Last week, we were asked to draft an equipment lease agreement. The equipment consists of hand-held testing devices, which are used to test whether a product contains a chemical additive. Our client’s main business is the supply of the additive, but he also provides the device to his distributors, to enable them to test whether products in the market contain the additive.
We had previously advised the client on a contract with the manufacturer of the devices, and on distribution agreements for the additive. The client now wanted a straightforward leasing agreement, for relatively low value equipment, and with no special requirements.
A simple task, you might think. Find a decent template agreement for an equipment lease, tailor it to the circumstances of the product and the parties, and Bob’s your uncle. Sorted.
However, it turned into a nightmare task. The problem, as you may have guessed from the title of this posting, was finding a suitable template. We didn’t have anything suitable from our own resources, so we used a published template from a reputable source as a starting point.
Unfortunately, the template was written in very old-fashioned language, and required a great deal of work to turn into something that I was prepared to send to a client. Here is an example of wording from the template:
3.3.7 To obtain, effect and keep effective all permissions, licences and permits and to pay all rates, rents, taxes and charges which may from time to time be required in connection with the business of the Lessee, the Goods and their use, the premises where they are from time to time situated or kept, this agreement and the purchase, ownership, delivery, leasing, possession, operation, import to or export from any country, any return or other disposition of the Goods, or upon the rentals, receipts or earnings arising from them, including interest and penalties (other than corporation tax charged on the profits or taxable gains of the Lessor) and to comply with all statutory and other obligations of all kinds in relation to the Goods and the use of them and at its own expense to add to or install with the Goods any safety or other equipment required by any applicable law or regulation to be so added or installed for the use or operation of the Goods and to protect the Goods against distress, execution or seizure [(or in Scotland any form of diligence)] and to indemnify the Lessor against all losses, charges and damages however incurred by the Lessor by reason of failure by the Lessee to comply with any of the above terms of this clause
Eagle-eyed readers will notice that the above clause isn’t even a sentence. Several pages earlier in the document, the words “The Hirer agrees” appear at the start of a main clause (clause 3), and the above sub-clause hangs off those words. Ugh!
There are so many other drafting horrors in the wording quoted above, that it is difficult to know where to start in describing them. The problems include:
- too many words in a single sentence (assuming that “the Hirer agrees” is added to make it into a sentence). 222 words in a sentence is far too many
- convoluted phrasing, where the sense of the obligation is buried in a sea of words
- long lists of words that mean the same thing
- use of legal terminology that will mean little to the overseas distributor, eg “distress, execution or seizure”
- using the term “Lessee” when the defined term for that party elsewhere in the agreement is “Hirer” – a straightforward drafting error
The draft that we have prepared looks very different from the original template. We cut out large swathes of text. The clause that came closest to some of the above wording reads as follows:
4.7 The Hirer shall at its own expense:
4.7.1. comply with all statutory and other obligations of all kinds in relation to the Equipment and its keeping, transportation and use; and
4.7.2. add to or install with the Equipment any safety or other equipment required by any applicable law or regulation to be added or installed.
Some further work needs to be done on this wording, but at least it is now possible to see what the clause is trying to say. For example, I see there is an inconsistency in referring to “statutory and other obligations” in the first part, and “law or regulation” in the second part. This inconsistency appeared in the original.
Further suggestions on drafting techniques may be found in our book, Drafting and Negotiating Commercial Contracts.