Contract hire

From CEOpedia | Management online
Contract hire
See also

Contract hire is a monthly contract for renting a vehicle or a plant, which covers everything but insurance, fuel and operator[1].

This kind of contracts are provided by contract hire companies specialised in renting who agree to rent a vehicle or a plant for period that is not necessarily the life of the vehicle or plant[2].

Contract hire agreements are much simpler than contracts at a fixed price, because the commitment and responsibility of the supplier is smaller. Cases such as late payment, acceptance tests and many others simply do not appear. However, account should be taken of the intellectual property rights arising from the work[3].

Diferrence between contract of hire and sales of goods

Contract of hire is fairly well easy to distinguish from the sales of goods[4]:

  • Because the parties never predict that ownership will be transferred from the owner to the hirer.
  • A contract of hire is an agreement whereby one person gives the right to possess without ownership of the goods to another person in return for payment.
  • Payment can be periodic as in the case when the owner of the house hires the TV or can be one-time, as in many cases car rental.

„Hire contracts may be called rental agreements, leasing agreements, contract hire, etc. but legally they are all the same”[5].

Contract hire of vehicles

Contract hire of vehicles has become a very attractive option. It may differ from the delivery of the vehicle itself, through maintenance, drivers, insurance, etc. to the condition of the complete distribution conflicts. Therefore, there has been a rapid development of external distribution companies offering a variety of services. The financial benefits of contract hire include the release of capital and the easier and more predictable costs of operations[6].

Contract hire commonly used in the supply of car fleets company. The lessor bears some responsibility for the management and maintenance of the assets at an agreed level. However, fleet management goes beyond normal contract hire and includes constituents such as accident management so that altogether related to the vehicle is outsourced to the hirer[7].

Body shopping

Contract hire is sometimes dismissively referred to as „body shopping ". Independent contracts are closely linked, whereby individuals sell their own services to customers on a similar basis to a contract hire[8].




Author: Maciej Michałek