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Offering Mobile Plant and Equipment for Hire? Here’s What You Need to Know.

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We explore the key considerations when hiring out your MPE. It's essential to understand what you are doing regarding hire arrangements and insurance.

Australia is experiencing a transport, urban and civil infrastructure boom. There is also considerable activity in the mining and general construction sectors (commercial and residential). 

With this massive pipeline of projects, businesses are making the most of their opportunities and looking forward to years of productive work. But there’s a snag: mobile plant and equipment (MPE) availability.

Thanks to disrupted global supply chains (due to the COVID-19 pandemic, the war in Ukraine and many other factors), MPE is in short supply.

As a result, many businesses are looking to hire the equipment they need. This environment of MPE shortages and increased demand is music to the plant hire industry’s ears. At the same time, companies with surplus MPE can generate additional revenue from assets that would otherwise be sitting idle. 

It is essential to understand what you are doing regarding hire arrangements and insurance, as these can be a minefield to navigate. If you get them wrong you may end with a customer conflict or, worse, an uninsured financial loss. Obtaining the right expertise is essential. 

So, where do you go for help? Here we explore the key considerations when hiring out your MPE.


Obtain quality legal advice

Hire agreements are central to any hire business and a critical risk management tool when set up correctly. They are a contractual matter, so engage a lawyer experienced in preparing hire agreements for the mobile plant industry to draft an agreement tailored to your needs. 

The one-off (and tax deductible) expense is negligible compared to the risk exposure from a contract that’s ambiguous, onerous, unfair, poorly worded or doesn’t cover the relevant risks and conditions. 

“This is critical,” says NTI’s Gary Woodhams. “Don’t take shortcuts – if you don’t obtain good legal advice, you’re guaranteed very poor results when things go wrong.”

Crafting a good quality hire agreement at the outset will provide years of contract certainty and clarity of obligations for all parties. You’ll avoid many problems, which will be great for your brand and reputation.

Conversely, a poorly crafted hire agreement – or worse, one drafted without legal input – invites difficulties and complications for your business. You’ll most likely experience constant problems obtaining adequate insurance, conflicts around who is responsible for damage and insurance, accusations of unfair contract terms, damage waiver issues, and delayed or even declined insurance claims. 


Understanding your business objectives and hire profile

Before drafting a hire agreement, your lawyer will need to understand some critical facts about your business to establish the hire profile and needs, including:

Crafting the hire agreement

Preparing your hire schedule with transparent terms and conditions (T&Cs) is a critical step you must carefully work through with your lawyer. 

“There is so much to consider, and you need that legal expertise to craft a hire agreement that will serve you and your customers well into the future,” Gary says. 

“Critically, you want to deliver positive customer experiences. They’ll protect your reputation and boost your brand, leading to repeat business, referrals and a steady revenue stream.”

The goal is clarity of obligations to protect both owner and hirer. Key considerations include: 

  • Hire schedule and any appendices to align unambiguously with standard T&Cs
  • Provisions to ensure the agreement identifies the owner and hirer
  • Conditions governing the equipment’s use 
  • Owner to provide adequate and appropriate training (e.g. walk around, manuals, instructions)
  • Outline clear conditions of delivery, pick up and returns, operator qualifications, equipment condition, payment terms, safekeeping, maintenance and loss minimisation
  • Clauses to set out insurance responsibilities, including indemnities, to insure the hired item and whether a certificate of currency is required 
  • If owner insuring: clarity of hirer’s obligations (excess, conditions, exclusions etc.)
  • If hirer insuring: conditions to guarantee compliance including evidence of insurance 
  • Ensure there are no unfair terms: for example, replacement value conditions on aged equipment will be unattainable for most hirers 
  • Damage waiver conditions and responsibilities must be made clear and be fair and reasonable (see below) 
  • An indemnity or ‘hold harmless’ clause, releasing the owner from any liabilities whilst the equipment is held, used or operated by the hirer 
  • Ensuring you’re protected via the Personal Properties and Securities Register (PPSR)  


Damage waivers

Damage waivers are not insurance policies. 

Damage waivers are conditions or clauses in a hire agreement that limit the hirer’s liability or responsibility for ‘certain types of damage to the equipment’ whilst in their possession and use. All damage outside the damage waiver’s scope remains the hirer’s responsibility. 

If poorly constructed or not clearly understood, damage waivers have the potential for disputes and other difficulties. If you offer a damage waiver, it’s essential to ensure the conditions are fit for purpose, fair and achievable for the hirer. 

A common example is where the hired MPE is road registered or conditionally registered. A damage waiver will not cover any damage the hirer may cause to third parties whilst the MPE is being driven. So, if the hirer is driving on a public road and hits a car, the damage waiver will only cover ‘damage to the hired item’ – not to the car that was hit. The hirer will be liable for that damage.

You do not want to expose the hirer – your customer – to contract uncertainty or an uninsured loss, as these can lead to unpleasant, expensive and time-consuming disputes (and poor outcomes). Communication and clarity on what the damage waiver covers and does not cover is critical so the hirer can identify and make suitable arrangements to deal with any gaps, including opting out of the damage waiver and insuring themselves if they prefer.

An alternative to a damage waiver is to comprehensively insure the equipment yourself whilst in hirers possession and use. You can attach conditions such as hirer responsible for an elevated (ie not extreme) level of excess to force their skin in the game and other appropriate & reasonable terms to ensure accountability. Or, require the hirer to insure. The hire agreement should clearly reflect any such insurance requirements and conditions. 

Our experience has been that insurance-based solutions tend to provide solid contract certainty and satisfaction for both the owner and hirer in a hire arrangement with lesser exposure to the potential variables and issues damage waivers can present. 


Speak to your insurance broker

As noted above, your hire agreement must clearly describe what insurance you’re providing and the risks the hirer must manage or cover. Gary’s recommendation is to work with your broker.

“Brokers are experts and your appointed risk advisors,” he says. “Seek and be directed by their advice. The insurance side needs careful professional attention. If you are providing a damage waiver or full insurance, that is increased risk; you will need to make sure your insurances are aligned to include these arrangements. If the hirer is insuring, there can be benefits to your insurance program due to the reduced risk. 

Your broker’s input on how insurance arrangements comply with hire agreement requirements is invaluable to you and your lawyer. Your goal is to avoid any uninsured losses for you or your customer. You want to be sure your hirers understand their liabilities and have a positive experience.”

It is essential to understand that your insurer is legally entitled to follow and deal with any insurance claims per the hire agreement terms, conditions, exclusions and limitations, including making recoveries (i.e. suing) directly off the hirer (i.e. your customer), which could be awkward from a commercial perspective. Another reason is to have the right professional legal and insurance inputs for this process.  

Hiring out your MPE can be a great way to generate revenue from all your assets. Working through the above considerations is a relatively simple process. 

If you’re thinking of hiring out some of your MPE (or any other vehicles or equipment), we cannot overestimate the importance of obtaining the right advice and insurance. 

Speak to your lawyer and your insurance broker.