Repossession

In Nigeria the arrangement appears most often with vehicles, equipment, generators and machinery.

A hire purchase agreement should state the cash price, the total payable including charges, the instalments and their dates, when the hirer becomes owner, the events of default, the owner's rights on default, and what happens to instalments already paid.

On default, a lawful process matters more than speed. The creditor should serve a written notice of default giving the debtor an opportunity to remedy it, follow the contractual procedure exactly, and where the contract or the law requires it, obtain a court order before taking possession.

What a creditor should not do is send men to seize a vehicle from the street, take goods from premises without authority, or use the police to recover a civil debt. Each of those exposes the creditor to a claim, and involving the police in a civil matter is itself unlawful.

After repossession, goods sold to recover the debt should be sold properly, and the debtor is entitled to an account of the proceeds.

Self help is the recurring Nigerian problem, and it runs in both directions.

Creditors seize vehicles from roadsides and car parks, sometimes with men hired for the purpose, on the basis that the agreement allows repossession. Even where the agreement does allow it, taking goods in a manner that involves force, intimidation or breach of the peace exposes the creditor to claims in trespass and conversion, and potentially to criminal liability.

The police route is worse. Debt recovery is a civil matter and the police have no role in it. Nigerian courts have repeatedly awarded damages against both the police and the complainants who used them to detain debtors, and a fundamental rights application is the standard response.

For a debtor facing repossession, the practical steps are: get the agreement and read what it actually says about default, respond in writing rather than going silent, propose a documented payment plan, and take advice quickly where seizure has already happened.

For a creditor, the boring route is the effective one. Written default notice, contractual procedure, court order where required, and a properly conducted sale with an account of the proceeds. It is slower and it survives challenge.

Three ways to buy something over time, with very different consequences on default.

Hire purchase: the owner keeps ownership until the final instalment. You have possession and an option to buy. On default the owner can recover the goods, and instalments already paid are usually not returned.

Credit sale: ownership passes to you immediately and you owe the price. On default the seller has a debt claim and nothing to take back, unless a retention of title clause was agreed.

Secured loan: you own the goods, bought with borrowed money, and the lender holds security over them or over other assets. On default the lender enforces the security, following the process the document and the law require.

A buyer should know which of the three they signed, because it decides whether anybody can take the item back and what happens to what they have already paid.

Repossession recovers goods, not value. Used equipment and vehicles sell for a fraction of the outstanding balance, so a creditor often recovers less than the debt and must still pursue the shortfall.

The process also takes time where a court order is required, and goods deteriorate while it runs.

For debtors, the loss can be disproportionate. Instalments paid under a hire purchase agreement are generally not returned, so somebody who paid most of the price and then defaulted can lose both the goods and the payments, subject to what the agreement and the law provide.

And unlawful repossession creates a new liability rather than solving the old one. A creditor who seized goods improperly may face a claim worth more than the debt they were recovering.