Clothes rental services are becoming more popular with each passing year. But if you want to participate in this emerging and sustainable business model, you need to first lock down the legal side of things. To do that, you need a rental agreement that protects your business and your stock.
If you're new to the clothing rental industry and are planning to start your own clothing rental business, this blog is for you.
What is the purpose of a clothing rental agreement?
A clothes rental agreement is a document that sets out the legal terms and conditions when customers rent clothing from your business.
There are two parties involved in a rental agreement for clothing hire. They are:
The owner: the company or individual that owns and rents out the clothes.
The renter: the company or individual that borrows the clothes.
A rental agreement is a contract between you (the owner) and the renter.
The primary function of a rental agreement for clothes is to define things like:
The general terms of the rental agreement
Rental fees and payments
Commitments for you and the customer
Establish liability for you and the customer
A written agreement ensures that both parties know their rights and responsibilities. The document is also helpful if legal disputes arise from renting the clothes.
Finally, a legal agreement is about more than just protecting your business and its assets. They also ensure customers have a great experience renting clothes from your company.
How to draw up a rental agreement for clothes
There are several ways that you can draw up a rental agreement document. You can:
Use a rental agreement template
Draw up the terms and conditions yourself
Get the terms drawn up by a professional
While you can build the terms and conditions of a rental agreement yourself, you need to know a lot about contract law to ensure that they are legally enforceable. There are subtle changes in law from state to state (or country to country), so ensuring you know what is allowed in your area is essential.
If you draw up the T&Cs or use a template, it's worth getting a legal professional to review your terms and conditions. You don't want to find out that your rental agreement contract is invalid when you are in the middle of a dispute.
What should your terms and conditions document include?
Your terms and conditions document needs to include several different things. We'll break each one down into different categories so you can ensure the terms cover the clothes and accessories you rent.
General terms that you should include on the terms and conditions document are:
Your full registered company names
Any trading names your company uses
A company telephone numbers
Your registered address
General description of the service
A rental agreement should also include a general description of your service. For example, the renting party should acknowledge that they are renting the goods but that the ownership remains with your business for the entire agreement.
Additionally, the terms might include provisions for people to rent the item who are under 18. For example, your conditions can allow those under 18's to rent from your business but only with a parent or guardian's approval (and involvement).
The rental agreement should also include information about the booking or rental period. Clothing rentals are typically charged per day, so any agreement between you and the renter should clarify the dates the renter hires the clothes. These details will be essential if there are any disputes, late fees, or other issues.
Payment and fees
Your agreement should also include details about how renters should make payments. These include any details like charges for each date of rental, deposits, cancellations, and shipping.
Here is a list of the fees you might include in your agreement.
A rental fee refers to the cost of renting the goods. Rental fees should be very clear on your website and include any other charges relating to delivery and collection of the item.
How you structure your charges should be made clear. For example, if you lend dresses, your price can include the costs you incur to have the items professionally cleaned and delivered, plus any insurance. These fees must be established before rental and be transparent.
Most businesses charge for everything upfront. However, some might choose to invoice their customers after the event. Again, whatever your business model, it needs to be transparent.
Credit card authorizations for security deposits
Another popular agreement that clothes rental sites can put in their terms and conditions are credit card charges for when something goes wrong. One of these protections is a security deposit that is charged on a credit card. This facility will only be activated if something goes wrong, such as theft, damage, or non-return of the item. Quite often, the security deposit is around 50% of the full purchase price of the goods.
You must add clauses like this before the rental. By signing the agreement, the renter agrees that their credit card will be charged for an item's partial or full retail value in the event of damage or non-return of the item. This payment will be charged to their credit card.
Shipping fees are required for any collection and delivery services. Shipping fees are typically paid as an additional payment on top of the purchase price. However, some businesses choose to build shipping into the rental fee.
Of course, much of this depends on where your customers are renting from. If they are quite far away — and the delivery price is higher — this should be built into the shipping price.
Your rental agreement should detail your policy and make clear who is responsible for paying for shipment, mail, or couriering of items.
Sometimes clothing renters will cancel their orders. Therefore, you need to have an agreed-upon policy to deal with cancellations. For example, you might allow users to cancel within 24 or 48 hours of the time of agreement without charge.
However, if it is after that time, and the items have been processed already, you can charge a cancellation fee. The cancellation prices might be a fraction of the full rental price, or it can be a charge of the full rental fee in scenarios where the item has already been sent.
Your contract must also include a provision for late fees. Late fees occur when the renter doesn't drop the item back in the agreed time. Because not having the item available by the agreed date can hurt you commercially, you can charge late fees to make up for the costs.
The most common way that clothes rental businesses determine if an item is late is by the time it was sent back and not necessarily by the time it is received back at the warehouse or depot.
So, if it's returned by courier or post, the renter is responsible for sending it by a specific date. Once that date is satisfied, the renter is not held accountable for shipping delays that are out of their control.
Damaged product fees
In some situations, a renter will damage goods. While you might choose to cover these events with insurance, depending on the type of damage, you might decide to charge their credit card for some or all of the retail value of the damaged items.
Some clothing rental companies include additional services. These could include late fees, shipping, return fees, or other services such as alterations, insurance, or stylist fees.
Commitments of the company
Any rental agreement should also outline your obligations toward your renters. This relates to several sections of your service, as outlined below.
Delivery: The delivery section pertains to how you will get items to your customers. It can contain assurances of delivery times or methods you use to fulfill your rental orders. For example, it can outline which shipping companies you might use, whether renters will receive a tracking number, whether items should be signed for, etc.
Guarantees: The guarantee section can relate to assurances that if the renter receives the incorrect item or one that does not fit, they can receive a refund. Typically, these sections require users to report the problem within 24hrs of receipt. Once the item has been returned — and as long as you are satisfied it has not been worn — you can issue a refund or credit to the renter account.
Cleaning: Agreements for rentals should also contain a section about cleaning. You may choose to dry clean each item before sending them out. Your policy should be made apparent in your agreement. Many agreements also suggest that renters borrow these items at their own risk and that the company isn't responsible for any health risks resulting from wearing them.
Return packaging: As part of your service, you can include an envelope that is prepaid and pre-addressed. This cost will typically be built into the rental price. Once the rental period is up, renters can send the parcel back by registered mail or courier, depending on the terms and conditions.
Additional services: Some rental services provide additional services, such as help choosing styles and outfits. If you do want to provide these services, it's important to lay out the terms in your rental agreement or on your website.
Commitments of the customer
When a customer is renting items from you, they also need to agree to the terms of the service, such as taking care of the clothes, using them properly, and returning them. Signing the agreement means the renter acknowledges they agree to these terms.
The following are some of the most popular terms that deal with customer commitments.
Reception of items: If a courier delivers items, your customer must take responsibility for them once delivered. This stipulates what happens if the customer doesn't provide a secure address and asks that the clothes are left somewhere. Should the items go missing in the meantime, you need to ensure the customer is responsible.
Use of items: This section is essential, so the renter acknowledges that they will take utmost care of the item. You should ensure the customer commits to ensuring damage, theft, disappearance, and destruction of the clothes are avoided. Minor wear and tear, spills, missing beads, and small rips are typically covered by insurance.
Returning of the products: This section ensures the customer commits to the timely return of the item. You should outline what is expected and when a late fee will be activated.
Extending the booking: You should also build a facility that allows the renter to extend the booking period. You can set guidelines detailing how customers can extend their booking (phone, email, via your app, etc.) and avoid a late fee.
Compensations: A compensation policy for item loss is at the renting company's sole discretion. Usually, it has a maximum value of a percentage of the item. For example, if you rent a dress, you can charge compensation of up to 100% of the dress's retail value.
Debt collection procedures: Debt collection procedures should be ironed out before booking. Your terms should be transparent if a customer owes money due to damages. These can include the right institute collection procedures, the cost of collection, and reasonable attorneys' fees.
It's important that your terms and conditions also cover things that could go wrong with your rental.
Incorrect or faulty items: If the renter receives the wrong item or a damaged item, you should have provisions for a refund.
Issues with fit: Your agreement should lay out provisions for when the clothes don't fit the renter. This could include a full or partial refund.
Your agreement should also make clear how refunds work.
Cancellation policy: Your agreement should include a clear cancellation policy. I.e., How many hours after the order can it be canceled without any charges?
Definition of refund: Your agreement should also define what a refund is. Should it return the full rental fee, plus shipping costs?
Limitations of liability
Your terms and conditions should also deal with the limitations of liability. Most agreements will limit your business's liabilities towards your customers or third parties for damages resulting from using your products.
Additionally, typical agreements will limit potential damages to cover only the fee your customer paid during the rental period.
Finally, the renter should assume full responsibility for damages resulting from renting the equipment.
You should also include a section that states your rental agreement is the full and final document of the agreement between your company and the subject.
You can add a section that gives you the right to terminate the agreement at any time for any reason. Additionally, you can add further removal of liability due to an event like a natural disaster, fire, supply disruption, etc.
Approval of the agreement
You will need to prove that your customer has agreed to your legal agreement in certain situations. However, to ensure your contract is legally binding, it must satisfy several categories.
Two things that you need to be able to show are:
When the customer accepted the agreement
Which version of your rental agreement was live at the time
Finally, it's important that you know what constitutes the acceptance of your agreement. You and the renter can agree on the terms and conditions in three ways.
Verbal agreement: The renter can verbally agree to the terms and conditions. While a verbal agreement is a legally binding contract, it is understandably more challenging to prove than a written agreement.
Click-to-accept: If your renter clicks to accept your terms and conditions on your website, that also counts as a legally binding agreement. Also, advise them to read your T&Cs carefully.
Signature: Finally, if the renter signs a form with your terms and conditions, that also counts as reaching an agreement.
How to deal with problem situations
When you run a company, you can't avoid problems. However, how you resolve them will ultimately stop you from running into legal problems. If you have an issue with a renter, it's best to try and first settle the incident amicably.
If the renter damages your items, per your terms and conditions, you can seek the full purchase price. However, using the full force of your terms and conditions can hinder future rental orders, so be prepared to compromise in situations if they will affect revenue in the future.
A rental agreement is an essential document for protecting you and your customer. By signing this form for each rental order, you and your customers understand what happens in the event of loss, damages, late fees, or any other event that can occur when renting clothes.
Agreeing on terms and conditions is essential. If things go wrong, it's hard to enforce fees or remove yourself from liability after the event. So build a clothing rental agreement first, and you'll always be covered.
Finally, it's worth getting a legal professional to review your document to ensure that the terms and conditions are fair for the renter. Remember, these forms aren't just about protecting your business. They also ensure that the rental experience is good for your customers and that they understand what is expected of them.