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Businesses use contracts to build trust between other entities. Contracts build trust because they are legally binding. This means that a party can enforce a contract in court if the other party does not follow the contractual terms. One contract that you may have to use is a dry hire agreement. This article will explain what a dry hire agreement is and what terms you should include so that it protects your transaction. 

What Is a Dry Hire Agreement?

Businesses use a dry hire agreement to hire out equipment to another business or individual. 

These agreements are useful since:

  • the hired equipment might be specialised;
  • uncommon to a specific locality; or
  • not used often enough to warrant purchasing. 

The dry hire agreement will govern how a business hires your equipment and the rights that they have when using it. 

On the other hand, your business might want to use a wet hire agreement. A wet hire agreement is where your business hires out equipment but also provides personnel to operate the equipment. It is important that you use the right agreement depending on the type of equipment that you are hiring out. 

Key Clauses in a Dry Hire Agreement

Contractual Terms

The first clause that you should include in your dry hire agreement is the contractual terms. These are the important details about the agreement such as the names of the parties and what equipment they are hiring. You should also include a term that relates to the proper use of the equipment you are hiring. This is useful to ensure your customer does not cause damage to your equipment. 

Additionally, you should also make sure to inform your customer of any storage or maintenance procedures that they must follow when in possession of your equipment. If these matters do not form part of the contractual terms, they are under no obligation to store your equipment in a specific way. Therefore, you should ensure this clause is accurate and specific. Otherwise, if there is any ambiguity in the terms, then the courts can rule that the contract is unenforceable. 

Insurance

Another important term to consider in your contract is one that relates to insurance. Insurance needs to be at the forefront of a business’ mind when they are hiring out equipment. This is because it guarantees that a business receives compensation if a customer misplaces or damages any leased equipment. If a business’ insurance does not cover this, they should include a clause that makes the customer liable for any damage. The customer could then find out if their own insurance covers this. If not, they should be prepared to pay out of their own pocket if they damage or misplace any equipment of value. 

Termination

Termination is also an important issue to recognise when you are dealing with dry hire contracts. A termination clause allows each party to cancel the agreement if they meet the agreed conditions in the termination clause. Commonly, a termination clause will entitle a party to terminate if the other breaches the terms of the agreement.

For example, if a customer uses a piece of equipment in an incorrect fashion that might damage it, the business is entitled to cancel the contract.

However, you must make sure that you have grounds to cancel the contract. Otherwise, you could be liable for not following through with the contract. Doing so would constitute a contractual breach in itself. 

Key Takeaways

If you run a business in New Zealand, you will be familiar with how contracts work. They are legally enforceable documents that help build trust between commercial parties. If you are in the business of hiring out equipment, you should use a dry or wet hire agreement. Businesses should use a dry hire agreement when only hiring equipment. Alternatively, businesses should use wet hire agreements when they are also providing personnel to run the equipment. It is important to include the right terms in your agreement to ensure that you are protected in case there is a dispute with your customer. For legal assistance with managing your contracts, contact LegalVision’s contract lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What is the difference between a dry and wet hire agreement?

A wet hire agreement should be used when you are hiring equipment with a qualified operator. By contrast, a dry hire agreement should be used when you are only providing the equipment.

Will my insurance cover any damage by my customers?

Whether your insurance covers damages caused by customers depends on the insurance plan you are on. It is recommended that you discuss an insurance deal that allows your customers to pay extra for insurance when they hire your equipment.

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