Examkin

Question

Difficulty: HardHire Purchase: Features, Statutory Requirements, Rights, and Obligations

A commercial bakery entered into a hire purchase agreement for an industrial baking oven with a total hire purchase price of ₦2,000,000\text{₦}2,000,000. After paying regular monthly installments totaling ₦700,000\text{₦}700,000, the bakery decided to exercise its statutory right to terminate the agreement voluntarily. Assuming there are no installment arrears and the asset is returned in good order, what is the minimum additional amount the bakery must pay to the owner under hire purchase statutory provisions?

  1. A
    ₦0
  2. ₦300,000Answer
  3. C
    ₦633,333
  4. D
    ₦1,300,000

Answer

The bakery must pay an additional ₦300,000 to meet the statutory 50% minimum payment requirement upon hirer termination.
Under statutory provisions governing hire purchase contracts, a hirer exercising the right to terminate the agreement must make up any shortfall so that total payments equal at least 50% of the total hire purchase price. With a total price of ₦2,000,000, 50% equals ₦1,000,000. Subtracting the ₦700,000 already paid leaves a minimum additional liability of ₦300,000.

Step-by-Step Solution

1
Determine the statutory minimum payment threshold for termination by a hirer.
Statutory provisions specify that total payments must equal at least 50% (one-half) of the total hire purchase price.
The Hire Purchase Act protects hirers by allowing voluntary termination provided 50% of the total price is satisfied.
2
Calculate 50% of the total hire purchase price.
50%×₦2,000,000=₦1,000,00050\% \times \text{₦}2,000,000 = \text{₦}1,000,000.
This establishes the minimum cumulative amount required by law.
3
Deduct the total installments already paid from the required 50% minimum threshold.
₦1,000,000−₦700,000=₦300,000\text{₦}1,000,000 - \text{₦}700,000 = \text{₦}300,000.
The difference represents the remaining sum needed to satisfy the statutory termination obligation.

Key Concept

Statutory Minimum Payment on Hirer Termination
Estimated Time:2m 0s
Rate this question

Topics

Hire Purchase: Features, Statutory Requirements, Rights, and Obligations

More questions from this topic