What Language Is In Your Rental Contract?

If you are a contractor who regularly rents construction equipment, you have probably signed numerous rental contracts. While each of these contracts may vary slightly based on the rental company, along with the type of equipment you are renting, most of them contain some of the same basic language. If there is a slight change in this language, it could make a difference in what your contract will cost you in the long run. There are a few terms you want to look for, as well as know how they will affect you and your business.

What Is A RPO?

If you are renting a piece of equipment you may want to purchase in the future, you need to make sure your rental contract includes a rental purchase option, or an RPO.  This may also be referred to as a fixed price purchase option.

While this option does not obligate you to purchase the equipment at the end of your rental, it does give you the option to do so. Some contracts will give you credit for the full amount of your rental payments towards the cost of purchase, while other contracts will only give you credit for a portion of your rental payment.

Failure to include this option in your rental contract may result in you forfeiting any rental payments you make if you choose to purchase the equipment in the future. If you choose to include an RPO, your contract should at least include the following:

  • The amount of your lease payments that will apply to your purchase
  • When you can exercise your purchase option
  • The purchase price of the equipment

Even if you do not think you will want to purchase the equipment at the end of your lease, this is a great clause to include, especially if there is no additional cost to you to include it. You never know what your needs may be in the future. Additional work or contracts may make purchasing the equipment feasible before your lease is up.

What Is Your Billing Cycle?

You may assume that your rental bill will be due every 30 days, but that is not always the case with a rental contract. Billing cycles can vary based on the terms and conditions of your contract. Some companies may use a 28 day billing cycle versus a 30 day billing cycle. This means you will owe thirteen payments in a year versus the twelve you will owe with a 30 day billing cycle. If you attempt to pay this bill on a 30 day cycle, you will probably find yourself amassing interest charges and late fees. 

How Many Hours Of Use Are Included?

The rental cost of construction equipment is often not only determined by the number of days you need the equipment, but the price is also calculated based on the number of hours you will be using the equipment. Failure to ensure you have enough hours of use included in your contract can result in you being charged large fees at the end of your contract for exceeding these hours.

To avoid this, calculate how much you anticipate using the equipment per day, and then multiply that number by the number of days you will be renting the equipment. Make sure you add a few extra hours in to give yourself a cushion. 

What Is Your Liability?

There is always the potential for something to happen on a job site that may result in damage to a piece of equipment, but who is liable when the equipment is rented? Most contracts will include some type of indemnity clause. This clause will often require you to be held responsible for any damage that is incurred by the equipment, but you need to consider what happens when the damage is not caused by you or your actions.

For example, a tire blows out on a machine due to a defect in the tire, and this causes the machine to sustain damage; you do not want to be held responsible. What you need to know is that most of the indemnity clauses included in contracts are negotiable. You need to make sure you are negotiating this so you are only responsible for damages where you are liable. 

These are just a few examples of some of the language you need to be aware of within your rental contracts. Read your contracts closely, and do not be afraid to answer questions. Remember the questions you ask could save you substantial amounts of money.

For more information about contractor equipment rental, contact a local rental company.