If you run an equipment hire business, there are multiple ways you can provide your services. For example, you may choose dry hire, wet hire, marketplace hire or hire-to-purchase. Regardless of how you arrange your business, however, you will need an efficient hire agreement. Your equipment hire agreement tells your clients the terms and conditions under which you will provide the service. This article discusses the key terms to include in your equipment hire agreement.

Delivery, Pickup and Returns

You will need to decide whether you will: 

  • deliver the equipment to your client; or 
  • have the client collect and return the equipment to you. 

You should state what the process or penalty will be if a client fails to pick up a piece of equipment or returns it late. 

For example, you may wish to ensure that if the client fails to pick the equipment up within a certain time frame, you will not continue to hold the equipment for them. This means that you will be able to hire the equipment to somebody else if a walk-in client who is ready to pay approaches you. 

You may also wish to outline a fee the client must pay if they return the equipment late or whether it roles onto the daily rate of the next day.

Security Bond

Holding a security bond while the client uses the equipment can help to manage your business’ risks. It is essential to include this in the equipment hire agreement so the other party understands what you can use the security bond for in the event that they damage the equipment or fail to return it on time. A bond can only be offset against damage that actually occurs. 

For example, you can subtract the cost of repairing a damaged item from the bond.

Requirements and Conditions for Using the Equipment

You should include specific requirements for the client who will be using the equipment.

For example, you may set a minimum age or require a driver’s licence if the client will be driving machinery.

You also may want to include specific instructions on how to use your piece of equipment. 

For example, your forklift may only take diesel fuel. If this is the case, you should ensure the client is aware of this and any other aspects that may be unique to your equipment. 

Limitation of Liability and Indemnities

You do not want to be responsible for any loss, theft or damage that occurs while the client is in possession of the equipment. Therefore, you should require the client to indemnify you for any loss or damage to the equipment. 

For example, if you hire out a jukebox and a patron at a bar falls into it and breaks it, you want to ensure your client is liable for the damage and not your business. It is important to outline specific risks that relate to your business in the contract, to ensure that the indemnities cover your risks.

Minimum Hire Periods 

You may want to impose minimum hire periods regardless of how long the person intends to hire the equipment for. This may be commercially sensible, as doing so: 

  • protects your business; and 
  • ensures the equipment does not sit unused for periods of time. 

You need to make sure that you identify and disclose any minimum hire periods to your client before they sign the equipment hire agreement.

Cancellations and Refunds

You cannot charge unreasonable penalties for cancellations or refunds. You are also legally required to mitigate any losses you suffer as a result of a client’s actions. For example, if someone cancels, you should try to find another person to hire the goods rather than expecting the person cancelling to pay the entire amount. Also, you should not make the customer who has cancelled pay the full amount and then charge a new customer the same amount for the same piece of equipment. 

In your agreement, you may want to set out: 

  • a certain mandatory notice period for both cancellations and refunds; and 
  • Whether you will charge a fee.

Key Takeaways

It is important for you to have a clear and accurate equipment hire agreement to ensure your clients understand and agree to the details of your service. Some key terms include:

  • delivery, pickup and returns;
  • security bond;
  • requirements and conditions for using the equipment;
  • limitation of liability and indemnities;
  • minimum hire periods; and
  • cancellations and refunds.

If you need help with drafting your equipment hire agreement, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

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