What is a Boat Rental Agreement?
Whether a boater is a kayaker or a power boat owner, the boat rental agreement is the key document that admits and permits a renter to rent and take possession of the boat after the rental payment is completed. A boat rental agreement will become a legally binding contract between the boat owner and the boat renter which becomes enforceable in the court system. The purpose of a boat rental agreement is to accomplish a complete understanding between the boater and the person renting the boat on such items as the rental period, payment terms, inclusions and exclusions for the rental period, the condition of the boat being provided, and other contingencies, such as the need for the boat to come in for repairs or cleaning, weather cancellations, refunds, release of liability, or other contingencies. The importance of a boat rental agreement cannot be overstated as it also provides a level of protection for the boat owner and a process whereby the boat renter agrees to pay for damages that occur to the boat while in its possession . There would also be an agreement on what damages would be fair to charge back to the boat renter for reversions to the boat when compared to the condition of the boat at the start of the rental term. It can be very useful to have photographs taken of the condition of the boat both at the beginning and end of the rental period. All of these items are covered by the boat rental agreement, along with other important information such as insurance requirements, inclusions and exclusions, and whether the boat can be taken to a different port, overnight, etc. It is important to understand that a boat rental agreement will become a legally binding contract once signed that can then be enforced in court. For this reason, a boat rental agreement should be drafted carefully. Many times, it is worth the cost to a boater to have a lawyer draft these types of agreements, although the Internet has a number of online providers as well.
Essential Elements of a Boat Rental Agreement
Written agreements are preferable to verbal agreements. Not only because they can be incorporated into the written rental agreement, but because they help eliminate misunderstandings about the scope and terms of the rental. Here are some key components of a boat rental agreement.
Rental Party: (a) Lessor – owned by the person renting the vessel to others (b) Lessee – person renting the vessel (c) Vessel – the boat that is being rented
Rental Duration: Rental agreement should identify the exact term of the rental. The agreement should also include details regarding any options for extending or renewing the rental. However, any extension or renewal of the rental period can be included in the rental agreement in the form of an amendment signed by both parties.
Payment: Rental agreement should identify the payment terms (i.e. one or two-year rental with monthly payments).
Registration of the Vessel: Identify whether the vessel has to be registered in order to rent it. If so, identify the agency with authority to register the vessel.
Taxes: To the extent possible, identify whether taxes will be calculated based on a flat fee or a percentage of the rental agreement’s value (i.e. Coast Guard documentation fees, state sales and use taxes, local sales and use taxes, sales taxes, excise taxes, entertainment taxes, personal property taxes). Any taxes that are delayed or become due should be passed along to the taxpayer responsible for the tax.
Permitted Use of the Vessel: Identify what the lessee will be allowed to do with the vessel.
Requirements for Legal and Regulated Agreements
Just as there are regulations for boat ownership – such as having a hull ID number and registering with state authorities – boat rentals also have legal requirements. However, those requirements also vary at the state and municipality level. Much like car rentals are regulated by the state, so too are boat rentals. Many states, including Florida and Texas require boat renters to pass an open book exam to obtain a temporary boating certificate, which is considered proof of "competence." As outlined in the Department of Transportations waterways safety program, these exams cover a wide range of topics from navigation rules, to safe boating equipment, to boating accidents. In addition to competence, there are requirements to obtaining a boat rental permit, which can often be confused with, or overlap with insurance requirements. To ensure that a renter has financial coverage in the event of an accident, most boat rental companies require renters to have liability insurance. Some companies offer coverage for a fee. While many boats will have a flares, life vests, a fire extinguisher and a first aid kit, there are also safety requirements that vary from state to state. For example, in Florida, there should be a "backfire flame arrestor," also known as a flame arrestor. Which "prevents the ignition of the explosive mixture generated within the engine combustion chamber from igniting any vapors present in the intake manifold" according to the U.S. Coast Guard.
Typical Terms and Conditions
Most boat rental agreements are for a set period of time, usually in daily, weekly or weekend timeframes. Daily rates are generally 24 hours with a set boarding time in the afternoon and a set return time the following day. Some of these timeframes can be flexible, particularly if they are stated in a scenario where the rental is approaching the end of a slow season and the owner would like to see another day rented to even out some of the time periods. In such cases, the owner will often offer a small discount to potential renters to stretch the time period, i.e. an additional two to four hours. These owners are usually willing to go later into the night than earlier in the morning. Weekly rentals are often stated as 10 a.m. to 10 a.m. but may be extended as discussed above as the owner seeks to add another day to the calendar. Weekend rentals usually run from Friday at 4 p.m. to Sunday at 1 p.m., again with the opportunity for flexibility if things are slow. Some owners do not provide discounts for stretching the schedule, particularly if they are avid boaters themselves and have some set trips programmed that do not include you in the first place.
Many of these agreements provide that the owner is required to clean the boat and return it in good condition. So long as this is done, the renter is not required to file a report afterwards with respect to the boat itself. The agreement is complete when the time comes that the renter leaves the boat in the same condition as it was found. This generally involves a minimum cleaning of the kitchen area only. If the kitchen is left very dirty, such as garbage strewn around and the actual food product spilled in and around the kitchen area, there may be a claim for additional cleaning charges. However, in most instances, the owner will not make such a claim. When the renter has taken care to clean the boat but not too thoroughly, make sure to point this issue out to the owner prior to setting sail. Such notification will help limit the owner’s ability to make a claim against the renter later on for cleaning not done. Once both parties are aware of any issues, no further claim should be made. Otherwise, when you are contacted after the fact about cleaning that was not done, the owner may be offended and simply penalize you without even considering your side of the story.
In many cases, a security deposit will be required. The boat rental agreement may start with a deposit but not require the funds to be collected until the day before the rental. Check your state or local laws, as most states do have laws governing the amount of advance notice required to collect security deposits. A four to seven day advance notice is typical. If collected less than that time frame, the owner runs the risk of not being able to collect the full amount of the security deposit if there is a claim of damage to the boat. Many times, boat rental companies will provide a smaller security deposit for large scale boats, such as catamarans and ocean going yachts, believing that it will be sufficient to cover whatever issues arise. Shuttles for the boats are often contracted out to underwriters who provide this service. Boat rental companies are generally held by their insurance broker to a higher standard than that of the renters and are usually forced to submit a claim themselves to the underwriter to recoup some of the costs of a claim. Thus, there will definitely be a claim made if this occurs.
Navigating the use of the boat with respect to nightly rentals is very important, as the egress is often set for a certain time. Late returns are always looked upon as being a breach of contract, with the damages flowing from that breach often being substantial. Make sure to make inquiries as to the lock-up requirements prior to agreeing to the use of the boat. This will avoid any future arguments as to whether the renters left the key and reported to the owner that it was in the lock box. Generally speaking, it is the responsibility of the owner of the boat to ensure that the keys are set in advance of the rental confirmations, certainly prior to the rental commencing. If the owner has failed to secure the key or developed the lock box to hold the keys, this responsibility should not fall on the renter or anyone filed under "the renter".
Things to Consider before Signing a Boat Rental Agreement as a Renter
Renters in Florida will typically be asked to read and sign a rental agreement before renting a boat. Renters should be cautious and never rush through this process. We recommend that renters:
- Read all the terms of the agreement carefully. For instance, many owners retain the right to go on the boat at any time. Others let you know that they plan to give the boat a quick wash each day of the rental. While this isn’t always an issue, perhaps there’s a good reason you don’t want the owner on board the vessel every day.
- Make sure the agreement lists the cost of renting the boat, and that it includes details about fuel costs and other fees. Most rental agreements permit the owner to charge the renter an extra fee at the end of the term if the gas tank is not full upon return. However, not all rental agreements include a provision about how the gas tank should be filled. Some rental agreements act as a kind of "pay by the hour" arrangement, where the renter is charged for the number of gallons used during the rental period. Other agreements act as an "all you can eat buffet" option, where the renter is paid back for the amount of fuel used, if any , upon return.
- See if the agreement includes a Waiver of Liability. Owners often include a Waiver of Liability to protect themselves from claims made by the renter for injury or death. However, it is also possible that the Waiver of Liability was supposed to protect the renter but didn’t, such as in a case of a breach of warranty or a defect with the boat. Be sure that you understand to whom the Waiver of Liability applies.
- See if the agreement includes a clause that limits the damages the boat renter could pursue following a claim. While it is entirely lawful for the owner to include a clause that hits the renter for attorney fees and costs if the renter brings a lawsuit and loses, it might be illegal for the owner to include a clause that ends liability for any injury, no matter how serious. Check with an attorney familiar with maritime law if you need help determining whether a clause is lawful.
- Consider its enforceability. Some terms of a boat rental agreement are entirely unenforceable. For example, personal injury liability waivers and insurance disclaimers are completely unenforceable in federal court. Examples like this should discourage you from automatically agreeing to any term of the contract.
How to Draft a Boat Rental Agreement
When drafting a boat rental agreement, ensure its structure is comprehensive by including key legal components such as the specifics of the rental, safety and financial considerations, and dispute resolution methods. If you are not well-versed with the drafting particularities of such agreements, use widely available free online templates or consulting a reputable local attorney to draft or review the agreement. Whether you opt for templates, or a legal consultancy, make sure you properly customize your document.
Common Mistakes to Avoid when Entering into a Boat Rental Agreement
One area to avoid is drafting an agreement that will leave the boat owner exposed to liability to third parties. A boat owner may want to limit his or her liability to a certain amount. In California, without a limitation of liability provision in the contract, the owner would be liable for all damages, either to third parties or to the person renting the boat, no matter how much money that person may or may not have. The problem is that most owners do not have the means to protect themselves from third parties. For example, let’s say you have a boat that is rented to people and there is an accident. The boat is insured for only a small amount to cover property damage, say $20,000, but the accident was substantial and ended up in litigation. Where will the owner get the funds to defend and to get out of that litigation? When drafting a rental agreement, you need to ensure the owner is protected. Also, when drafting the rental agreement, you should ensure that whoever is renting knows that under California law they are responsible for having insurance on the boat when they are using it. If something happens and they don’t have insurance, then as the owner, you are going to have to reimburse them for it. This may be something that the owner has to accept, however, it should be in the boat rental agreement. In drafting boat rental agreements, it is important to ensure that the owner is protected, and that everyone is clear on their own responsibilities and liabilities.
Frequently Asked Questions on Boat Rental Agreements
For an owner, a rental agreement is a tool to establish the rights and responsibilities of both you and the renter. For renters, it’s a way to establish what you’re getting as a renter and serve to protect you, as well. Additionally, some states have laws that require a rental agreement to be signed by both the renter and owner. But not surprisingly, some boaters have misconceptions about the purpose of a boat rental agreement. Here are a few questions and answers:
Do I really need a rental agreement?
Yes. At its most basic level, a rental agreement clarifies the responsibilities of the owner and the renter. It empowers an owner by making each party aware of their role. It also protects the renter from liability for the condition of the vessel prior to the rental.
Will a rental agreement protect me if there’s an accident?
Yes and no. Generally, the inherent risks of boating fall on the boater who sees them first. That said , having a rental agreement that complies with the law can serve to shield you from liability. A boat rental agreement that includes indemnity language can also serve to protect you from liability.
Is it possible to have a rental agreement that’s still deficient?
Of course. That can happen in a number of ways. Essentially, a rental agreement that doesn’t capture your use of the boat can be problematic. Failure to address issues like fuel type, limitations on the boat, and the condition of the boat can lead to problems.
What should be in a boat rental agreement?
Straightforward enough, a rental agreement should capture the following items:
Does a rental agreement need to be signed by the renter and the owner?
It absolutely does. Indeed, some state laws require that a rental agreement be entered into by both the renter and the owner. Better safe than sorry – have a rental agreement signed by the parties.