HIRE-PURCHASE TERMINATION
An example of the common law mitigation rule, which states that a claim may not be made which benefits the claimant to a greater extent than his losses, nor which punishes the defendant.
Mr R. obtained a Mini Mayfair for £3050 in February 1987. He paid a deposit of £500 and the balance was to be paid on hire-purchase over 36 months. Included in the Total Charge for Credit was a £10 Option to Purchase fee. The monthly payments were £92.37, of which he made only one. Mr R. lost his job in March 1987, returned the car to the garage, and subsequently emigrated. The car was resold by the garage for only £1600. A county court issued a plaint 516 days after the termination date. What is R.'s liability?
There are two ways of determining R's liability to the finance company:
(a) Termination (s.100 of the Consumer Credit Act 1974)
|
Total
Amount Payable under agreement = |
£
500.00 + (36 x 92.37) = |
£3825.32 |
|
Half
total amount payable = |
£3825.32
¸
2
= |
£1912.66 |
|
Less:
Amount paid already = |
£
500.00 + £92.37
= |
-
£592.37 |
|
Balance
payable on termination
= |
|
£1320.29 |
(b) Settlement of agreement based on common law rules for compensation
|
Total Amount Payable under agreement = |
£
500.00 + (36 x 92.37) = |
£3825.32 |
|
Less:
Deposit = |
£
500.00 |
|
|
Instalments
paid =
|
£
92.37 |
|
|
Option
to purchase fee = |
£
10.00 |
|
|
Rebate of charges (on |
£ 751.45 |
|
|
Sale
of car = |
£1600.00 |
|
|
Total
Deductions = |
£2953.82 |
-2953.82 |
|
Balance
payable = |
£
871.50 |
|
|
Add: interest on £871.50 pursuant to Section 69 of the County Court Act 1984 at 15% per annum from the date of termination to the date of the plaint (516 days) = (as
then in force) |
|
|
|
Balance payable at date of claim =
(with the plaintiff claiming additional interest
at the daily rate of £0.36 until judgment.) |
£1057.26
|
|
The plaintiff must therefore claim £1057.26, less than his apparent right under termination of the hire-purchase agreement.
© Bob Imrie 26 October 2004