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If you are considering hiring out machinery or have a business already hiring out machinery, it is essential that you legally protect your business. When renting out machinery, there are multiple factors to consider, including:
- the type of hire you will be undertaking;
- having your terms and conditions prepared; and
- protecting yourself through the Personal Properties and Securities Register (PPSR).
This article will explore what you need to keep in mind when running an equipment hire business that rents out machinery.
Terms and Conditions
You need to have a clear set of terms and conditions in place for your clients to agree to when using your hire services. Some important terms you should include in the terms and conditions are:
- delivery, pick up and returns – you may require the client to collect and return the machinery to you, or you may agree to deliver it to them;
- use of equipment – you may require a certain age and licence for anyone to use the machinery;
- equipment conditions – you might want the responsibility to be on the client on whether the machinery is fit for their purposes;
- risk – you will want to waive your legal responsibility when it comes to risk from the hirer using the machinery;
- indemnity – you will want the hirer to be liable for any damage to the machinery or other personal property; and
- payment terms on how the hirer will pay you.
Types of Hire
Dry Hire v Wet Hire
A dry hire is when you hire the machinery without an operator. In comparison, a wet hire is when you provide an operator for the machinery.
You will need to include different terms and conditions if you do intend to provide an operator. If you want to engage a worker to be the operator, you will need a contractor agreement or employment agreement for the operator.
A hire purchase is when you offer the hirer the opportunity to purchase the machinery at the end of the hire period. If you intend to undertake a hire purchase agreement, you must ensure that it is clear in your terms and conditions that ownership of the goods will only pass once your client has paid for the machinery in full.
A marketplace hire is when you may provide a platform which connects hirers with owners of machinery.
You will want to ensure in your terms and conditions that your legal responsibility is limited so that the parties being connected on the platform assume their own responsibilities.
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Personal Property and Security Register
The PPSR is, essentially, a notice board of security interests. You may want to secure your interest in the machinery to ensure you have priority over other creditors if your customer goes broke before they have paid you in full. If you do not register your interest, your machinery may be sold to pay other creditors first. Making a registration helps protect your interest in your machinery when they are not in your possession.
You are only able to secure your interest through the PPSA if you hire the machinery out for two years or more or for an undefined period of time. Shorter term rentals are not subject to the Personal Properties and Securities Act (PPSA).
Consequential Loss and Caps on Liability
Consequential loss is a type of loss which both parties foresee might occur when they enter into the contract. You typically limit or exclude yourself from legal responsibility for consequential loss in the contract.
In every contract you sign, you will usually find a reference to indemnities. In basic terms, indemnities are promises from one party to compensate the other party for certain losses or damage. You will want to include a cap on your responsibility to indemnify the other party.
If you are planning on starting a business which hires out machinery, or you want to ensure your existing business is protected when hiring out machinery, you must have a robust set of terms and conditions in place. You also must consider:
- the type of hire arrangement you want to have;
- whether your terms and conditions accurately reflect your arrangement; and
- whether you should register your interest in the machinery on the PPSR.
If you have any questions about running an equipment hire business, contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.
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