8 Must-Have Equipment Rental Terms and Clauses
In the high-stakes world of equipment rentals, every term in your agreement can make or break your business. Industry experts like the VP of Market Operations and the COO share their invaluable insights in our latest article. Discover why insisting on third-party inspections is a must and learn how adding a security deposit can safeguard your interests. With eight expert insights, this is a must-read for anyone looking to fortify their rental agreements.
- Insist on Third-Party Inspections
- Include Prohibitions
- Specify a Liability Clause
- Implement a Cancellation Fee
- Define Usage Restrictions Clearly
- Require Comprehensive Insurance Coverage
- Outline Damage-and-Maintenance Responsibility
- Add a Security Deposit
Insist on Third-Party Inspections
We will often need to use rental vehicles to expand our fleets during high-demand periods in larger markets, and we’ve learned the hard way that we need to read the fine print on those rental agreements carefully, especially when it comes to liability for maintenance or repair issues.
We’ve started insisting on clauses that include third-party inspections of all vehicles before we take delivery of them in order to ensure that we aren’t left paying for problems that aren’t our fault.
Nick Valentino
VP of Market Operations, Bellhop
Include Prohibitions
Operating within the fencing industry, we supply temporary fences for rent to commercial construction sites. An essential part of our agreements is the liability clause, which limits our responsibility for any injuries resulting from the equipment and mandates that renters indemnify us against any related claims.
In our rental agreements, we clearly define the permissible uses of the equipment, which also include prohibitions against subleasing, alterations, and unsafe operations. This level of clarity helps us protect our business by minimizing liability.
Roberts Haligowski
COO, Big Jerrys Fencing
Specify a Liability Clause
As someone who has navigated the complexities of the gate industry for over a decade, I’ve learned that a comprehensive liability clause is an essential term to include in any equipment-rental agreement.
This clause clearly outlines both parties’ responsibilities regarding possible damages or repairs during the rental period. My experience has shown that specificity in this area not only safeguards our business interests but also provides peace of mind to the client, ensuring transparency from the start.
For instance, at New York Gates, we explicitly state the extent of our coverage and what the client is responsible for, which helps prevent disputes and bolsters trust in our professional relationships. This approach showcases our commitment to protecting our assets and our customers’ investments, reinforcing the integrity and reliability that we are known for in the New York area.
Beni Avni
President, New York Gates
Implement a Cancellation Fee
To protect our business interests, one important clause I always include in our equipment-rental agreements is the “cancellation fee.” This is critical because it allows us to recover costs if a renter cancels within a short time-frame, minimizing financial losses and preventing disruptions in our operations.
I’ve found that this fee not only helps cover administrative expenses but also encourages clients to honor their commitments. It sets clear expectations and fosters a sense of accountability, which reduces last-minute cancellations. For any equipment-rental business, a cancellation fee is essential for maintaining stability and protecting revenue, ensuring that even when plans change, your business can still remain financially secure.
Jeffrey Pitrak
Marketing Account Manager, Transient Specialists
Define Usage Restrictions Clearly
The “Usage Restrictions” clause is one of the most important elements of our equipment-rental agreements. It clearly outlines the acceptable and prohibited uses of the equipment, including a strict ban on illegal or harmful activities. This clause is essential not only for protecting our equipment but also for safeguarding our reputation.
I’ve witnessed how it encourages responsible behavior and significantly reduces the risk of misuse or damage. Setting clear boundaries guarantees the safe and appropriate use of the equipment throughout the rental period. Including a Usage Restrictions clause is a proactive step to prevent liability issues, protect assets, and maintain trust with clients. It’s a simple yet powerful tool for ensuring long-term success.
Matt Gehring
Chief Marketing Officer, Dutch
Require Comprehensive Insurance Coverage
As an expert in the insurance field (not necessarily the equipment-rental field), I would advise equipment-rental businesses to include a requirement in their contracts for renters to carry comprehensive insurance. This insurance should cover the entire replacement value and give you protection against risks like fire, theft, vandalism, and accidental damage. Doing this protects the equipment owner from financial loss if something goes wrong. Plus, it smooths out any potential conflicts between the renter and the owner—no one wants to deal with that hassle!
It’s also really important to make sure renters show proof of insurance before they get their hands on any equipment. This should come in the form of an insurance certificate that adds the rental company as an additional insured. This isn’t a formality; it’s an important step in preserving the owner’s interests and shielding the business from any financial setbacks that might arise due to insufficient insurance coverage by the renter.
Brent Thurman
Owner, Keystone Insurance
Outline Damage-and-Maintenance Responsibility
One essential clause I always include in our agreements is a “Damage-and-Maintenance Responsibility” clause. This clause clearly outlines that the renter is responsible for any damage to the equipment that occurs during the rental period, beyond normal wear and tear. It also specifies that the equipment must be returned in the same condition as when it was rented, and the renter is obligated to report any issues or malfunctions immediately.
For example, we rent out moving equipment, like dollies and pallet jacks, to customers at our self-storage facility. This clause protects us in cases where equipment is mishandled or damaged by a renter, ensuring we are not left to bear the cost of repairs or replacements. We’ve had instances where dollies were returned with bent frames or broken wheels because they were overloaded or used improperly. Thanks to this clause, we were able to recover repair costs from the renter without any disputes.
Additionally, we include specifics on how the renter will be charged if the equipment is damaged, either through repair fees or full replacement costs if the damage is beyond repair. This level of detail prevents misunderstandings and gives us a solid foundation to protect our assets while making it clear to the renter what their responsibilities are. It’s also a good practice to take photos or note the condition of equipment before and after the rental to have documentation if a dispute arises.
Bill Pederson
Owner at Lock It and Leave It Storage, Lock It and Leave It Storage
Add a Security Deposit
As the owner of a roofing-and-construction company, one essential term I always include in equipment rental agreements is a security deposit, typically equal to the full replacement value of the rented equipment. This deposit is refunded once the equipment has been returned undamaged and in working order. The deposit provides an incentive for the client to properly maintain and care for the equipment during the rental period. If damage does occur, the costs are deducted from the deposit before any remaining amount is refunded.
I also include an indemnity clause stating that the client assumes full responsibility for the equipment during the rental period, including proper operation, security, and insurance. This indemnifies my company from any liability in the event of accidents or injuries resulting from improper use of the rented equipment. The client is responsible for operating the equipment properly according to provided instructions and for maintaining adequate insurance coverage.
Jimmy Hertilien
Senior Project Manager, Herts Roofing & Construction
Submit Your Answer
Would you like to submit an alternate answer to the question, “What is one essential term or clause you include in equipment rental agreements to protect your business interests?”