Drawing Up a HIRE AGREEMENT
Page 76
Page 79
If you've noticed an error in this article please click here to report it so we can fix it.
/REFERRED last week to some of the points that needed consideration when a trader was deciding whether to hire road transport or operate his own vehicles. These were arbitrarily grouped under the five headings of company structure, traffic, vehicles, finance and labour. Because, to a trader, transport is an ancillary service, it is reckoned to be of secondary importance to his main business. There is, consequently, an understandable tendency in such circumstances to underestimate the amount of administrative ability and experience required to run a transport department efficiently.
Even where the responsibility of running one's own vehicles is recognized, the level of competition in a particular industry or the special characteristics of a certain type of traffic may require the trader to have greater control over the driver than would be the case when vehicles were hired day by day.
Inquiries from readers show that there is increasing interest in the operation of vehicles under contract. This could be either under A licence, where the haulier provides and pays the driver, or by C-hire, where vehicles are purchased, maintained and owned by a contract-hire specialist, with the customer employing the driver. The latter arrangement is particularly suitable where the vanman is also a salesman, possibly handling substantial amounts of cask
Verbal Acceptance
Included in such inquiries there is usually a request for an indication as to the way in which a contract should be drawn up to the satisfaction of both operator and customer. Many traders have little or no knowledge of goods-vehicle licensing, and may ask why any contract is necessary. They point out that large quantities of traffic pass daily to the satisfaction of both customer and haulier without the necessity of any written agreement and often with only verbal acceptance of a particular rate.
If a trader requires the exclusive use of a vehicle, with the haulier supplying the driver, a contract for a minimum of 12 months' work is necessary to comply with legal requirements before a contract-A licence can be granted.
From the commercial aspect, where a vehicle is being supplied exclusively to one customer, and possibly is purchased especially for that purpose, it would be prudent for the haulier to have a written guarantee of the amount of work he will have. This legal minimum period of 12 months may well be extended to two to five years, according to the outlay involved, and by the limitations on other use which any special feature of the vehicle may impose. A haulier who is proposing to hire out a vehicle on contract and has not previously had experience of this type of work R42 should have the contract drawn up by a solicitor. I can do no more than to call attention to several items which would normally be included in the agreement.
The opening paragraph would name the parties concerned, the haulier being termed "the contractor" and the customer "the hirer." The period of the hire would then be stated. Whilst the commencement date would also be given, both parties must recognize that the execution of the contract must initially depend upon the granting of a licence. It is, therefore, necessary to insert a clause which would have the effect of cancelling the agreement in the event of the licence being refused. If this were not done the haulier could find himself in the impossible position of having contracted to hire out a vehicle which he was not legally permitted to do.
It would also be necessary to make some provision in the event of either party being unable to carry out his part of the agreement because of unforeseen circumstances. The minimum notice required in such circumstances should be mutually agreed. A similar clause would determine the notice needed to extend the contract.
Separate Schedule
The vehicle, or vehicles, which the contractor is to provide would then be specified. Whilst the major specification relative to size and type may be included in this clause, it will probably be found more convenient for minor details, such as the colour and lettering, to be detailed on a separate schedule attached to the contract. Subsequent variation of these details would not then entail further legal expense in redrafting the agreement.
Where the vehicle is to be hired out under a contract-A licence, the • agreement must include a recognition that the haulier is responsible for the provision of the driver and the conditions under which he is to work. Alternatively, if the contract refers to a C-hiring arrangement, it would be advisable to insert a clause to the effect that the driver, who would then be the employee of the customer, should be acceptable to the haulier. This would obviously be of vital importance to the contractor, as he will be committing himself to provide and maintain a vehicle at a fixed cost.
Even where the vehicle was to be operated under A licence, it might be advisable to include a similar clause, so as to avoid difficulties which might arise if the contractor were not prepared to take on a driver recommended to him by his customer.
Under a contract-A licence, the haulier, as the holder, would be responsible for the actions of his drivers. It must be clearly stated in the agreement that the hirer of the vehicle should not instruct or encourage the haulier's driver to contravene the law. Additionally, it would be in the contractor's interest to include a clause to the effect that, if such an instruction were given to his driver, the man would have the right to refuse to carry it out, and if the haulier thought fit, he would be at liberty to terminate the contract.
Of prime interest to both parties would be the stating of the charge, together with the method by which it was to be calculated and the manner in which payment was to be made.
The customer's need to hire vehicles on contract implies a specific set of conditions as to their operation and, in consequence, detailed and accurate costing could normally be more readily achieved than in the case of general haulage. The basic principles of commercial-vehicle costing—the division of these expenses into standing and running costs—however, remain. It would be in the haulier's interest to ensure that he received adequate payment for any period where thc vehicle was not employed through no fault of his own. Whether the standard charge is assessed on a tonnage, mileage or any other basis, the agreement should clearly state the rate to be paid for additional mileage or overtime working. Although only a minor addition to mileage may be involved for a single journey, the contract should state specifically whether journeys are to be regarded as starting at the premises of haulier or customer. Over a period of 12 months such mileage could add up to a substantial amount.
Prohibiting Overloading
The maximum capacity of each vehicle included in the contract must also be stated, so as to .give effect to.a subsequent clause prohibiting the overloading of a vehicle by the customer. Additionally, this clause should specify that; 'if a breakdown occurs as a result of overloading, the customer would be responsible both for the cost of the repair and the provision of a substitute vehicle.
It would be advisable fc:r any agreement to hire vehicles to contain a proviso to allow for the adjustment of charges in the event of an increase in any Of the basic items of operating cost, such as fuel or wages, over which the operator has no control.
It should be mutually agreed whether the contractor should be paid weekly, monthly, or at senne other period. In the event of default, such an arrangement would give the contractor legal grounds for discontinuing the contract and taking steps to recover payment for past services.
Under a C-hiring arrangement, responsibility for the goods carried, and the-manner in which they are loaded, is obviously the cuitomer's, because the driver is his employee. But even where the vehicle is run under contract-A licence, with both vehicle and driver supplied by the haulier, the. operator should ensure that the contract contains a clause stating that tlic customer, is responsible for the goods carried, and that the contractor will not be liable for any loss of goods, or of cash which the driver may have to collect on behalf of the customer.
. It should also be stipulated that no dangerous goods should be loaded without prior -written agreement. In this context and in other similar circumstances, the extent to which a driver is tinder an obligation to carry out instructions of the hirer should be determined. If these were reasonable instructions. they would obviously be part of the driver's daily work, but there should be a clause providing that where such instructions vary the written clauses of the agreement, the contractor has the right to disclaim liability for any resulting loss or damage.
Because under a contract-A agreement, the haulier is responsible by the terms of his licence to ensure that his driver observes statutory hours of work, the contract must also state that the customer must not give instructions to a driver which would have the effect of infringing them.
Allocation of Costs
When calculating the charges to submit as an estimate to the customer, it is important -that the contractor should make certain that all It) items of operating costs—licences, wages, rent and rates, insurance, interest, fuel, lubricants. tyres, maintenance and depreciation—are either included in his own estimate or clearly understood to be -the responsibility of the customer. This is particularly important where contract-A vehicles may be located at several of the customer's branches, as it may be more convenient for the customer to be responsible for, say, washing and light services, or 'even fuelling.
As one of the prime reasons for the customer hiring is to be relieved of ,the. responsibility of maintenance, and the disorganization which would arise from the breakdown of his own vehicles, he will naturally expect maximum availability from those supplied by the contractor. Even so, the agreement should. clearly 'state the extent to which the contractor is expected to provide a replacement vehicle in the event of breakdowns, or through other .causes. Additionally,, he should not forget to include the cost of providing substitute vehicles.
The division of responsibility as between the contractor and hirer, relative to insurance, should be defined. Where vehicles aro supplied tinder contract-Alicence, the haulier would have to indemnify the customer against any claim by his driver, as well as by third parties in respect of injury or damage. It 'would be advisable, however, for the haulier to..disclaim liability for anyone riding on the vehicle without his authority. Such situations could arise where loading staff -employed by the customer were carried in the vehicles.
Should an accident or breakdown occur, any additional payment resulting from overtime or overnight . allowances would be the contractor's liability. But the agreement should specify that where 'additional expenses are incurred, on the hirer's instructions, he would be responsible for their payment.
There would also have to be a clause indemnifying the contractor in the event of his inability to supply vehicles through strikes, lock-outs or wars. Vehicles may be cornniandeered even before a state of war is declared, making it impossible for the haulier to carry out the contract. There should also be the customary clause relating to bankruptcy. Finally, in the event of subsequent disagreement between the two parties,
the method qf arbitration should be specified. &B.