A Brief Introduction About the Equipment Purchase Agreement
Whether you are purchasing or selling equipment or some item, you are required to prepare an in-depth equipment purchase agreement to the transaction between the buyer and the seller. As a buyer, you are supposed to take a specific item that is worth a fixed amount and ask the seller to sell you the same through an equipment lease-purchase agreement. If the transaction is confirmed between the buyer and the seller, it is the responsibility of the seller to prepare the agreement signifying the transaction that occurred.
There are some specific items over which multiple agreements can be made wherein both the parties (the buyer and the seller) are needed to oblige before the occurrence of any kind of transaction. The equipment lease agreement that comes with the option of purchasing the equipment is a special contract wherein both the parties agree to the fact that at the end of the contract’s lease term, the buyer has the option to purchase the item completely. The equipment lease-purchase agreement is quite distinct from the typical lease purchase in the sense that a lease-purchase contract obliges the buyer to purchase the item during the end of the lease term while just a lease option would not do so.
Who Takes the Equipment Purchase Agreement?
The equipment purchase agreement is usually entered between two parties, including the seller and the buyer. The seller is known to be the party who is willing to sell the specific equipment on lease to some potential buyer. At the same time, the buyer can enter into the contract with the seller upon showing the will to purchase the item on a lease. In a typical contract for equipment lease-purchase transactions, both the parties are expected to agree upon the conditions including equipment being sold, payment terms & conditions, delivery of the equipment, the transaction at the end of the lease term, and so more.
Purpose of the Equipment Purchase Agreement
The main objective of having this contract is to ensure that the sellers of the equipment remain protected by law once the buyer has come to agree on the specific terms & conditions of the contract while specifying the will to purchase the given item or equipment as offered by the seller.
In most cases, a typical equipment purchase agreement template is known to contain the following terms & conditions:
- In the given contract, the seller warrants that he or she is the rightful owner of the equipment, and can legally transfer the title ownership to the seller
- The client or the buyer agrees to the fact of accepting the equipment “as-is” without any provision of warranty. Any maintenance or repairs come under the full-end spectrum of the buyer.
- All the associated fees, including taxes and licenses, are expected to be paid by the buyer during the instance of purchase.
- The buyer agrees to indemnify as well as hold the fact that the seller would remain harmless against any claim for damage or loss –without any limitation
- The commercial equipment lease-purchase agreement form shall be governed by the law
Contents of the Equipment Purchase Agreement
Typically, an equipment purchase agreement is known to contain the following contents that specify the terms & conditions of the contract:
- The Name of the Buyer: It is important to make sure that the name of the buyer is 100 percent accurate. Otherwise, the commercial equipment lease agreement will be considered null or void. Make sure that there are no spelling errors during the identification of the buyer’s name.
- The Name of the Seller: If you are the seller of the equipment, you can opt for either providing your full name or the company name (if you are working for a company) on the given purchase agreement document.
- The Agreement: The main agreement section should contain all the important clauses as well as terms & conditions upon which the seller agrees to provide the buyer with the opportunity to purchase the equipment after the ending of the lease term. In the agreement, you are also expected to specify the kind of equipment that is being processed in the transaction. It will point out that both the buyer as well as the seller have agreed to the given terms & conditions to provide evidence in the court in case any party would try violating the contract’s terms & conditions.
- Delivery & Acceptance: As a seller, you are required to specify that you have sold the equipment to the buyer in the condition, as mentioned in the agreement. As a buyer, you are supposed to go through the document properly and then, duly sign the agreement.
- Purchase Payments: This is the section that will specify the exact payment that the buyer is expected to pay to the seller for the possession of the equipment. In addition to the amount of payment for the equipment, the document also states the type of payment and how the buyer wishes to make the payment.
In addition to the information as provided above, the equipment lease purchase form might also contain additional information including details about the maintenance & repair of equipment, the condition for the damaged or lost equipment, taxes & licenses, and indemnification of the seller.
How to Draft the Equipment Purchase Agreement?
The seller of the equipment is required to draft the terms & conditions of the given contract. Before drafting the contract document, the seller is expected to analyse the exact amount for sale and the grounds of violation of the contract. Here are some additional points to consider:
- Purchase & Sale of Equipment: The seller is allowed to sell, convey, assign, or transfer to the buyer. In turn, the buyer is expected to purchase, pay, and accept all the interests and title of the document.
- Closing Document: This represents the closing as well as consummation of all the transactions that are contemplated by the given agreement.
- Representations & Warranties of the Seller: The seller in the given document is known to represent as well as a warrant to the buyer that the statements that are contained in the document are accurate, correct, and complete on the effective date of the contract.
- Representations & Warranties of the Buyer: Buyer also represents as well as warrants to the seller that the statements contained in the document are true and accurate on the execution date of the contract.
There are several grounds upon which the buyer of the equipment might consider negotiating with the seller. Some of the common factors that comprise the negotiation strategy in the equipment purchase agreement include the condition of the equipment, the cost of the equipment, cost of warranty services, cost of repairs, and so more. The negotiation terms & conditions of the contract should be specified during the drafting phase of the document.
Benefits & Drawbacks of the Equipment Purchase Agreement
Equipment leasing or purchasing serves to be a big-time solution for entrepreneurs or companies that are cash strapped and need to invest in the high-grade industry or commercial equipment. This is wherein the role of a reliable commercial equipment lease-purchase agreement comes in. Some of the potential benefits of leasing vital equipment through an equipment lease-purchase agreement are:
- Validation of the Purchase: The contract serves to be an official document that validates the fact that the purchase of the equipment has been made between the buyer and the seller.
- Proof of Law: If you wish to carry out any significant commercial transaction, it is mandated for you to present a proof of concerning the given transaction. The purchase document serves to be a valid document that is lawful and relevant at the same time.
- Ease of Transactions: When the specific purchase terms & conditions are mentioned in the contract document, it becomes easier to carry out the particular transactions.
While there are several advantages of preparing an equipment lease-purchase contract, some of the additional drawbacks to the same might include the provision of increased penalties, restricted utilization of the asset, and increased prices.
What Happens in Case of Violation?
In a typical case of the violation or breaching of the terms & conditions of the agreement, the seller (the one preparing the document) might decide to terminate the contract altogether. In other terms, the seller might as well transfer the ownership to his or her name and prohibit the buyer from using the equipment any further.
In case of a commercial transaction involving the transfer of ownership of equipment between a buyer and a seller, the equipment purchase agreement plays a vital role. It is important to go through the terms & conditions of the agreement before complying with the same(1).