Equipment hire agreements: small print with a big bite

Our experience has taught us that many of the organisations that enter into these contracts are caught out by not being able to get out of the contract when they want to (or thought that they could), or are paying fees that they did not expect to have to pay.

Below is a non-exhaustive list of the common provisions found in an equipment hire agreement, together with details of what you should look out for when reading one.

1. Value and identifying characteristics of the equipment: does the equipment hire agreement make it clear what equipment is being leased? It is useful to append a specification of the equipment to the agreement and where relevant, identify serial numbers.
2. Restrictions on how the equipment may be used: You should check in the equipment hire agreement whether your use of the equipment is restricted to a particular site. If it is, you should decide whether you are happy with this provision. This will depend on whether you are likely to need to use the equipment at any other site.
3. Repairs and replacements: You should check the agreement to establish who is responsible for maintaining and repairing the equipment, and whether there are any provisions that deal with the replacement of any damaged or lost equipment.
4. Purpose or job will the equipment be used for: You should ensure that the agreement clearly sets out what the equipment may be used for. For example, if you are leasing a printer, you may also expect the printer to offer scanning and photocopying functions too.
5. How will the equipment be delivered and returned?: The equipment hire agreement should identify who is responsible for the delivery of the equipment and whether there is a cost associated with delivery and return. It should also clarify what happens at the end of the agreement and whether you need to return the equipment to the owner, or whether they will collect it from you.
6. Rental cost: The equipment hire agreement should clearly set out the rental cost of the equipment, how frequently you need to pay (I.E. weekly, monthly or annually), whether you should pay in advance or after the service period, and whether the rental cost includes VAT.
7. Deposit and insurance: You should be able to establish whether you need to pay a deposit from the equipment hire agreement. If you do need to pay a deposit, the agreement should set out when this deposit will be returned to you and under what circumstances can the owner make deductions from the deposit. You should also establish whether you need to obtain insurance to cover the equipment whilst it is in your possession.
8. Rental period: The equipment hire agreement should set out how long the lease lasts for and whether it is subject to automatic renewal. You should also be able to establish whether you are tied in to a fixed period of time or whether you have the option to terminate at any time upon providing notice.
9. Option to purchase: The equipment hire agreement should set out whether you have the option to purchase the equipment, should you wish to do so, once the agreement comes to an end. However, an option to purchase may not be suitable if you want the arrangement to be an “operating” lease for accounting purposes as opposed to a “finance” lease where the equipment can be an asset on the balance sheet.
10. Training: If you require training on how to use the equipment, you should establish how much this will cost and who should pay for this (you or the supplier).