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Key clauses to include in equipment lease agreements

On Behalf of | Jun 27, 2024 | Commercial Disputes |

Equipment leasing works best for businesses looking for an upgrade but do not want to pay the hefty upfront costs. This approach is often flexible and effective, but only if the lease agreements are well-crafted. So, to ensure a smooth leasing experience, including key clauses in your agreement is crucial.

What constitutes a well-crafted lease agreement

A detailed lease agreement can help protect the rights and responsibilities of both the lessor (who owns the equipment) and the lessee (who rents the equipment). Your agreement must be able to outline the following:

  • Parties and description of equipment
  • Lease term and termination
  • Payment terms
  • Equipment use and maintenance
  • Risk of loss and insurance
  • Ownership and purchase option
  • Default and remedies
  • Notices
  • Governing law

This is not an exhaustive list. For instance, you can include a warranty disclaimer clause when leasing used equipment or address the tax implications for both parties. Depending on the situation, you can add more clauses.

Commercial litigation is possible

Commercial disputes, however, can still arise between lessors and lessee. Conflicts may happen due to end-of-lease options, early termination and hidden fees, but the most common ones are under breach of contract. This includes a lessee’s non-payment and improper equipment maintenance or a lessor’s failure to deliver the equipment as promised or provide necessary repairs.

An attorney specializing in commercial disputes can help review the agreement before, during and even after the lease period. They can also guide you in commercial litigation and recommend an effective course of action when necessary.