What You Need To Know About Equipment Hire Agreements

by | Jan 9, 2023 | Business Sellers & Purchasers, Commercial Clients, Franchisors, Start-Up & Expanding Businesses, Tradie Businesses

One strategic decision you may decide to make this year is to buy equipment rather than keep on hiring it. Then, rather than have expensive pieces of equipment sit dormant between jobs and costing you money you may decide to get them to work making money for you. How? By renting the equipment out to other people when you don’t need it.

If you decide to do this though you need two things in place first; good insurance and an equipment hire agreement drafted for you by a commercial lawyer.

 

What is an Equipment Hire Agreement?

A legally drafted equipment hire agreement outlines the terms and conditions that customers are bound by when hiring equipment from your business. This agreement forms a contract between you and your customer and provides a safety net for your business if something goes wrong.

Often it is a requirement of the insurers that you have in place a properly legally drafted equipment hire agreement with your customers.

 

What should be included in an Equipment Hire Agreement?

A typical, well-drafted hire agreement should include:

  • a description of the equipment you hire out to customers;
  • obligations of the customer to you and your business;
  • a disclaimer of liability for your business if loss/injury/damage is suffered by the customer when hiring the equipment;
  • key payment terms including; the price of the equipment hire, invoicing, payment requirements and the availability of refunds (according to Australian Consumer Law); and
  • the availability of a good dispute resolution process if a party is wronged in the process of the equipment hire arrangement.

 

Why do I need a legally drafted Equipment Hire Agreement?

This essential contract contains important terms and conditions to protect you and your business. We’ve set out 5 critical clauses to consider in your equipment hire agreement below:

1. Payment Terms

  • Perhaps the most important aspect of any business arrangement is ensuring that you get paid for the provision of your goods/services.

Make sure that your agreement sets out the Hire Fees (wet and dry hire fees as appropriate) as well as all additional expenses (for example delivery fees) and that the customer agrees to pay those fees. Also, be clear about any minimum hire periods.

Did you know that you cannot charge interest on late payments or include a late fee unless this right is expressly included in your hire contract? Furthermore, a well-drafted hire contract should include the right to engage debt collectors and pass on those costs to the customer.

Including robust payment terms such as these in your equipment hire agreement will help to ensure you are paid on time by your customer. If you require a Deposit or up-front payment to secure the hire dates, this will also need to be drafted into your equipment hire agreement. This is a great way to prevent last-minute cancellations and ensure that your equipment is not left unhired.

2. Security Deposit

If you are hiring out valuable equipment, it is wise to collect a suitable security deposit in advance from your customers. This ensures your equipment is protected and helps to manage your business’ risks against theft or damage to equipment by the customer. Certain clauses must be included in your hire agreement to give you the contractual obligation to be able to use the security deposit if the equipment is damaged by your customer.

An experienced commercial lawyer who regularly prepares equipment hire agreements will know the types of clauses you need to include for this purpose.

3. Conditions of Use/ Limits of Liability

Limit your risk, by setting out clear conditions of use that your customer must comply with and limit your liability. These may include:

  • the type of licence that the customer must have before hiring equipment;
  • the minimum age that the customer must be to hire and use equipment;
  • that the business is not liable for loss, theft, damage and destruction of the equipment;
  • that the business is not liable for personal injury or death etc caused by the equipment;
  • only the customer can be in control of the equipment, not a third party;
  • that the customer must secure the equipment and not part with possession of it at any time; and
  • that the customer must exercise reasonable care and diligence when operating the equipment.

You should also include any special conditions specific to the equipment being hired (e.g. about vehicle towing capacity and refuelling of vehicles etc).

4. Delivery/Returns

Depending on the type of equipment, your equipment hire agreement should set out:

  • whether the client needs to collect and return the equipment from your business premises or whether the customer needs a trailer to pick up the equipment; or
  • whether your business delivers the equipment to the client and collects it at the end of the hire period.

Also, be clear on delivery fees and requirements.

5. Title retention

To ensure that your equipment remains your property at all times, add in a suitable title retention clause. This should ensure that your customer acknowledges that you retain title to the Equipment and that they will have limited rights to use the Equipment. The customer must agree not to sell, assign, sub-let, charge, lend, let hire or otherwise part with personal possession of, or create any security interest over, the Equipment.

 

How Do I Go About Implementing a Legally Drafted Equipment Hire Agreement Into My Business?

If you want to hire out your equipment it is crucial to get an equipment hire agreement drafted by a lawyer.

Rise Legal can assist you with creating an equipment hire agreement that is tailored to the unique needs of your business and will protect you from liabilities that could otherwise arise from the equipment hire, such as damage, injury, and theft.

To get started, book in for a free 15-minute consultation with one of our lawyers.

Helen Kay - Managing Director

Helen Kay

If you require any assistance with your business legals or any other commercial legal issue, please do not hesitate to contact me.

Typical Legal Disclaimer!…

Unfortunately, there is never a ‘one size fits all’ formula to apply. Every situation is unique and it can be tricky to wrap your head around some areas of the law. To ensure you are setting yourself and your business up for success, it is always best to consult a legal professional with expertise in the field.

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