Home Business Know EVERYTHING the Equipment Lease Agreement needs to be valid

Know EVERYTHING the Equipment Lease Agreement needs to be valid

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Understand what an Equipment lease is and in which situations you should use it. How to do it, which essential clauses must be included in your contract. Simple PDF and word templates for printing.

Many companies and Skymarketing.com.pk , when they need to use machines and tools in their works, prefer to hire an outsourced company to supply them, thus giving up investing resources in the purchase of this equipment. 

By adopting this option, it is possible to obtain several benefits, such as the reduction of business costs. This is because, in general, we are talking about equipment with high economic value. 

However, when adopting this option, it is necessary to be aware that the rental of machinery has specific contracts and laws that govern the relationship between the contractors. 

With this in mind, the main points of the equipment lease agreement, its characteristics, clauses, model are highlighted.

The objective is to inform the reader so that they are aware of everything they need to know before signing this type of contract, thus avoiding unwanted situations.

1. What is the lease of machinery and equipment and how does it come about?

Initially, it is important to clarify what a lease of machinery and equipment is, as well as explain how it appears in practice. 

Well then, the lease of machinery is a contract for movable property. It arises when an individual or legal entity cedes the right to use a given good to another individual or legal entity. Thus, what we call a commercial relationship is established.

It is essential to clarify the importance of the written contract in this case, as it will establish the rules that need to be followed by the lessor and lessee. In addition, he will assure them of any contractual breaches.

Here, there is a basic principle of the law of obligations, the so-called “mandatory or binding force of contracts”. 
That is to say: as long as the agreement between the contracting parties is not prohibited by law and there is no defect in the legal business, it “makes law between the parties”. 

In this sense, the fulfillment of the assumed obligations is now widely demanded between the contracting parties (except in the cases of the occurrence of an act of God or force majeure).

Once this point is understood, it is important to differentiate the option available to those interested in hiring a service provider or renting machines and equipment directly. 

For this, you must have a valid contract in hand, and the developers ofnova city Islamabad are making sure that these contracts hold all legal notices as there are some requirements that most are not aware of and that must be included in this document, as if they are missing, the declaration will become invalid.

2. Contract for the provision of services x equipment lease.

It is necessary to understand that these two contracts have specific and distinct objects. It is important to make this distinction to avoid surprises for the contractor who, being safe, can choose the option that best suits their business. 

Well then, the service provision contract is nothing more than a contract formalized through a document in which one of the parties undertakes to the other to offer a certain service. 

For example, this agreement can be signed whenever a person undertakes to perform a job, or perform an activity, for a certain fee. 

This contract meets its basic rules provided for in our Civil Code. From a legal point of view, it will cover any service or work that is not the subject of any other specific labor law.

It is mainly used to establish links with the most varied activities of an autonomous and/or occasional nature (such as consulting, law, accounting, etc.).

On the other hand, the lease of machinery and equipment is nothing more than a contract for the lease of movable property. 

The difference between the two contracts is clear: in the service provision contract, an individual or legal entity is hiring another individual or legal entity to provide a certain service, bringing with them their machines and tools.

In the machinery and equipment lease contract, the contract is made with an individual or legal entity that will assign the use of its machinery so that the contractor can, in their possession, directly perform the service they need. 

On the one hand, we have the hiring of the skill of the individual or legal entity, who can use any equipment to carry out the work; on the other hand, we have the contracting of movable assets, to carry out the work directly, and not by third parties.

The advantage of one or the other needs to be measured according to the circumstances of the specific case, especially taking into account some aspects, such as economic costs and logistics. 

Therefore, the entrepreneur needs to carry out the prior budget and check what is most feasible for him: hire an individual or legal entity to provide the service and bring his machinery and equipment or lease movable property and use the machinery and equipment to perform the service directly.

Every contract must follow basic rules and requirements that sometimes on the internet are outdated, as the models offered are generic and do not represent what is specific in the contractual relationship, which is unique.

Therefore, it is recommended that it be done by a notary or lawyer, who knows exactly what mandatory clauses it must have.

Equipment Lease Agreement

3. Construction Equipment Lease Agreement.

Particularly entrepreneurs and workers in the civil construction sector are faced with the question between buying or renting the machines to carry out the work. Equipment leasing has some advantages, especially when you are going to make only occasional use of equipment and machinery.

To resolve this doubt, it is necessary to carry out a survey taking into account the expenses, execution time, materials and labor essential for carrying out the work, as well as which machines and equipment are needed at each stage and the period of use of them. 

With this in mind, it is necessary to highlight some advantages of the equipment lease contract, especially because such a contract can sometimes mean a substantial reduction in the costs of the work or renovation. Let’s see. 

  • Variety of Machines and Equipment Available for Lease
  • Lower Investment 

The investment for equipment rental is less than that required for the purchase. When choosing to rent machinery and equipment, the targeted resource is smaller, leaving the company’s capital free and clear to be invested in what really matters, compromising credit less and generating savings. 

  • Eliminate Maintenance Expenses
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When leasing materials, one of the advantages is that maintenance is up to the lessee. It is he who bears the maintenance costs.

  • Labor reduction
  • Decrease in expenses with logistics, transport and storage

Machine and tool rental eliminates the accumulation of stranded materials and the need to have an appropriate place to store them. When they are no longer needed, just return them to the landlord. 

4. Rental of machinery with operator.

In some specific cases, it is necessary that the asset is leased together with the service provided by the machine operator. In this case, the contract must specifically determine what is the amount for the lease of equipment and what is the amount for the operator’s services. Thus, in addition to the equipment lease contract, a labor concession contract with the machinery operator will also be required.

Equipment Lease Agreement

5. How to make an equipment lease contract?

  • Contractor data

The data of the lessor and lessees and the filling in of these data correctly are essential for the validity of the contract as well as for identifying who are the active and passive subjects of the lease obligation.

  • Equipment description

The indication of the contracted object is important as the lessor can only charge and be responsible for the equipment described in the contract. 

In this sense, it is essential that all leased equipment is checked before and after the lease. This way, the parties will know in what situation they received such equipment and in what situation they are returning it.  

  • Deadline of the contract

The equipment lease contract may or may not have a fixed term, a circumstance that is assessed according to the needs of the contractors in each case.

  • Guarantee 

As in any contract for the assignment of rights or assets that have economic value, for greater security in the fulfillment of the contract, guarantees can be established in favor of the lessee, such as surety, surety bond and suretyship. 

Such guarantees can be perfectly applied to the equipment lease contract. Also because in this type of contract, high-value equipment may be involved, in an undertaking surrounded by risks.

  • Possibility of subletting

Simply put, it occurs when a movable property or property rented by one person is occupied by another person, who pays part or all of the rent. This practice is very common when the person who is renting the property will not use it for a period, but still does not want to break the contract.

Sublease is perfectly applicable in the equipment lease agreement, provided that such hypothesis is expressly provided for in the original agreement.

It is important to highlight that in the sublease, the sublessee starts to respond under the same terms and obligations as the lessee, now in relation to the sublessor. 

All this information must be observed, so that the Equipment lease contract protects the lessee from any problems, such as the contract not being fulfilled by the end of its term due to change of owner.

Equipment Lease Agreement

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  • Safe

Insurance is any contract by which one of the parties (insurer) undertakes to indemnify the other (insured) upon the occurrence of a certain accident, in exchange for receiving an insurance premium.

This institute is interesting in equipment lease contracts when they involve high-value machinery and/or risk of equipment loss. This, without a doubt, brings greater security to the parties involved in that deal.

  • Liability in the equipment lease agreement

The contract is essential to establish the rules that need to be followed by the parties, in addition to safeguarding them from any breaches that may occur. 

In this sense, it is worth highlighting some of the rights and obligations that are contracted in this type of contract:

  • Examples of Tenant duties are:
  • Use the good for the purpose for which it is intended, according to its nature and circumstances;
  • Ensure the integrity of the machinery;
  • Make the payment of the rent within the period established;
  • Return the item under the established conditions, at the end of the contract.

It is noteworthy that, if the lessee makes improper use or causes damage to the equipment, the lessor may arrange for the immediate breach of the contract, requesting losses and damages as a result of the damage that may have been caused.

  • Examples of Lessor duties are:

Deliver the asset to the lessee, with all equipment belonging to him and in good condition;
Ensure that the use of the property is peaceful, during the period of the contract signed;

In addition, it cannot demand that the goods be returned before the end of the period established in the contract. If this occurs, there will be a refund to the lessee for losses and damages arising from the early termination.

  • repentance clause

The repentance clause is expressly provided for by law, and is perfectly applicable to equipment lease contracts, provided that certain requirements are observed.

If we are faced with a civil contract for the lease of equipment, it is advisable that the period of repentance is relatively short and that it provides for reimbursement to the lessee for the expenses he made to make the equipment available to the lessor.

On the other hand, we may be facing a contract governed by the Consumer Defense Code, especially in those cases where we have an individual who is not skilled in the civil construction industry and who rents equipment to use it as a final recipient. 

In this case, if the contracting of the equipment was made by telephone or over the internet, for example, the period of repentance will be that provided for in the Consumer Defense Code, if another is not fixed in a more favorable manner in the contract. 

All this information must be observed, so that the equipment lease contract protects the lessee from possible problems, such as the contract not being fulfilled by the end of its term due to change of owner.

6. How much to charge for equipment rental?

To calculate how much it costs to lease a certain equipment or tool, it is necessary to use some references, such as:

  • the market value of that good;
  • its availability on the market;
  • whether it is an easily accessible and replacement product;
  • the price charged by other companies in similar cases;
  • the logistics for delivery;
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7. What documents are required for the Equipment Lease contract?

When closing an equipment lease agreement, it is necessary to have:

  • the contracting parties’ personal documents (RG, CPF and CNPJ, as the case may be); 
  • the document proving where they reside and/or carry out their activities (proof of residence or business address); 
  • the income statement and balance sheet for the last year, in order to ensure that the assets are not being leased to
  • someone who is completely in debt;
  • proof of warranty, insurance, surety, etc.; 
  • documents and technical specifications of leased equipment etc.

8. How to proceed after signing the contract?

To add greater security to the contract, the parties may, after signing in the presence of at least two witnesses, take them to the notary’s office for notarization.

At the time, the parties will have their signatures registered, as well as may register that contract, even for the purposes of any future contractual protest, in case one of the parties defaults on its obligations. 

This procedure for authenticating signatures and the contract, without a doubt, creates greater security for contractors. So neither party can claim afterwards that the contract is illegitimate.

Curiosity: if they deal with online contracts, the parties can use the electronic signature, which has the same legal security as handwritten signatures.

All this information must be observed, so that the equipment lease contract protects the lessee from possible problems, such as the contract not being fulfilled by the end of its term due to change of owner.

Equipment Lease Agreement

9. How to break the equipment lease contract?

It is desirable that the contract lasts as long as the parties agreed in writing. However, its termination may occur before such date, with one of the parties giving up the continuity of that contract.

A breach of contract, dissolution or termination can occur in different ways and for the most varied reasons (such as insolvency, reasons for moving the company, etc.). 

For this reason, it is recommended that the contract tries to foresee the hypothesis of premature termination of the contract, as well as the consequences of its breach, such as reimbursement for the expenses employed, the imposition of a fine, etc. 

When canceling the contract, it is desirable that the party notify the other in advance, so that there is awareness of the breach of contract and also so that it can take the necessary measures to reduce the damages resulting from the breach, which must also be observed when the consumer exercises the right of regret. 

In this scenario, when breaking the contract, the party that wants to cancel the contract must observe all contractual circumstances and calculate all the consequences of undoing the deal.

10. How to renew the Equipment Lease contract?

The end of the machinery lease agreement will occur on the date that was determined in the signed agreement. In this case, attention is drawn to the fact that there is no obligation to notify the lessee in advance of the end of the contractual term. 

However, if he remains with the property that was leased without any opposition or manifestation by the other party in this regard, the presumption that the contract has been extended is born, and henceforth becomes effective for an indefinite period.

In another case, the lease term may be coming to an end, however, the work is not yet completed, requiring the lessor to keep the leased equipment to complete it. 

In another example, the lessor may have budgeted an “x” amount of equipment and when the work was carried out, he noticed that a greater amount would be needed.

In both situations indicated, the contracting parties can use contractual institutes, such as amendments and adjustments. 

11. Contract Amendment 

The contractual amendment is nothing more than a document used by contractors who wish to modify the clauses originally provided for in the contract.

Well, from the contractual addendum, the parties can agree on new rules that will apply to that contractual relationship. 

As an example, among the various changes that may be made, team of park view city islamabad can mention the following:

  • change the amounts to be paid by one contracting party to the other (for example, the parties can sign a contractual amendment to
  • readjust the value of equipment rental);
  • modification of the contractual term (it is possible that the parties establish a contractual amendment to extend the term of the equipment lease);
  • change in payment method;
  • change in the way a given obligation is to be fulfilled;
  • substitution of a previously established obligation for another;
  • change in the warranty given above etc. 

One question many people have is how to use this document. As in the original contract, in the contractual amendment the parties must carefully read all clauses, fill in all spaces and sign all sheets. 

It is recommended to save the additive in Word and PDF versions , keeping the files in a safe place (where they can download whenever they want) and, at the end, print in as many copies as necessary.

Depending on the details of the contract that is being amended, it may be necessary to register it at a notary public (eg, to recognize the signature, in which case the parties will have their signatures registered, a procedure that adds greater security). 

As a general rule, the same formalities imposed for the original contract must also be respected for the contractual amendment referring to it.

Another point that should be taken into account is that, as the contractual amendment is used to change clauses and conditions of an existing contract, the Law applicable to it will be the same applicable to the original contract.

12. Contract Renewal

Finally, once the equipment lease agreement has reached its final deadline, the parties can take the following positions: 

  • renew the contract under the same terms as the previous obligations; 
  • renew the contract with small adjustments, in terms of price or quantity of equipment; 
  • renegotiate, making substantial changes to previously assumed obligations; 
  • consider the obligations of both contracting parties fulfilled and resolved, when the contract ends and both parties no longer have an interest/need to renew it.
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