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Report No. 20

7. Assignment by hirer.-

The Hire-Purchase Act, 1938, is silent on the question of assignment of hire-purchase agreements, which will therefore be governed by the Common Law. According to that law, in a contract of bailment pure and simple, the bailee gets no property in the goods, and he has therefore no right to transfer them by sale or pledge. But a person, who has an option to purchase goods, has a kind of proprietary interest therein, and that is capable, in law, of being transferred, unless there is a prohibition against it in the agreement.

As a hire-purchase agreement is a composite transaction involving elements both of bailment and of sale, the validity of the assignment of the rights thereunder or of the goods comprised therein must be judged on the principles stated above.

It has accordingly been held that when the hirer assigns his rights under a hire-purchase agreement, the assignee succeeds to all his rights and his obligations, vide Whitley v. Hilt, (1918) 2 KB 808. and that that is the position even though there is a restriction on the right to assign the goods, vide Belsize Motor Co. v. Cox, (1914) I KB 244;1 but that where there is in the agreement a prohibition against assignment thereof, a transfer of the goods by the hirer conferred no rights on the assignee, vide Trust Commercial Ltd. v. Parkway Motors Ltd., (1955) 2 AER 557 In the draft which was circulated for opinion it was proposed that, notwithstanding any restriction contained in the agreement, a third person who obtains bona fide a transfer of the goods from the hirer without any notice of the hire-purchase agreement should have the same rights and be subject to the same obligations as the hirer, and that should be without prejudice to the rights of the owner as against the hirer and his surety.

But as there was some opposition to this proposal, we decided, on reconsideration, to drop it. The result is that, under this legislation as under the English Act, when there is an assignment of a hire-purchase agreement, the rights of the parties will be governed by the general law. To this, however, we have provided one exception,1 departing, in that particular, from the English Act. It is that the hirer could assign the agreement, notwithstanding any prohibition contained therein, if the owner unreasonably withholds his consent thereto. Such a provision is to be found in the Australian Acts, and is calculated to do justice.

It might happen that a hirer who had made considerable payments under a hire-purchase agreement may not be in a position to go on with it, either because he is in financial difficulties or because he wants to close down his business. In such a case if he can assign the agreement, he will have a chance of realizing at least part of his investments. But if there is a prohibition against assignment in the agreement, and that is to be strictly enforced, he would have no option but to surrender the goods and lose all the payments made.

A provision such as the one now proposed to be inserted would give relief to the hirer in such cases, while the owner will not be prejudiced thereby as he can insist on all the amounts due to him being paid before the assignment is recognised, and further, neither the hirer nor the surety is discharged from their obligations to him under the agreement by reason of the assignment.

1. See Appendix I, clause 11.

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