Many businesses hire out equipment for a third party to use or operate themselves. This is known as a dry hire agreement. It is in contrast to a wet hire agreement, where you provide an operator along with the goods.
For some businesses, it would be rare to provide an operator with the equipment, like if you hire out marquees for events. In contrast, it is common for businesses that hire out machinery like forklifts or excavators to provide an operator.
The terms to include in your hire agreement depend on whether it is a wet or dry hire arrangement. This article explains what clauses you should include in a dry hire agreement to best protect your business.
Condition of Equipment
You should outline the condition of the equipment in a dry hire agreement. Here, you need to determine who is responsible for the condition of the equipment. If it is the hirer, you may wish for them to provide a condition report when they return the equipment.
By adequately documenting this, you can more easily ensure that the hirer provides the equipment back in the condition they received it. Here, you should also outline that the hirer must ensure that the equipment is in proper condition before they start to use it.
You are unlikely to want to be responsible for any loss, theft or damage the hirer causes to the equipment. Therefore, you should require the client to compensate for any loss or damage they cause to the equipment.
For example, if you hire out a marquee and a patron at an event rips it, you want to ensure the hirer is responsible for the damage, and not your business.
It is important to outline specific risks that relate to your business to ensure that the hirer is responsible for all of those risks.
Maintenance of Equipment
You may want a hirer to bring the equipment back to you for servicing during the period of their hire. Alternatively, you could stipulate that they need to engage an authorised third party to service and repair the equipment while it is in their possession.
For example, your contract could outline a minimum number of services and who is responsible for the costs of servicing.
You might want to use someone who you already know and trust to fix the damage.
For example, if you hire out a forklift that needs to be serviced every three months, you should include a provision in your agreement setting out that the hirer must take the forklift to get serviced if they hire it for more than three months.
Collection and Return of Equipment
You should include a term in your agreement that stipulates how the equipment will come into the hirer’s possession.
For example, you should outline whether the hirer will need to collect the equipment from you, or if you will deliver it.
Security Bond
You should hold a security bond over the equipment while the hirer is using it. This can assist to manage your business’ risks in case the equipment needs to be repaired.
It is essential to include this in the hire agreement, so the hirer understands that you can use the security bond in the event that they damage the equipment or fail to return it on time. Here, you can offset the bond against any damage that the hirer causes.
For example, here you can subtract the cost of repairing a damaged item from the bond.
Key Takeaways
It is imperative to have a robust hire agreement in place for your dry hire or wet hire arrangement to reduce risk to your business. Some important terms to consider include the:
- condition of the equipment;
- maintenance of the equipment;
- collection and return of equipment; and
- security bond.
If you have any questions on how to draft a dry hire agreement, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.
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