction, the owner is required to give the hirer an option to purchase the goods at the
price which he intended to sell.17 Failure to do so would render the owner guilty for an
offence under the Hire Purchase Act 1967.18

14
Section 17(1) of the Hire Purchase Act 1967.
15
Section 17(2) of the Hire Purchase Act 1967.
16
Section 18(4)(a) of the Hire Purchase Act 1967.
17
Section 18(4)(b) of the Hire Purchase Act 1967.
18
Hire-Purchase by Puan Zuramaznum Sainan, 2014
QUESTION 2

Explain the types and effects of crossing of cheque according to the Bills of
Exchange Act 1949.

(25 marks)

Cheques is define a bill of exchange drawn on a banker payable on demand by

virtue of Section 73(1) of Bills of Exchange Act 1949.19 The “banker” includes a body of
persons who carry on the business banking.20

By virtue of Section 3 of Bills of Exchange Act 1949, which defines “bill of

exchange” and Section 3 of Bills of Exchange Act 1949, which defines “banker”, the
cheques is necessarily comprises of the following characteristics which is an
unconditional order in writing, it is issued and signed by the drawer, drawn on a banker
(drawee bank or paying bank), it orders the drawee or paying bank to pay a sum certain
in money on demand and it is drawn in favor of a specified person (payee) or to his order
or in favor of a bearer.

The purpose of crossing a cheque is to instruct that payment can only be made
through a bank or that it must be paid in a certain manner, for example, through an
account. Drawers cross their cheques in order to ensure that even if the cheques fall into
wrong hands, it would be difficult for such an authorized person to obtain payment on the
cheques. For instance, a crossed cheque must be cleared through an account and this
makes it difficult for the wrong party to obtain payment and it also enables the recipient
to be traced.

Crossings are either general, special and limited. A general crossing may take any
of the following forms where a cheque bears across it face two parallel transverse lines
simply, or added in between those lines with the words “not negotiable”, or the words “and
company” / “& Co.” either with or without the words “not negotiable”.21

19
Negotiable Instruments by Puan Zuramaznum Sainan, 2014
20
Section 2 of Bills of Exchange Act 1949
21
Section 76(1) of Bills of Exchange Act 1949
 The effect of this general crossing is the paying banker, in example, the drawee
bank can only pay the amount of the cheque to a collecting banker, in example, the bank,
which collects payment for its customers. The paying banker also cannot pay cash the
cheque across the counter. It is hindrance for the someone who has obtained the cheque
wrongfully to obtain payment. It gives the customers of the paying bank some time to
request the paying bank to stop the payment.22

A special crossing may take of the following forms where a cheque bears across
its face two parallel transverse lines, added in between those lines a name of a banker,
either with or without the words “not negotiable”. The cheque may also be crossed with
the name of a banker without the two parallel transverse lines. However, the words “not
negotiable” may be added to banker’s name.23

The effect of special crossing is it is safer than general crossing. The paying banker
must pay the amount of the cheque only to the collecting banker named in the crossing.
The person who wants to obtain payment of the cheque must be “customer” of the
collecting banker named in the crossing, in example, having an account with that
collecting banker. If the cheque going to be negotiated, it can only be negotiated to any
person who is a “customer” of the collecting banker in the crossing.

Limited crossing is divided into two categories where one cheque “Not Negotiable”
and other is “Account Payee Only”. The form “Not Negotiable” if a cheque is crossed with
the words “not negotiable”, the cheque loses the full character of negotiability but remain
transferable. The holder of the cheque cannot negotiable the cheque to another but he
can transfer the cheque to someone else. However, the transferee cannot obtain a better
title than that of the transferor. If the transferor is defective, it will also affect the title of the
transferee, even though the transferee may not know of the defect.24

22
Negotiable Instruments by Puan Zuramaznum Sainan, 2014
23
Section 76(2) of Bills of Exchange Act 1949
24
Section 81 of Bills of Exchange Act 1949
 The “Account Payee Only” objectives are to minimize the chances of fraud. It
operates as a “notice” to be collecting banker that only the account of the payee name
named in the cheque is to be credited, not the account of someone else. A collecting
banker would be guilty ‘negligence’ and liable to the true owner for the amount of the
cheque, if the collecting banker disregards the crossing by not crediting the amount of the
cheque of the true payee.

However, the liability from negligence, can be rebutted if the collecting banker can
prove that he made proper inquiry as to the authority or title of the person into whose
account the cheque was credited.25

As conclusion, the purpose of crossing a cheque is to make payment through

account only and not in cash. As such the payee should deposit the cheque for collection
with his banker and his banker will collect the cheque for him and he can withdraw the
amount once the amount after collection is credited to his account. This is one among the
protective measures by which wrong payments are avoided.

25
Negotiable Instruments by Puan Zuramaznum Sainan, 2014