Equipment Rental Agreement Overview

An equipment rental agreement, which is sometimes called a rental of goods agreement, is a contract that details the conditions by which one party can rent equipment to or from another party. It will define the obligations and rights of the parties involved, including details such as who is responsible for repair and upkeep of the equipment, who is liable for any injuries suffered while using the equipment, and how the equipment may or may not be used. It will also describe the equipment, how payment for equipment use is to be made, and for how long the equipment may be used.

An equipment rental agreement is useful as a record of transaction and as a legal reference in case the agreement is broken. These agreements are usually subject to state laws, which cover the general principles of the contract like mutual understanding and formation. It is generally a good idea to have legal counsel review any contract before signing it.

Key Considerations for Equipment Rental Agreement

Equipment rental agreements can make for fairly flexible contracts, but there are some details that should be included in any equipment rental contract. These details include:

  • Equipment. An equipment rental contract should define clearly the nature of the equipment being leased. If a piece of equipment has additional attachments that can be lost, stolen, or broken, such attachments should be listed and detailed.
  • Term Length. The length of the rental should be stated. Equipment leases are rarely made on a month-to-month basis without a term agreement being established.
  • Rent. The cost of renting the equipment should be set out, along with payment amounts, payment due dates, and acceptable payment methods.
  • Termination. Conditions under which the agreement can be terminated should be stated, as well as whether this termination may be voluntary and whether due notice is required.
  • Usage Limitations. Because that which is considered “normal wear and tear” falls under “good faith use” of rental equipment, setting up usage limitations is important, lest “normal wear and tear” be abused.
  • Insurance. Who will be responsible for insuring the equipment and how they will go about doing so should be worked out in the contract.
  • Transport and Installation. Who is responsible for transporting the equipment to the site of usage and installing it for usage should be specified in the contract.
  • Maintenance. To whom the responsibility of maintaining the equipment falls to should be stipulated, as well as what type of maintenance any equipment might require.
  • Warranties. Even though some quality and safety assurances are required by the law, additional warranties may be recommended. Any such warranties should be listed in the contract.

Indemnification in Equipment Rental Agreements

Indemnification is a major issue insofar as equipment rental agreements are concerned, since equipment usage tends to have a greater risk for leading to situations that could put a party at legal liability. Additionally, the standard equipment rental agreements tend to offer unclear language related to who is to indemnify who or to what extend and under what circumstances, which can in turn lead to much confusion and unsatisfactory outcomes for all parties involved. Thus, it is of the utmost importance when negotiating a rental agreement contract that it is made completely clear to all parties how indemnification will work in the contract.

A common outcome of indemnification negotiations is that the renting party will be required to hold the other harmless for damages caused due to equipment operation, unless gross negligence in the upkeep of the equipment can be proven. However, indemnification agreements can offer complete indemnity for one party or the other and any variation in between. What outcome all depends on the process of negotiation and the strategies and desires of the parties involved.

Terminating an Equipment Rental Agreement

If for whatever reason you desire to terminate an equipment rental agreement, you will most likely be contractually required to send an equipment lease termination letter. This document will specify the date the agreement will be terminated and the reasons for the termination. Such notices are time sensitive and generally must meet certain formatting and issuing requirements, so great care must be taken in their drafting.

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