The lessor then mailed copies of its lease to the lessee requesting payment. The lessee sent a letter to the lessor that purported to enclose a PO however, the PO was not enclosed. The lessor delivered the crane, and it was used by the lessee for two months. The two representatives signed a handwritten memorandum of their discussion, part of which stated that the lessee would not agree to the terms of the lessor’s standard lease. In that case, representatives of the lessor and lessee (neither of whom had actual contractual authority from their employers) met to discuss the terms of a crane rental. The difficulties inherent to negotiating equipment leases are illustrated by the Idaho case of Essex Crane Rental Corp. At least one court has accepted the position that industry practice is to ship the equipment being leased before contract formation. In any event, the lessee is eager to get the equipment on-site and the entire transaction will be completed in a relatively short period of time. Lease agreement formalities are never on the front burner when a project is being bought out and ramped up. Neither party will think to sign anything, because in most cases the people exchanging the forms are not authorized to sign contracts for the company.Sometimes only one party will sign a form agreement or.The lessee will incorporate the terms of its PO by reference.The lessor will cross out parts of the lessee’s handwritten material and then sign.The two forms (lease and PO) will cross in the email, and the parties will sign both.The lease can be executed in any number of ways: The lessee will review the lessor’s form lease and either mark it up before signing, or attach its own purchase order (PO). The lessor's lease form may be very one-sided, particularly as to maintenance of the equipment (all) and the condition in which the equipment will be returned (perfect). The lessor typically sends a form lease to the lessee that includes blanks filled in for the lease rate and term and a set of general conditions. The lessor (equipment owner) and lessee (GC or subcontractor) are rarely in the same city – and may not even be in the same state. The leasing process, however, is typically a little different than a publicly bid or privately negotiated construction contract. The lease of construction equipment is a contract like any other contract, and the process of contract formation necessarily includes offer, acceptance and consideration. A personal property lease is created when the lessee agrees to furnish consideration for the right to the possession and use of goods over a specified period of time. Under common law, a lease of personal property is a bailment for hire. This article will outline some of the legal issues in negotiating equipment lease contracts with an eye toward preventing unnecessary disputes at project close-out. By the time the equipment lessor brings suit, there may not be much an attorney can do, as project personnel have moved on emotionally, geographically or both, and the opportunity to document equipment usage and repair will have passed. ![]() Weak or ambiguous leasing contracts can lead to unanticipated charges for transportation, repair and additional rental charges at project completion when personnel are being reassigned and profit margins are being squeezed. In the rush from contract award to full mobilization, equipment leases and agreements are often negotiated quickly. Most contractors seem to find renting more attractive than owning heavy construction equipment, as the acquisition and maintenance costs can be staggering. Virtually all heavy equipment is available on a rental basis, from the largest cranes to exotic bits for directional drilling. In buying out a construction project, a general contractor (GC) or a subcontractor will likely negotiate and enter into equipment leases that cost, on an item-by-item basis, $10,000 to $20,000 per month – and could, by project completion, cost millions. THE PROBLEM: “I want it on the jobsite yesterday!”
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