I’m a boda boda rider; should I save or get a shylock loan to buy my own motorcycle in one year?
Boda-boda riders using the lipa mdogo mdogo financing model have secured a legal victory after the High Court ruled against the repossession of motorcycles based on vague and incomplete hire purchase agreements.
The judgment stemmed from a dispute between Minutes Logistics Limited and Deckson Muma, whose motorbike was seized after he defaulted on daily payments, prompting the lender to demand Sh373,101 in alleged arrears and penalties.
In the judgment that exposes widespread weaknesses in many of the credit contracts used in the low-income transport sector, the court said the documents used in the popular lipa mdogo mdogo system failed to show the purchase price, the payment period, and the borrower’s actual repayment history.
The case began in 2023 when the company sued Mr Muma at the Small Claims Court in Milimani, Nairobi, accusing him of breaching a January 2020 hire purchase agreement. This was after he fell behind on his Sh485 daily instalments.
Court documents revealed that Mr Muma had initially deposited Sh10,000 as an expression of interest and was required to pay Sh485 daily for 15 months.
However, after he defaulted, the company repossessed the motorcycle and sued him for arrears, penalties and repossession charges.
The lender claimed it had received Sh188,055 toward the purchase price, leaving a balance of Sh43,246, but also imposed late payment fees of Sh311,855 over 18 months, inflating the total demand to Sh373,101.
The trial court partially upheld the claim, awarding the company Sh55,246 and ordering the motorcycle’s return to Mr Muma.
Dissatisfied, the lender appealed, arguing that the trial court had granted relief not sought in the pleadings.
However, the High Court dismissed the appeal, finding that the lender’s own documentation failed to substantiate its claims.
The court noted that none of the four submitted contract documents—including the hire purchase agreement—specified the motorcycle’s purchase price or the contract’s duration.
“There was no evidence relating to the total amount the respondent was required to pay, no evidence of the payment duration, and no concrete proof of what he had actually paid. Consequently, there was no basis to declare him in default,” the court ruled.
It emphasised that without these essential terms, no clear contract existed between the parties.
The court further criticised the lender for poor record-keeping, noting that while it alleged Mr Muma had paid Sh188,055, it provided no bank statements, M-Pesa records, or other evidence to verify the claim.
“No payment trails were presented to demonstrate compliance or default,” the judge observed, making it impossible to determine whether the rider had breached the agreement.
Additionally, the court condemned the lender’s attempt to impose an exorbitant Sh311,855 penalty, deeming it “unconscionable.”
The court clarified that the Sh485 figure cited as a late fee was, in fact, the standard daily instalment, not a penalty.
It added that the lender could not repossess the motorcycle and still demand instalments. “The appellant could not have both the motorcycle and the amount of the instalments due,” said the judge.
The judgment further highlighted procedural lapses, noting that the hire purchase agreement entitled the borrower to a grace period and proper notice before repossession—neither of which the lender proved it had provided.
“No evidence was adduced to show whether these rights were respected. Without such proof, there can be no basis for finding a breach of contract,” the court held.
The court concluded that the company failed to prove its case. “There was no material upon which the trial court could find in favour of the appellant,” he ruled, adding that the appeal “cannot… have any merit.”
The ruling adds judicial weight to complaints raised by subscribers of lipa mdogo mdogo items across Kenya, many of whom sign simplified hire purchase agreements without full details of payment timelines, penalties or total costs.
It also places pressure on lenders in the growing micro-credit motorbike market to improve record-keeping and contract clarity.
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