Rental Contract Considerations During the Coronavirus Outbreak


The Coronavirus (COVID-19) has negatively impacted the economy worse than many of us imagined. We still don’t know the full impact this virus will have. As a result, demand for equipment is slowing in many areas and customers increasingly have been canceling reservations or terminating existing rentals. Understandably, for this reason, rental operators are asking:

Can the coronavirus be considered an “Act of God” that gives my customers the right to cancel their reservations and/or contracts?

Although unfortunately, there is no way to avoid many of the economic problems this pandemic will cause. However, the good news, according to the ARA, is that it is possible for rental operators to protect themselves contractually from much, though certainly not all, of the fallout from pandemics and other unforeseen problems, including cancellations and terminations, as well as the lawsuits that are sure to ensue.

But doing so requires incorporating some provisions that, until now, routinely have been overlooked in most rental contracts and leases. Here, will we quickly list some of the issues and related contract provisions that just might prove to be the most meaningful to you currently.

  • Acts of God– Even if a judge or jury decided that a global pandemic qualifies as an “Act of God,” your customer likely is still deemed liable for payment in full if, but only if, your contract is properly written.
  • Frustration of purpose– A lessee might say a cancellation due to coronavirus made the rental company’s performance of its obligations worthless to the lessee, thereby not obligating them to make payments. However, this would require a court to support at least 2 arguments:
  1. That the purpose of the contract was ‘successful completion of the project or event’ as opposed to simply ‘the successful completion of the rental’.
  2. The pandemic actually did “frustrate” that purpose. If the contract states the equipment was selected without the lessor’s assistance, an argument can be made that the true purpose of the contract was to complete the rental- not the project/event.

Eliminating contingencies, trap-doors, setoffs, prorations, counterclaims, and extraneous agreements is crucial to protecting the lessor. If any of these should fail to appear in your rental agreement, now would be a good time to consider updating it to include them:

  • Unconditional duties
  • Eliminate allowances, credits, and setoffs
  • Selection
  • One-way acts of God/force majeure provisions
  • Default and remedies
  • Litigation, claims, and chargebacks
  • Liens
  • Chargebacks
  • Rental purchase options (RPOs)
  • Venue

How else can you protect your business?

Every good business owner knows there are things you can and cannot control. A worldwide pandemic is one of the things you can’t. But how knowledgeable you are about the health of your business is one thing you can.

Rental360 is a single platform that can help you do just that by connecting all facets of a rental business. Through its interactive and customizable Power BI dashboards, a business can leverage detailed data visualizations around Utilization, Revenue, Equipment, Equipment on Rent, and Financials to see the health of the business in real time and track equipment locations at a glance.

Since Rental360 provides a single source for all critical business data, it is easier than ever for users to track contract and customer information whenever and wherever they need it.  

This kind of specific insight gives you the power to have a complete, organized view of your company, ensuring that nothing falls through the cracks and no money is lost. Because if there is one thing we can be sure of during these hard economic times, it is that not even 1 dollar can afford to be wasted.

See Rental360 in action with this on-demand webinar. 

Source: Rental Pulse, “Legally Speaking: Dealing with the coronavirus”, 3/22/2020