Almost any small business can set up a rental department and offer equipment ranging from power tools to carpet cleaners to computer network modems. Even a small department can be a good way to increase your competitive edge and generate additional revenue. As the lessor, you’re not only responsible for purchasing and maintaining equipment, but also for protecting your business by making sure each customer signs a rental agreement.

Goals and Objectives

A simple equipment rental agreement clarifies the terms and conditions for what most often constitutes a short-term contract. This agreement identifies the type of equipment, the duration of the rental period and the payment amount. It also lays out specific guidelines for using, storing and returning the equipment. Once signed, the agreement becomes a valid contract, so make sure to address any questions or concerns before signing and delivering or giving the renter the equipment.

Standard versus Custom Contract

Small businesses have multiple options for creating an equipment rental agreement. You can work with an attorney and create a custom agreement or modify a sample agreement or template you find on the Internet and then review it with an attorney. Samples and customizable templates are available on websites such as, and

Terms and Conditions

Terms and conditions are the rights and obligations of both parties as they pertain to the equipment. Clear, well-written clauses are vital to protect your business from liability or financial losses that may result from injuries due to misuse, damaging or failing to return the equipment. With a simple agreement, most terms and conditions are standard inclusions based on your company’s rental policy rather than on negotiated terms. For example, most rental policies have standard rental periods, charges and security deposit fees.

Rental agreements for power tools and machinery should include a warranties and representations section. In this section, you make certain promises about the condition of the equipment. These promises serve to protect your business from liability if the customer gets hurt and claims the injuries were due to malfunctioning or damaged equipment. For example, state that the equipment will be in good working condition and fit for its purpose on delivery. Some agreements also include no alterations, assumption of risk, and release of liability clauses that increase protections from potential legal actions even further.