Review Your Business's Equipment Leases – Part 1
If your business leases equipment to consumers or other businesses, take the time to have an experienced business law attorney review your standard lease agreements periodically. Laws are constantly changing, and a knowledgeable professional can help keep you and your business up to speed.
Equipment leases can also be quite lengthy and contain a number of terms that don't necessarily have anything to do with the equipment you normally lease. Deciding which terms to leave in and which to take out is like gambling if you don't know the ins and outs of equipment leasing.
Remember there are two primary purposes of a lease agreement:
- Ensure the lessee is legally obligated to pay
- Limit the lessor's liability.
While every transaction is unique and every party to a contract has his or her preferences and opinions, the following items make up the backbone of most leases and meet the two main goals.
- Acceptance. Acceptance means the lessee (the renter) confirms receipt of the property subject to the lease. Signing the acceptance provision obligates the lessee to perform his duty under the lease, e.g. make lease payments.
- Disclaimer of Warranties and Limitation of Liability. These clauses allow the lessor (the property owner) to disclaim all express and implied warranties. The lease should include a disclaimer concerning the lessor's liability for damages related to the lease or the equipment.
- Indemnity clause. This clause indemnifies the lessor for damages arising out of the operation and maintenance of the equipment by the lessee.
- Risk of Loss. A risk of loss clause shifts the burden to the lessee to bear full responsibility for the damage, loss, destruction or theft of the leased property.
- Default and Remedies. Your lease agreement should state what circumstances amount to default, along with collection strategies for the equipment and the unpaid rent.
For an equipment owner, these are some of the most important items you should include in your equipment lease. In an upcoming article, we will discuss other important terms to consider adding to your lease.
If your business leases equipment to consumers or other businesses, be sure to consult an experienced business law attorney to take a look at your lease agreement. To speak to a knowledgeable Bryan, Texas business attorney, contact the Peterson Law Group at 979-703-7014 or contact us online to schedule a consultation.