Hiring out equipment can be a smart way to grow revenue without taking on full-time projects. But if you’re lending out your gear without a clear, written contract, you’re carrying more risk than you need to.
A solid dry hire agreement template protects your equipment, sets clear expectations with customers and helps you recover costs if things go wrong. In Australia, it also needs to align with the Australian Consumer Law and the Personal Property Securities Act so your rights actually hold up if there’s a dispute.
In this guide, we’ll walk through the essentials of a dry hire agreement template, common pitfalls, and practical steps to tailor and implement your contract. We’ll also cover when to register security interests and how to manage key risks like damage, downtime and late payments.
What Is A Dry Hire Agreement (And How Is It Different From Wet Hire)?
Dry hire is when you rent out equipment without providing an operator. Your customer is responsible for using the equipment, following site safety rules and returning it in good condition.
By contrast, wet hire includes an operator you supply to run the gear. If you sometimes provide operators as well, you’ll want a separate Dry Hire Agreement for “equipment only” jobs and a different agreement for operator-included work (see Wet Hire Agreement).
Because the operator is not included in dry hire, your contract needs to work harder to manage responsibility for training, licensing, safe use, damage and third-party claims.
Core Clauses Your Dry Hire Agreement Template Should Cover
1) Hire Items, Condition And Pre-Hire Checks
- Item schedule: A clear schedule describing each piece of equipment, serial numbers and accessories.
- Condition report: A pre-hire checklist with photos that both parties sign to record existing wear and tear.
- Suitability disclaimer: The customer is responsible for confirming the equipment is fit for their intended purpose and site conditions.
2) Term, Delivery, Risk And Return
- Hire period: Start date/time, end date/time, minimum hire, extensions and how daily/weekly rates apply.
- Delivery and collection: Who arranges transport, when risk passes, who loads/unloads and any site access requirements.
- Return condition: How and when equipment must be returned, cleaning standards and restocking fees if parts are missing.
3) Fees, Deposits And Late Charges
- Pricing: Daily/weekly rates, stand-down rates, distance charges and after-hours callout fees.
- Security deposit: Amount, how it’s held, when it can be applied to damage or unpaid fees.
- Late return: Overtime rates or additional daily charge for late returns, plus any restocking costs.
- Late payment: Clear interest or admin fees for overdue invoices in line with fair charging practices (see guidance on late payment fees).
- Credit terms: If you offer accounts, link your hire terms to your Credit Application Terms.
4) Customer Responsibilities And Use Restrictions
- Licensing and training: The customer confirms operators are properly trained and licensed.
- Safe use: The customer must use the equipment per manufacturer instructions and WHS laws, and handle site safety and inductions.
- No unauthorised modifications: No repairs or changes unless you approve in writing.
- No sub-hire or relocation: The equipment can’t be moved or sub-hired without consent (important for tracking and insurance).
5) Damage, Breakdown And Maintenance
- Damage allocation: The customer is liable for damage beyond fair wear and tear, including missing parts and vandalism while equipment is in their custody.
- Breakdown reporting: Immediate reporting obligations, stop-work requirements, and a process for assessment and repair.
- Downtime: When hire charges pause for genuine breakdowns not caused by misuse, and when stand-down fees apply.
- Maintenance: Who handles routine checks (e.g. fluids, tyres) during the hire and how defects are reported.
6) Insurance And Indemnities
- Customer’s insurance: Proof of public liability and equipment insurance (with sum insured adequate to replace the gear), listing you as an interested party where possible.
- Indemnity: Clear indemnities for losses arising from the customer’s use, breach or negligence, including third-party claims.
- Limiting your exposure: Include a balanced cap on liability and exclusions where permitted by law (more on limitation of liability clauses below).
7) Title, Security And PPSA
- Title retention: You retain ownership at all times; hiring the equipment does not transfer title.
- Security interests: If you extend credit or leave accessories on site, consider taking security and registering it under the Personal Property Securities Act 2009 (PPSA). You might use a General Security Agreement and then register a security interest on the PPSR to protect priority over your equipment and any proceeds (background on what the PPSR is).
8) Australian Consumer Law (ACL) And Warranties
- ACL compliance: If you hire to consumers or small businesses, you must comply with the Australian Consumer Law, including guarantees and refunds where required.
- Warranties against defects: If you offer remedies beyond ACL rights, state them clearly and include the mandatory wording in any Warranties Against Defects Policy.
9) Termination, Default And Recovery
- Termination triggers: Non-payment, unsafe use, suspected damage, insolvency or breach.
- Recovery rights: Your right to enter a site to recover the equipment if the customer defaults (ensure this is drafted lawfully and practically).
- Early termination fees: Reasonable costs for early cancellation or site attendance if the job is called off late.
10) Dispute Resolution And Governing Law
- Escalation: A simple, time-bound escalation process (project managers → senior contacts → mediation) helps resolve issues fast.
- Jurisdiction: Nominate the Australian state or territory law that governs your agreement.
Step-By-Step: Tailor Your Dry Hire Agreement Template
Step 1: Map Your Business Model And Risks
List the types of equipment you hire, typical sites (construction, events, mining, residential), common hazards and how customers use your gear. The risks you identify should drive your clauses around insurance, training, damage, and site safety.
Step 2: Decide Your Pricing And Credit Settings
Lock in your minimum hire periods, day/week rates, delivery or call-out charges and cleaning or restocking fees.
If you offer accounts, connect your hire terms to your credit application, set credit limits and overdue workflows, and set out transparent late fees that comply with Australian law.
Step 3: Draft The Operational Clauses
Write clear, practical obligations around pre-hire checks, handover, safe use, reporting breakdowns and returning equipment. Keep the instructions practical and aligned with manufacturer guidance.
Step 4: Insert Liability, Insurance And Security Protections
Add indemnities, a reasonable liability cap, insurance requirements and a title retention clause. If you extend credit or leave valuable accessories on site, consider PPSR protection by using a security agreement and registration.
Step 5: Align With The Australian Consumer Law
Review your refund, cancellation and warranty language for ACL compliance. If you supply to consumers or small businesses, unfair contract terms rules also apply to standard form contracts, so keep your template fair, balanced and transparent.
Step 6: Finalise Termination, Default And Dispute Pathways
Make sure you can act quickly if there’s non-payment or unsafe use, but also give customers a straightforward path to raise issues and resolve them early.
Step 7: Build Your Handovers And Admin
Prepare an equipment schedule, condition report template and an incident/breakdown form. These documents should integrate with your agreement to make proof and recovery easier.
Key Legal Issues To Get Right In A Dry Hire Agreement
Unfair Contract Terms (UCT) For Small Business Contracts
If you hire to consumers or small businesses using a standard form contract, certain terms can be void if they are unfair-for example, one-sided indemnities with no legitimate business justification or termination rights that only benefit you.
Keep your clauses necessary and proportionate to the risk. Clear explanations, reasonable liability caps, and fair notice periods reduce UCT risk.
Limitation Of Liability That Actually Works
Limitation clauses need careful drafting to be enforceable. A typical approach is to exclude indirect loss to the extent permitted by law, cap direct loss to a defined amount (e.g. the hire fees for a period), and carve-in mandatory ACL rights. See more on designing a practical and enforceable limitation of liability.
PPSR Registrations For Priority Protection
Retaining title in your contract is important, but registering a security interest is what usually preserves your priority if your customer becomes insolvent or sells encumbered goods. If the value at risk warrants it, use a security agreement and register quickly (timing affects priority) to protect your gear and proceeds (read more about the PPSR and how to register a security interest).
Personal Guarantees For Corporate Customers
If you hire to a company with limited trading history, you can require a director guarantee to backstop the account. This sits alongside your credit terms and security registration. Depending on the deal, a standalone Deed of Guarantee and Indemnity can add extra protection.
Late Fees And Collections
Late fees should reflect genuine costs of chasing payment and be disclosed up-front in your contract and invoices. Combine this with a clear invoicing cadence, reminders, and a right to suspend future hires until payment is made. When used transparently, these tools help you maintain cash flow and reduce disputes about overdue amounts.
Common Pitfalls We See (And How To Avoid Them)
No Condition Report Or Photos
Without a signed condition report (with photos) at handover, it’s much harder to prove a damage claim. Bake the process into your delivery checklist so it happens every time.
Vague Damage And Downtime Clauses
If your agreement doesn’t spell out responsibility for misuse, vandalism or theft, expect disputes. State clearly when charges pause for genuine breakdowns and when they continue (e.g. where misuse or site issues caused the stoppage).
No Security Or PPSR Registration
Title retention alone won’t always protect you. If you extend credit, regularly leave valuable accessories on site or supply high-value plant, consider a security interest and timely PPSR registration. It’s a practical way to reduce insolvency risk tied to a single customer.
Weak Termination And Recovery Rights
Make sure you can suspend or terminate for non-payment or unsafe use, and that you have lawful, practical steps to recover your equipment. In the real world, delays in acting often increase losses.
Overly Broad Liability
If your contract leaves you exposed to all indirect and consequential loss, a single incident could wipe out profit on multiple jobs. Thoughtful liability caps and exclusions, consistent with ACL, help you price risk and avoid uninsurable exposure.
Implementing Your Dry Hire Agreement In Your Operations
Train Your Team On The Process
Great contracts fail when teams don’t use them. Train staff on quoting, condition reports, pre-hire checks, ID/insurance verification, delivery protocols and incident reporting.
Integrate With Your Systems
Build templates into your CRM or hire software so customers accept your terms before delivery. Automate reminders for returns, overdue invoices and service intervals.
Use Clear, Consistent Paperwork
Keep your agreement, schedules and forms consistent in style and naming. If there’s a conflict between documents, your contract should specify which one prevails.
Review Annually (Or When Your Model Changes)
As you add new equipment types, enter different industries or change pricing, update the template. Laws change too-especially UCT enforcement-so a periodic legal review is smart.
Dry Hire Vs Wet Hire: Should You Combine Them In One Template?
It’s usually cleaner to separate them. Dry hire places responsibility for operation and site safety squarely on the customer. Wet hire shifts more responsibility back to you because you supply the operator, so you’ll need different clauses around performance, delays, variations and site control. Keeping separate templates reduces confusion and protects you in both scenarios.
FAQs: Quick Answers For Small Hire Businesses
Should I take a bond for every hire?
A bond (security deposit) helps cover damage or missing items and focuses the customer on return condition. It’s common, especially for high-risk or short-term hires. State clearly when you can use the bond and how you’ll calculate deductions.
Do I need the customer to have insurance?
Yes-make it a condition of hire that they hold adequate public liability and cover for loss or damage to your equipment while in their care. Ask for certificates of currency and consider listing yourself as an interested party.
Can I charge for cancellations?
You can charge reasonable, disclosed cancellation fees reflecting genuine costs (like delivery scheduling or opportunity cost). Ensure your clause is fair and consistent with ACL expectations, particularly for consumers.
When should I register on the PPSR?
If the value at risk is significant or you’re extending credit, registering a security interest can protect your priority if the customer becomes insolvent. Use a security agreement, then register promptly so your protection is effective.
Key Takeaways
- A dry hire agreement template should clearly cover condition, pricing, delivery and return, customer responsibilities, damage allocation, insurance, liability and termination.
- Keep your contract fair and ACL-compliant, especially if you hire to consumers or small businesses under standard terms.
- Use practical protections: deposits, condition reports, personal guarantees and PPSR registrations where the value at risk justifies it.
- Separate dry hire and wet hire templates to reflect the very different risk profiles and responsibilities.
- Build your template into your processes-quoting, handovers, invoicing and incident reporting-and train your team so it’s followed every time.
- Review your agreement regularly to keep pace with new equipment, industries and regulatory updates.
If you’d like a consultation or a tailored Dry Hire Agreement for your equipment hire business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
