If you want to rent equipment, or are a supplier of equipment rental, there’s one big aspect that you need to cover and understand perfectly: the equipment rental agreement. There might be some traps in any equipment rental agreement terms and conditions.
This article points out the areas of the legally binding contract to which both Lessor and Lessee should pay more attention. Many companies do not want to employ someone to draft their equipment rental agreement. So they just download free rental agreement templates from the Internet.
Oftentimes, these templates include abusive and restrictive clauses that can end up being damaging for both the owner and the renter. There are also other legal risks. Both parties should thoroughly read the contract before agreeing to it. However, the first party, i.e. the owner or lessor does read it, while the renter or lessee usually doesn’t go through the whole thing. We all know that “nobody reads the terms and conditions”. However, if you’re renting equipment, you might just want to reconsider this.
Always go through the whole document, which is a legally binding one. Do not forget that in equipment rental, a lot of accidents do happen. So, you must know exactly if you are susceptible to any liabilities, and when these may apply. Whenever you make, or read the equipment rental agreement terms and conditions, here’s what to look out for.
The Main Parts of an Equipment Rental Agreement
A usual equipment rental agreement template, also known as an equipment rental lease agreement, has about 20 paragraphs. It’s pretty easy to go through these. Most of them are only formalities. Yet, usually, things get complicated later on the agreement. Usually, this happens in the damage and liability sections. Let’s go through all of the sections of the contract, one by one.
1. The onset of the document usually states the parties of the agreement. Make sure that the terms clearly specify both the renter / lessee and the owner / lessor’s details. Usually, the owner is a company or corporation. In such event, their name must be clearly spelled out, along with the address. If the renter’s party has more than one representative, make sure that all are written down in the onset.
2.The document should then specifically spell out the exact pieces of equipment to be rented. Be sure to write the names in full and do not omit anything if you are the owner / lessor. If you are the renter / lessee, likewise make sure that everything is written down.
3. After this simple section, the numbered clauses begin. Here, there should be information about the date to return the equipment by. After that, the agreement should contain pricing information for all of pieces of equipment, where prices differ. Most agreements also allow the owner to charge the renter for any taxes directly via credit or debit card. These cases should be clearly described.
4. The next sections are: the security amount deposited by the Renter, late payment taxes, and the location of the equipment – i.e. where the renter will use the equipment. Other important info usually regards the care of the equipment, repair of the equipment, and insurance of the equipment.
The renter usually is contractually bound not to hand the equipment to unauthorized personnel, break the law with the equipment, or store and use the equipment in potentially damaging situations. And so we’ve gotten to the topic of damage. Here is where the trickiest of bits begins.
Damage, Indemnification, and Liability Traps
Obviously, as a renter, one has the obligation to do three things if the rented equipment gets damaged:
- First of all, the renter must alert the owner as to the exact nature of the damage.
- Second of all, the renter must be responsible for any loss, damage, and needs to pay the diminution of the equipment, or its loss.
- Third, the renter must agree to inform the owner if the equipment must be repaired, and is obligated to pay for the subsequent repair.
The condition of the equipment upon rental is a very important issue as well. Most contracts and agreements state that the equipment must be inspected before signing said contract. However, many do not do that. Thus, the agreement must state that the equipment will be inspected upon use or upon arrival (if the renter is from a different area/state than the owner). Fragile equipment must be handled with care.
Almost any sample equipment rental agreement states that the equipment must be in the exact same condition upon return, except for normal decay on account of usage. As a renter, make sure that latter part is indeed specified.
Then comes the most difficult part of the equipment rental agreement: indemnification. Some articles include person damage and the negligence of the owner. Other articles include person damage and exclude the negligence of the owner. There are also articles that exclude person damage, and negligence of the owner. Needless to say, the middle one is the worst case scenario, while the first one is the best case scenario. Let’s go more into detail:
Most contracts state that the renter must indemnify the owner in case of property damage, equipment damage, or personal injury arising from the renter’s use of the equipment. However, this damage may be the cause of negligence on the part of the owner. This needs to be specified, as the renter may end up paying for the fault of the owner. Furthermore, personal injury may be caused this negligence of the owner. Yet the renter may end up paying up for it if owner negligence isn’t mentioned.
Suffice it to say, a careless renter who doesn’t thoroughly read through this part risks a major setback in his or her funds. While equipment damage and property damage may be covered more easily, personal injury can end up costing very, very much, if the injured party suddenly decides to pursue legal action against the renter.
This should be about everything that you, as either a renter or an owner, need to know about the equipment rental agreement. If you have any other problems, make sure that you pay attention to the last paragraph of the contract, which usually specifies the end-date, and court implications of the equipment rental. The most important thing to remember is: read the whole thing. I know it may be boring, it may be legal mumbo-jumbo, but it is important, and it may end up costing you your business. If you are preparing to rent construction or other type of equipment, you can also read our Complete Guide to Equipment Rental.
Luke Smith says
Thank you so much for the tip to always go through any legal document completely before signing it so you will know if you’re susceptible to any liabilities. I can see how this would be especially important with something like an equipment rental agreement where you will be using and operating costly machinery. It couldn’t hurt to hire a lawyer to look over any contracts like this for you so you can be sure you’re good.