Equipment Lease Agreement
Full Question:
Answer:
An equipment lease agreement is an agreement where a lessor, who is the owner of the equipment, allows a lessee to use the equipment in exchange for periodic lease payments. The leased equipment may be machinery, vehicles or any other equipment. When the equipment is leased, the lessee is conferred with right to possession and use the equipment for a specified term in return for compensation. However, the lessor remains owner of the equipment.
Generally, an equipment lease agreement contains clauses like term of the lease, rentals and payments due, termination option, and purchase option. An equipment lease agreement, once signed, will bind both the parties.
Following is a portion of a sample equipment lease agreement.
AGREEMENT made this _____ day of __________ by and between Lessor and Lessee.
WHEREAS Lessor desires to lease certain equipment to the Lessee, and the Lessee desires to accept for lease certain equipment upon the following terms and conditions:
Lessor agrees to lease to Lessee, and Lessee agrees to hire from Lessor, the equipment more fully described in the Approved Equipment Schedule annexed hereto ("Equipment"), and executed by the parties concurrently herewith and which may be, from time to time, hereafter executed by Lessee and accepted by Lessor.
The term of this Agreement, as to all Equipment designated on the Approved Equipment Schedule, shall commence on the Installation Date for the Equipment, and shall continue for an initial term of two years from the applicable Installation Date. Thereafter, the term of this Agreement for all the Equipment shall be automatically extended for additional one year renewal terms until terminated. This Agreement may be terminated by either party giving the other written notice three (3) months prior to the expiration of the initial term or any renewal term. Any such
termination shall be effective on the last day of the initial term or the last day of any successive renewal term. Lessee's notice of termination shall be mailed to Lessor's corporate offices listed above. Any notice of termination given by either party under this paragraph may not be revoked, without the written consent of the other party.
The monthly payment due from Lessee to Lessor for the Equipment is set forth in the Approved Equipment Schedule. Rental shall begin on the Installation Date and shall be due and payable by Lessee in advance on the first day of each month. If the Installation Date does not fall on the first day of a month, the first payment shall be a pro rata portion of the monthly rental, calculated on a thirty day basis, due and payable on the Installation Date.
Any payment which remains unpaid for thirty (30) days after the due date shall have a one and one-half percent (1 ½%) per month interest charge assessed against the unpaid balance from the date due until the date of payment.
Lessor shall arrange for delivery of the Equipment to the installation site designated by Lessee on or about the date given to Lessee by Lessor after receipt and acceptance by Lessor of a signed lease agreement from Lessee. In the absence of shipping instructions, Lessor shall select a common carrier on behalf of Lessee. Lessor shall not be responsible for delays in delivery which are beyond Lessor's reasonable control. Lessee shall undertake, at its own expense, to prepare and make available the installation site for each unit of Equipment.
After delivery, Lessor shall install, or cause to be installed, the Equipment, subject to the installation charges set forth on the Approved Equipment Schedule. Upon installation, lessor shall notify Lessee that the Equipment is installed and ready for use, the installation shall be deemed to be completed and the date of Lessor's notification to Lessee shall be known as the Installation Date. Lessor's installation report shall serve as such notification. Any installation charges shall be due and payable by Lessee on the Installation Date and Lessor shall add such charges to its initial payment notice or invoice.
The rental payments shown on the Approved Equipment Schedule annexed hereto and all shipments made hereunder are F.O.B. at the plant of each Equipment manufacturer identified in the Approved Equipment Schedule. All transportation, rigging, drayage, insurance, and other costs of delivery of the Equipment to and from the delivery site shall be paid by Lessee, and if prepaid by Lessee, Lessor shall note the amount of such charges in the payment notice or invoice.
All Equipment leased hereunder is and shall remain the property of Lessor or its assigns and Lessee's interest therein is only that of Lessee. Lessee further agrees that it will not pledge, loan, mortgage, or attempt in any other manner to dispose of the Equipment or to suffer any liens, encumbrances, or legal process to be incurred or levied on the Equipment. Lessor may affix tags, decals or plates to the Equipment indicating Lessor's ownership and Lessee shall not permit their removal or concealment. Lessor or its agents shall have free access to the Equipment at all reasonable times for the purpose of inspection and for any other purpose contemplated in this Agreement.
Lessee shall at all times keep the Equipment in its sole possession and control. The Equipment shall not be moved from the location stated in the Approved Equipment Schedule without the prior written consent of Lessor.
Lessee shall, during the term of this Agreement, at its expense, keep the Equipment in good working order and condition and make all necessary adjustments, repairs, and replacements and it shall not use or permit the Equipment to be used for any purpose which, in the opinion of Lessor, the Equipment is not designed or reasonably suited. During the term of this Agreement, Lessee shall maintain an Equipment Maintenance Agreement with Lessor, and an Equipment Maintenance Agreement with the appropriate manufacturer for any Equipment not covered by Lessor's Equipment Maintenance Agreement, at its own expense. Upon termination of this Agreement, Lessee shall, at its own expense, return the Equipment to Lessor in the same operating order, repair, condition and appearance as on the Installation Date, reasonable wear and tear excepted, with all engineering changes prescribed by the manufacturer prior thereto incorporated therein. Lessee shall arrange and pay for any repairs which are necessary for the
manufacturer or maintenance organization to accept the Equipment under contract maintenance at its then standard rates.
