Equipment leasing is a form of financing solution allowing companies to control and use assets without significant drain on working capital. There are three basic forms of leasing: Contract Hire, Hire Purchase and Finance Lease.
1. Contract Hire
A Contract Hire Agreement allows the hirer to take control and use a piece of equipment for the duration of the agreement in exchange for fixed payments (usually monthly) for the duration of the rental period. Ownership of the equipment does not pass to the hirer at all but it remains with the supplier and, the hirer will pay a set fee over a period to use that equipment. At the end of the agreement the supplier will take back the equipment.
2. Hire Purchase
A Hire Purchase Agreement is very similar to a Contract Hire Agreement in that it allows the hirer to take control and use the equipment of the supplier for the payment of equal monthly instalments. The main difference between a Contract Hire and a Hire Purchase is that ownership of the equipment is transferred to the hirer on the payment of the last instalment.
A Hire Purchase arrangement is particularly suitable for businesses wishing to purchase assets without paying the full value immediately. The hirer pays an initial deposit, with the remainder of the balance and interest paid over a defined period of time. At the end of that period ownership of the equipment transfers to the hirer.
3. Finance Lease
A Finance Lease is an agreement where one party (a finance company) buys the equipment from the supplier and allows the other party (the hirer) to use it by paying rental payments over a specified period. Ownership of the equipment remains with the finance company at all times i.e. the hirer will not end up owning the equipment at the end of the contract.
Although a Finance Lease looks similar to a Contract Hire, it differs from Contract Hire in that it usually has a ‘balloon payment’ at the end of the lease agreement which pays off the finance company’s investment.
This Equipment Hire Agreement is a contract hire, it is not suitable as a finance lease in that it assumes that the supplier directly owns and hires out its equipment to the hirer i.e. The supplier is not a finance company.
This Agreement contains a clause giving the hirer the option to purchase the equipment at the end of the hire term. If you decide to keep the purchase option clause this agreement becomes a Hire Purchase Agreement and ownership of the equipment transfers to the hirer upon the exercise of the right to purchase.
Please note: This Equipment Hire Agreement shall be used where both the supplier and the hirer are incorporated businesses (i.e. one company hires equipment, which it owns, to another company). Do not use this template where the hirer is a sole trader or another unincorporated body as certain hire and hire purchase agreements are regulated under the consumer credit regime; and this agreement assumes that it is exempt from regulation under the consumer credit regime.
This Equipment Hire Agreement template is fully comprehensive and balanced in that the interests of both parties are taken into account.
This Equipment Hire Agreement contains the following clauses:
- Definitions and Interpretation
- Equipment Hire
- Payments & Deposit
- Delivery of the Equipment
- Ownership and Insurance
- Supplier’s Obligations
- Hirer's Obligations
- Liability & Indemnity
- Consequences of Termination
- Confidential Information
- Entire Agreement
- No Partnership
- Third Party Rights
- Governing Law and Jurisdiction
This Equipment Hire Agreement is in Microsoft Word format, written in plain English, easy to use and edit.
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