Addendum Definition: A Contract Addendum is a separate document which modifies or adds provisions to...

AddendumDefinition:

A Contract Addendum is a separate document which modifies or adds provisions to a rental contract with respect to certain, usually very specific, issues. It can be any number of pages, but limiting it to one or two pages is generally a good idea.

A Typical AddendumExample Rental System

INHERENTLY DANGEROUS EQUIPMENT ADDENDUM

This Inherently Dangerous Equipment Addendum (“Addendum”) is executed and delivered by the undersigned Customer (a/k/a “Lessee”) as of the date of the Original Rental Contract identified below (the “Effective Date”) to and for the benefit of Example, Inc., an Illinois corporation, d/b/a “Example Rental System” (hereinafter, “Example” or “Lessor”).

Customer/Lessee: (hereinafter, “Customer”)

Rental Contract: Number: Dated:

The Customer identified above (“Customer”) has elected to rent certain INHERENTLY DANGEROUS EQUIPMENT, on the terms set forth in the above referenced Rental Contract. Capitalized terms used, but not defined, herein shall have the meanings assigned thereto in the Rental Contract. FOR THESE PURPOSES, “INHERENTLY DANGEROUS EQUIPMENT” (AS DESCRIBED IN PARAGRAPH 1 BELOW) (SAMPLE – NOT ENFORCEABLE), TENTS, INFLATABLES, GRILLS, HEATERS, AND CERTAIN OTHER RENTED ITEMS USED FOR RECREATION AND/OR ENTERTAINMENT. 1. WARNING. THE SUBJECT EQUIPMENT (“RENTED ITEMS”) IS/ARE INHERENTLY DANGEROUS. CUSTOMER ACKNOWLEDGES THAT THE POSSESSION, USE, TRANSPORTATION, AND/OR STORAGE OF SUCH RENTED ITEM(S) CREATE(S) SUBSTANTIAL RISK OF SERIOUS BODILY INJURY OR DEATH AND MAY ALSO RESULT IN PROPERTY DAMAGE OR DESTRUCTION. ACCORDINGLY, CUSTOMER AGREES TO COMPLY FULLY WITH THE SAFETY RULES APPEARING ON PAGE 1 OF THIS ADDENDUM, AS WELL AS ANY AND ALL OTHER “INSTRUCTIONS” (AS DEFINED IN PARAGRAPH 4 BELOW), AND TO CAUSE ALL OTHERS TO DO SO AS WELL. 2. ASSUMPTION OF RISK. CUSTOMER (SAMPLE – NOT ENFORCEABLE)LIABILITY, LOSS, PROPERTY DAMAGE AND/OR OTHER CLAIMS OF, TO, AND/OR ARISING IN CONNECTION WITH, THE RENTED ITEM(S), ITS/THEIR USE, TRANSPORTATION, LOADING, UNLOADING, STORAGE, REPAIR, MAINTENANCE, INSTALLATION, ALTERATION, TEAR (SAMPLE – NOT ENFORCEABLE), REPOSSESSION (INCLUDING WITHOUT LIMITATION, PERSONAL INJURIES AND PROPERTY DAMAGE CAUSED BY SNOW, (SAMPLE – NOT ENFORCEABLE). 3. INDEMNITY. CUSTOMER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, RELINQUISHES AND DISCHARGES ANY AND ALL LIABILITIES, CLAIMS, DAMAGES, LOSSES, COSTS AND EXPENSES, INCLUDING WITHOUT LIMITATION, CLAIMS (SAMPLE – NOT ENFORCEABLE), INCLUDING DEATH), PROPERTY DAMAGE AND ATTORNEYS’ FEES (COLLECTIVELY, “CLAIMS”) AGAINST Example, ITS PARENTS, AFFILIATES, PARTNERS AND SUBSIDIARIES, AND THEIR RESPECTIVE OWNERS, OFFICERS, MANAGERS, DIRECTORS, AGENTS, EMPLOYEES, INSURERS, SUBROGEES, (SAMPLE – NOT ENFORCEABLE), THE “INDEMNITEES”) ARISING FROM OR IN CONNECTION WITH THE RENTED ITEM(S) (OR ANY OF THEM), REGARDLESS OF CAUSE, AND EVEN IF ARISING FROM THE NEGLIGENCE OF ONE OR MORE OF THE INDEMNITEES. CUSTOMER AGREES TO INDEMNIFY, DEFEND AND HOLD HARMLESS EACH OF SUCH INDEMNITEES FROM AND AGAINST, ANY AND ALL LIABILITIES, CLAIMS, DAMAGES, LOSSES, COSTS AND EXPENSES (INCLUDING WITHOUT LIMITATION, ATTORNEYS’ FEES) ARISING FROM OR IN CONNECTION WITH THE RENTED ITEM(S). 4. Customer’s Acknowledgments: Customer has (SAMPLE – NOT ENFORCEABLE), inspected, examined and accepted the Rented Item(s) and all applicable training, instructions, operating and user manuals, and other information (including the “TENT SAFETY RULES” appearing on Page 1 of this Addendum, Example’s Tent Delivery and Installation Addendum, and all other training required under applicable (SAMPLE – NOT ENFORCEABLE), CODE(S), as well as all applicable EPA, OSHA and/or ANSI Standards, if any) regarding the proper and safe transportation, loading, unloading, use, maintenance, repair, installation, deinstallation and storage of the Rented Item(s), as applicable (collectively, the “Instructions”). Customer has tested each Rented Item and found it to be in good operating condition and repair (SAMPLE – NOT ENFORCEABLE). Customer has selected each Rented Item based on Customer’s independent determination that it is appropriate for Customer’s purposes and not based on any recommendation by Example. Each Rented Item is provided to Customer “AS IS”. Example MAKES NO WARRANTIES, EXPRESS OR IMPLIED (ALL OF WHICH ARE HEREBY (SAMPLE – NOT ENFORCEABLE)WITHOUT LIMITATION, ANY AND ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, UTILITY, FUNCTION, DESIGN, CAPACITY, FREEDOM FROM DEFECTS AND WORKMANLIKE PEFFORMANCE). Customer will fully comply with the Instructions, properly maintain and care for the Rented Item(s) and ensure such Rented Item(s) is/are used in a reasonable and (SAMPLE – NOT ENFORCEABLE), with all applicable laws, rules and regulations. 5. Miscellaneous: This Addendum modifies the above referenced Rental Contract. Customer hereby waives all incidental and consequential damages against Example and agrees that, anything contained herein or in any other agreement between Example and Customer notwithstanding, (SAMPLE – NOT ENFORCEABLE). Customer has carefully reviewed and hereby agrees to each of the foregoing provisions as well as the Safety Rules on Page 1 hereof.

Signature: ____________________________________________ Customer / Lessee / Authorized Signatory

AddendumCommon Uses:

Providing Use and Safety Instructions; Providing Specific Warnings; Adding Important Terms (e.g., Damage Waivers); Creating Environmental Indemnities; Proving Compliance with Applicable Laws; Supplementing use, care, cleaning or maintenance

requirements; Proving Delivery and Condition of Equipment Upon

Delivery; Authorizing Credit Card Charges; and/or Highlighting Other Issues Specific to your business.

AddendumWhy Are They So Important Now?

(It didn’t seem like they were in the past): Rental Operators shoulder more liability than ever before; Products Liability Lawsuits have become commonplace; Courts now permit anyone who comes into contact with your

equipment to sue everyone in the “chain of distribution” (and they can all sue each other as well);

Huge class action lawsuits are being commenced against rental operators;

Plaintiffs lawyers have become far more aggressive about soliciting lawsuits;

Laws have Changed, and New Laws Have Been Enacted (e.g., Tier 4 / Stage IV, CERCLA, RCRA, TSCA, ERISA, EPA, OSHA, FCRA, FCBA, FTC Rules, Lien Laws, Miller Act and State Little Miller Acts, Consumer Leasing Acts, Consumer Protection Acts, CCard Act, Local restrictions and permitting requirements, and dozens of others); and

The cost of defending lawsuits has skyrocketed. The average cost of fighting a large lawsuit rose by 72% between the year 2000 and 2008.

Objectives

1. Get Paid: Create leverage to ensure you receive payment.

2. Avoid Lawsuits: Make filing lawsuits against you as unappealing as possible.

3. Win: If you do get sued, make sure you win.

4. Get Out Early: Win as quickly as possible (save your time, your money, your effort, and your sanity) – fighting lawsuits is enormously expensive (legal fees, your time, manpower, etc.).

Getting Out EarlyPrimary Alternatives:

1. Settlement: Reaching an agreement with the other party to settle the matter, usually for less than the plaintiff is demanding, but more than the defendant considers fair.

2. Summary Judgment: Get the court to dismiss the case because there is nothing for the court to decide – i.e., it has already been decided - based on your contract or addendum).

3. Don’t Get Sued in the First Place: Make the prospect of suing you/your company so unappealing, based on your contract addendum, that plaintiffs’ lawyers advise their clients to look elsewhere for possible defendants.

Real-life Liability Claim:FACTS:

•Auction company rents several large tents for a classic auto auction;

•Severe Weather occurs, causing some of the tents to collapse, damaging a number of the classic cars parked underneath;

•50 of the Car Owners join together and sue the rental company;

•The Judge rules the car owners cannot sue the Auction Company because they signed an Indemnity and Hold Harmless Agreement;

•The attorney for the car owners elects to continue the case only against the rental company (dropping all claims against the Auction Company).

Real-life Liability Claim:OUTCOME:

•The Auction Company was fortunate enough to have gotten an Indemnity and Hold Harmless agreement signed before the event.

•By doing so, the Auction Company made itself an unattractive target “tactically” for the attorney representing 50 of the car owners.

•The Auction Company saves itself from: - Tens of thousands in attorneys’ fees, - Hundreds of hours in management time, and - A potentially catastrophic judgment (Note: A single classic

car can sell for over $200,000; sometimes much more).

•The Rental Company was not as fortunate, and remained embroiled in a large and potentially damaging lawsuit for more than two years thereafter.

Enforceability Issues

“Unconscionability”The judicial view that, given the parties’

negotiating positions and circumstances, a given contract or contract’s provision(s) is/are so unfair that it/they “shock the conscience,” and should

not, therefore, be enforced.

In fact, even the Uniform Commercial Code has specifically identified “unconscionability” as a valid

reason for refusing to enforce provisions a court deems unfair (UCC § 2A-108).

Legal “To Do” List1. Be Simple and Direct. Use simple, direct

language;

2. Be Clear. Use as large and dark a font as possible (emphasize important provisions);

3. Be Space-Conscious. Avoid “cramming in” provisions (use at least 10-pt. font, particularly where your rental contract is already printed in very small font);

4. Be Careful. Never “cut and paste”;

5. Be Fair. A “late fee” of $1 million usually won’t be enforceable, even if the customer signs it; and

6. Be Smart. Use Addenda to cover important issues.

Where to Start

Understand Your Exposure to Potential Liabilities

(Sources of Claims)

And

Decide Which Issues are Most Important

Top 5 (+2) Most Valuable Addenda

Number 5:Terms of Sale / Bill of Sale

Purpose(s): 1. Identify (and limit) the items being sold to the customer;

2. Limit the Rental Company’s liability for express and implied warranties, defects and malfunctions;

3. Obtain the buyer’s agreement to indemnify the Rental Company for post-transaction claims;

4. Minimize taxes; and

5. Require claims to be litigated in a nearby court.


Number 5:Terms of Sale / Bill of Sale

Some Important Provisions:

1. Lessor hereby sells, assigns, transfers and conveys to Buyer all of Lessor’s right, title and interest in and to the Item(s) identified in Exhibit A.

2. EXCEPT ONLY AS EXPRESSLY SET FORTH HEREIN, LESSOR MAKES NO WARRANTY, EXPRESS OR IMPLIED (INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF …

3. TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL SALES ARE FINAL. BUYER WILL INDEMNIFY AND HOLD HARMLESS LESSOR …

4. Buyer agrees to cooperate with Lessor to minimize sales taxes …

5. Proper venue for all legal actions commenced in connection herewith shall lie solely and exclusively in …

Number 4:Tier 4 / Stage IV Requirements

EPA Tier 4 standards require that emissions of PM (Particulate Matter) and NOx (Nitrous Oxide) be reduced by 90%, requiring manufacturers to build expensive emission control systems into new engines (currently, Tier 4f (Final) is already effective for small diesel engines (0-74 hp), and commences in 2014 for large diesel engines [174-751 hp]).

At least three issues for Rental Operators:1.How to make sure customers clean the PM filters (many engines require customers to commence a “regeneration” cycle).

2.How to make sure customers refill DEF (Diesel Exhaust Fluid or “urea”) tanks.

3.How to make certain customers are using only ULSD (Ultra Low Sulfur Diesel) fuel (becoming less an issue because ULSD is now easier to obtain).

Virtually NO Rental Contracts Cover Tier 4.

The issues are too numerous and too new to be covered in the average rental contract. Use a Tier 4 / Stage IV Addendum to advise customers of

the issues and to obtain their agreement to comply with the new legal requirements.



Number 3:Damage Waiver

Purpose(s): 1. Clarify that Damage Waiver is “OPTIONAL” and may be

declined (but if it is, the Lessee will be responsible for all damages);

2. Provide a specific list of Coverage Exceptions;

3. Set forth agreed deductibles and/or coverage limits (if any); and

4. Clarify that Damage Waiver does not constitute either Insurance or a Warranty;


Number 3:Damage Waiver

Some Important Provisions:1. Damage Waiver is OPTIONAL, and may be declined.

2. If you decline the Damage Waiver, you will be responsible for all repair and replacement costs …

3. The foregoing notwithstanding, the following are not covered under the Damage Waiver, and you will remain 100% liable for each: …

4. If you accept the Damage Waiver, Lessor will waive its right to collect from you ___% of its applicable repair or replacement costs, (subject to a deductible of $______) up to $__________.

5. Damage Waiver IS NOT INSURANCE, NOR IS IT A WARRANTY.


Number 2:Safety Rules

(Vehicles, Trailers, Lifts, Tents, Inflatables, Portable Storage Containers, Boats, Cycles, Snowmobiles, ATVs and others)

Purpose(s):

1. Notify the customer of specific requirements for safe use of particular types of equipment without creating additional exposure for the rental operator;

2. Provide proof (which may be introduced in court) that the Rental Company satisfied its “duty to instruct.”

3. Limit the Rental Company’s liability by setting up the defense of “misuse” (which can be extremely valuable if someone is injured or someone’s property is damaged).


Number 2:Safety Rules

(Vehicles, Trailers, Lifts, Tents, Inflatables, Portable Storage Containers, Boats, Cycles, Snowmobiles, ATVs and others)


1. The following rules are included for informational purposes only, and are NOT intended to: (a) serve as a comprehensive list of safety measures; (b) supplant the Code of Safe Practices, OSHA Guidelines, or other applicable safety precautions; or (c) supersede any manufacturers’ safety instructions, warnings, or guidelines, …

2. The undersigned agrees to carefully review and post in a conspicuous place all applicable OSHA Guidelines (including those contained in 29 CFR Parts …)


Number 1:Fall Restraint/PFP Warning/Declination

(Lifts and Scaffolds)

Purpose(s):

1. Notify the customer of legal requirements, including OSHA (29 C.F.R., Parts 1910.26, 67 and 450-454);

2. Warn the customer that Lifts and Scaffolds are Inherently Dangerous;

3. Provide instructions for safe use of equipment;4. Clarify that the Rental Company has made PFP available on

reasonable terms;5. Obtain an indemnity agreement from the customer.

Top 5 (+2) Most Valuable AddendaNumber 1:

Fall Restraint/PFP Warning/Declination (Lifts and Scaffolds)


1. I am aware that under Title 29 of the Code of Federal Regulations, Parts 1910.28, 1910.67 and 1926.450-454, all operators of such Rented Item(s) are required by OSHA to use or wear a personal fall protection system (“PFP”) when operating such Rented Item(s) …

2. WARNING: THE RENTED ITEM(S) IS/ARE INHERENTLY DANGEROUS, AND SHOULD BE USED WITH GREAT CARE …

3. Following is a summary of some common sense rules designed to promote safety in the use of Lifts and Scaffolds …

4. I agree to indemnify, defend and hold harmless the Lessor from and against any and all liabilities, claims, …

A Few Simple Questions1. Dangerous Items: Does my rental fleet include dangerous items?

(a) Number: How Many of These Dangerous Items Does My Fleet Include?(b) Frequency: How Often Do I Rent These Items?(c) Severity: How Great is the Potential Harm? (Does the harm typically include only property damage, or

also the risk of personal injuries and/or death?)(d) Likelihood: How Likely is the Harm to Occur? (Are my customers well-trained professionals, unfamiliar

beginners, or somewhere in between?)2. Common/Known Misuses: Do customers often misuse or overuse items?3. Instructions and Warnings: Would providing Instructions and/or Warnings in an Addendum reduce the danger

and/or help me avoid/win a lawsuit?

4. Other Issues: Do I need to cover any other issues? For example:(a) Damage Waivers(b) Maintenance Requirements(c) Rental Term Extensions(d) Services Provided by the Rental Company(e) Equipment Sales / Purchase Options(f) Return Requirements / Return Condition Reports(g) Credit Card Authorizations

SummarySteps to Take

1. Identify Potential Sources of Liability and Additional Cost (particularly, inherently dangerous equipment);

2. Identify Other Important Issues (e.g., Tier 4, Damage Waivers, Sale Terms, Extensions, Maintenance, Purchase Options, etc.);

3. Write them Down;

4. Decide How Best to Deal With Them (assumption of risk, hold harmless, indemnity, etc.);

5. Decide Whether They Commonly Apply to All or Most of your rentals, or only in some (but not all) cases;

6. If the Latter, Create an Addendum that Covers Them;

7. Use simple, direct, clear, concise and fair language;

8. Get it Signed whenever possible.


Top 5 (as of 1/1/2013):

1. Fall Restraint/PFPE Warning/Declination (Lifts and Scaffolds)

2. Safety Rules (Vehicles, Trailers, Lifts, Tents, Inflatables, Portable Storage Containers, Boats, Cycles, Snowmobiles, ATVs and others)

3. Damage Waiver

4. Tier 4 / Stage IV

5. Purchase Option (RTO) / Terms of Sale

Honorable Mention:

6. Receipt/Acceptance Certificate

7. Return Requirements / Return Condition Certificate


Number 6:Receipt and Acceptance Certificate

(Upon Delivery/Installation)

Purpose(s):

Obtain the customer’s acknowledgment that the customer inspected the equipment upon delivery and:

1. That all items were delivered;

2. Each was in good condition and repair when delivered;

3. Each was performing satisfactorily;

4. The customer received all instructions and warnings; and

5. The customer does not claim any breach has occurred.


Number 6:Receipt and Acceptance Certificate

(Upon Delivery/Installation)


1. I have received and accepted all Rented Items, and I am satisfied that they are properly described in the Rental Contract.

2. I have inspected and tested each Rented Item and found it to be clean and in good working order and condition, …

3. Each Rented Item has been installed properly, functions safely and properly for my intended use, and …

4. I have received, read and understood all warnings, instructions, user manuals and training required under applicable OSHA, ANSI, …

5. The Lessor is not, to my knowledge, in breach of the Rental Contract.


Number 7: Return Requirements /

Return Condition Certificate

Purpose(s): 1. Notify/Remind the customer of the required return

condition;2. Provide a reminder in bullet-point format for yard

personnel checking in equipment; and3. Document damage, defects and shortfalls.


Number 7: Return Requirements /

Return Condition CertificateSome Important Provisions:

1. You agree to return the Rented Item(s) in good order, condition and repair, “rental ready,” and …

2. Fuel / Fluids: ___ Full / Unfilled: __________

3. Hours: __________ / Mileage: ___________

4. Condition Upon Return: ___ Good ___ Fair ___ Poor

5. Damage(s), Defects, Deficiency(ies) / Required Repairs: ___________________________________

Why is it so Important Now?

The Growth of Litigation, particularly in the United States

1.Sources of Liability2.Damages3.Efforts to Protect Customers4.Efforts to Protect Bystanders5.Enforceability Issues (Contracts)

“Sources of Liability”

Products LiabilityA defect existed that rendered a product “unreasonably dangerous”

and resulted in harm to a customer or some third party.

NegligenceFailure to exercise the care a reasonably prudent person would

exercise.

Breach of ContractFailure to comply with any of the material terms of a contract.

Note: There are many more, but these are the most common in my view.

“Damages”

Personal InjuriesInjuries to a person’s physical being, as distinguished from his/her

property, feelings or reputation

Property DamageLoss, Injury or damage to real or personal property

Breach-Related DamagesLosses arising from or in connection with a contract breach

Other Reasonably Foreseeable Damages

All other damages that were “reasonably foreseeable”

Potential LiabilitiesImplied Warranties

(These Exist Even if You Never Say Them)

Lessors are charged with responsibility for “implied warranties” under the Uniform Commercial Code (UCC §§2A-211 through 213).

Implied warranties include:

(a) Warranty of Merchantability;

(b) Warranty of Fitness for a Particular Purpose;

(c) Warranty of Suitability; and

(d) Warranty of Non-Infringement (with I.P. rights).

Potential Liabilities

Implied Duties

Equipment Lessors are also charged with a number of other legal duties to their customers (and to anyone else who might come into contact with the equipment), including:

(a) The Duty to Inspect the equipment

(b) The Duty to Instruct the Equipment Lessor’s customers in how to properly and safely use it

(c) The Duty to Warn them of foreseeable hazards associated with its use

A breach can give rise to claims against the rental operator for “Negligence” or even “Strict Products Liability.”

Potential LiabilitiesProducts Liability Suits

Additionally (and posing the greatest threat), “Products Liability” lawsuits expose all parties in the “chain of distribution” to lawsuits for defects in the design, manufacture, advertising and distribution of equipment:

(a) Negligence;

(b) Breach of Warranty;

(c) Misrepresentation;

(d) “Strict” Liability (without proving anyone was at fault) when a product is rendered “unreasonably dangerous” as a result of:

(a) Design Defects: (Reasonable Alternative Design)

(b) Manufacturing Defects: (Departure from Design)

(c) Warning Defects (Failure to provide Instructions or Warnings)

Potential Liabilities“Strict” Products Liability SuitsThe array of potential plaintiffs has been dramatically expanded.

Since the late 1960s, any and all other parties (even bystanders) who might “foreseeably” be impacted are now permitted to maintain strict products liability lawsuits.1

Thus, liability that was once limited to the provider’s immediate customer now reaches everyone else who comes into contact with, or might otherwise be affected by, a piece of leased equipment (enabling all of them to file products liability suits against equipment sellers and equipment lessors).

1. See, e.g., Elmore v. American Motors Corp., 70 Cal. 2d 578, 1969

http://online.ceb.com/CalCases/C2/70C2d578.htm

Liability / Lawsuits

Potential Lawsuits

Foreseeable Claims

Direct Claims

Indirect Claims

A Few Simple Questions:1. Dangerous Items: Does my rental fleet include dangerous items?

(a) Number: How Many of These Dangerous Items Does My Fleet Include (e.g., lifts, scaffolds, cranes, excavators, demolition equipment, cutting tools, chippers, farm equipment, heavy hydraulic equipment, etc. . . . ALSO, tents and inflatables)?

(b) Frequency: How Often Do I Rent These Items?

(c) Severity: How Great is the Potential Harm? (Does the harm typically include only property damage, or also the risk of personal injuries and/or death?)

(d) Likelihood: How Likely is the Harm to Occur? (Are my customers well-trained professionals, unfamiliar beginners, or somewhere in between?; Have I received reports of problems or defects in the particular make(s) and model(s) in my fleet?)

A Few Simple Questions

1. Dangerous Items: Does my rental fleet include dangerous items?(a) Number: How Many of These Dangerous Items Does My Fleet Include?

(b) Frequency: How Often Do I Rent These Items?

(c) Severity: How Great is the Potential Harm? (Does the harm typically include only property damage, or also the risk of personal injuries and/or death?)

(d) Likelihood: How Likely is the Harm to Occur? (Are my customers well-trained professionals, unfamiliar beginners, or somewhere in between?)

2. Common/Known Misuses: Do customers often misuse or overuse items?

Important:Rental operators have an affirmative legal duty to warn customers against “foreseeable” misuses.

Also, “misuse” is a valid defense to most types of customer claims, but not if that misuse was “foreseeable” and you failed to warn them against it.

A Few Simple Questions1. Dangerous Items: Does my rental fleet include dangerous items?

(a) Number: How Many of These Dangerous Items Does My Fleet Include?(b) Frequency: How Often Do I Rent These Items?(c) Severity: How Great is the Potential Harm? (Does the harm typically include only property

damage, or also the risk of personal injuries and/or death?)(d) Likelihood: How Likely is the Harm to Occur? (Are my customers well-trained

professionals, unfamiliar beginners, or somewhere in between?)

2. Common/Known Misuses: Do customers often misuse or overuse items?

3. Instructions and Warnings: Would providing Instructions and/or Warnings in an Addendum reduce the danger and/or help me avoid/win a lawsuit?


An inflatable slide collapses on a 54-year-old married father of two, severely injuring his back;

Nine days after the incident, he collapses and dies as a result of a pulmonary embolism brought on by his back injuries and the ensuing surgery;

His family sues the Cleveland Indians, the manufacturer, the equipment owner and two other parties for wrongful death.

Real-life Liability Claim:

OUTCOME:

-Equipment Owner’s insurer denies coverage

-Equipment Owner fails to appear for trial

-Judge awards Plaintiff a $3.5 million judgment against the Equipment Owner/Lessor

-The other defendants, including the Cleveland Indians, quickly settle for undisclosed amounts.

Provisions That Might Have Saved $3.5 Million

Use and Safety Instructions Inspection and Acceptance WARNING OF RISK OF MOVEMENT OR COLLAPSE WARNING NOT TO OVERUSE/OVEROCCUPY Assumption of Risk (by the Customer) Hold Harmless, Indemnity and Defense Provision

Real-life Liability Claim:

FACTS:

Customer (contractor) rents a lift from an Equipment Lessor.

Customer’s employee fails to use PFP

He falls out and breaks his leg

Customer does not have workers’ compensation insurance

Customer’s employee sues Customer, and Customer impleads and cross-claims against the Lessor

Real Life Liability Claim

Worker sues the Equipment Lessor

OUTCOME:

Equipment Lessor

•Produces a set of Safety Instructions (an Addendum) signed by the customer;

•Produces an indemnity and hold harmless agreement signed by the customer;

•Hires an attorney, who files a Motion for Summary Judgment, which is granted

Critical Liability Issues

PFPE (Personal Fall Protection Equipment) Notice

Use and Safety Instructions / Safety Rules

WARNING OF INHERENT DANGER

Assumption of Risk (by the Customer)

Hold Harmless, Indemnity and Defense Provision

Optional Provisions(assuming these already appear in the rental contract)

Liability Disclaimer Acknowledgement that the Rental Operator

is not the Manufacturer “As-Is” Provision / Warranty Waiver Limitation on Claims and Damages Proper Use Clause Inspection Acknowledgement Insurance Requirement Attorneys’ Fees Clause Personal Guaranty

We will not be responsible to you

or to any third party for any

liabilities, claims, injuries, losses,

costs or damages arising from or

associated with . . .

The equipment is provided “as-is” and “with

all faults.” We make no warranty, express or

implied (including any and all implied

warranties of merchantability, fitness, freedom

from defects. . .

Important: An “As-Is” provision (the Lessee accepts the property “As-Is”) accomplishes several important objectives:1.Eliminates certain implied warranties;2.Makes the buyer/lessee responsible for inspecting and testing the equipment;3.Helps eliminate causation (claims that a defect “caused” the complained of injuries or damages).

Limitations: An “As-Is” provision still does not eliminate:(a)The implied warranty of “merchantability;”(b)Claims of fraud by the seller/lessor; or(c)Claims that the seller/lessor “impaired” the buyer’s / lessee’s right to inspect the equipment.

Anything to the contrary contained

herein notwithstanding, the Lessor’s

maximum liability to you for any and

all claims arising hereunder or in

connection herewith is hereby limited

to the Rent actually paid by you. . .

The Equipment is authorized for use only by you and your

agents and employees (each of whom must be skilled,

experienced, trained and authorized in its operation), at

the location given as the “Ship To” site (the “Site”)

identified on the face of your Rental Contract. The

Equipment is authorized for use only for . . .

The undersigned individual hereby

personally guarantees the prompt

payment and performance of all of the

obligations of the above named

Customer / Lessee arising hereunder . . .

Note: A Personal Guaranty can be valuable when used as a separate Addendum as well.


•Subcontractor rents dewatering equipment and uses it to remove water from a construction site;

•Adjacent landowner sues, claiming his property was damaged;

•General Contractor’s payment is reduced by the adjoining landowner’s damage claim;

•General Contractor sues the dewatering subcontractor and the rental company.

Real-life Liability Claim:OUTCOME:

•The Rental company proves its customer was provided the proper use and safety instructions and warnings, and importantly, took responsibility for proper operation of the rented equipment, and that the rental company had no control over its use or operation.

•The Rental Company showed that the customer had signed an agreement obligating the customer to indemnify and hold harmless the rental company.

•The court granted summary judgment and dismissed the case against the rental company.

Consider The Value of Your TimeManagement’s Time devoted to:

1. Investigating Claims;

2. Reviewing Pleadings and Other Documents;

3. Meeting with Attorneys;

4. Testifying in Depositions;

5. Responding to Interrogatories;

6. Responding to Requests for Production;

7. Testifying in Court; and

8. Thinking About the Case.

Management Time may comprise the largest single cost item (and may never even be recognized as part of the cost of litigation).

This makes Avoiding Litigation among the most important reasons for using a proper rental contract. So, WIN QUICKLY.

SummarySteps to Take

1. Identify Potential Sources of Liability and Additional Cost (particularly, inherently dangerous equipment);

2. Identify Other Important Issues (e.g., Damage Waivers, Extensions, Maintenance, Purchase Options, Tier 4, etc.);

3. Write them Down;

4. Decide How Best to Deal With Them (assumption of risk, hold harmless, indemnity, etc.);

5. Decide Whether They Commonly Apply to All or Most of your rentals, or only in some (but not all) cases;

6. If the Latter, Create an Addendum that Covers Them;

7. Use simple, direct, clear, concise and fair language;

8. Get it Signed whenever possible.

James R. Waite, Esq.

866-582-2586Email: [email protected]

901 Indiana Ave., Suite 250, Wichita Falls, TX 76301

1800 Glenarm, Suite 1300, Denver, CO 80202

mailto:[email protected]

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