Summary

A standard form agreement, which bore the hallmarks of a hire purchase agreement, was not converted into, nor was it to be construed as, a purchase agreement simply because it contained an option clause which entitled the option holder to acquire, for a wholly nominal consideration, goods for which payments in excess of £2.5 million would be made during the lifetime of the agreement.

Facts

A standard form agreement, which bore the hallmarks of a hire purchase agreement, was not converted into, nor was it to be construed as, a purchase agreement simply because it contained an option clause which entitled the option holder to acquire, for a wholly nominal consideration, goods for which payments in excess of £2.5 million would be made during the lifetime of the agreement.

Held

The fact that the consideration payable on the exercise of the option was nominal was not a decisive factor, since the court would not enquire into the sufficiency of the consideration under a genuine contract, which this undoubtedly was. There was no binding obligation upon Cheshire, as hirer, to buy the goods at the end of the agreement. To hold that the agreement was a purchase agreement would overturn or redefine a very large number of standard hire purchase agreements, and the court declined to go down that path. Helby v Matthews (1895) AC 471 considered.

Appeal dismissed.