A Tragic Accident Provides Important Lessons

Question:   James, we just received word of a tragedy that occurred yesterday.  A customer rented a lift and later called off the rental and parked the machine outside.  A young man not involved in the rental later happened upon the lift, entered it, and unfortunately, raised it into a power line.  He was electrocuted, and the lift caught fire and was destroyed. The rental company was using a standard form contract that made the customer responsible for damage and liability “for a reasonable period of time” until the equipment is retrieved by the rental company.  My question is, what is “reasonable” in a situation like this?

Answers:

Short Answer:   Black’s Law Dictionary defines the term “reasonable” as “fair, proper or moderate under the circumstances.”  That definition is certainly correct, but not altogether helpful here.  

More Complete Answer:   

“Reasonableness” takes many forms and has almost innumerable applications under the law.  For example, in the law of Negligence, the “reasonable person standard” is the standard of care that a “reasonably” prudent person would observe under a given set of circumstances.  In criminal law, the Fourth Amendment to the U.S. Constitution prohibits “unreasonable” searches and seizures.  And in contract law, Article 2A (Leases) of the Uniform Commercial Code includes at least 60 references to the term “reasonable” (17 regarding timing).  

Courts and legal authorities (including West’s Encyclopedia of American Law) generally address the reasonableness of timing this way:  “In the absence of an express or fixed time established by the parties to an agreement or contract, any time which is not manifestly unreasonable under the circumstances.”  If a contract does not fix a specific time for performance, the law will infer and impose a “reasonable” time for such performance (defined as that amount of time which is fairly necessary, conveniently, to do what the contract requires to be done, as soon as circumstances permit).  Consequently, the reasonableness or unreasonableness of time used or taken by a party may be the subject of judicial review in light of the nature, purpose and circumstances of each case.  In considering whether there has been unreasonable delay in performance, a court may also consider other factors such as prior dealings between the parties, business routine or custom within the trade, and whether there are any objective manifestations of expectation expressed between the parties.

In other words, determining whether something or someone is/was “reasonable” requires consideration of the circumstances.

And what were those?  Obviously, it depends.  Here are some examples of questions that might be relevant to determining whether the rental company and/or the customer acted reasonably:

  1. What time was the rental called off?
  2. Where was the lift located when it was called off?
  3. How easy, difficult, practical, realistic and/or potentially dangerous would retrieving the lift immediately have been?
  4. Was there a safe means of locking out and securing the lift when the rental was called off? As many readers know, the means of doing so can vary widely depending on the availability/applicability of things like transport pins, locks, straps, e-stops, keys, removable controls, automatic electrical disconnects, lockable battery disconnects, etc. 
  5. Was the lift actually locked out and secured by the customer, and was the customer made aware of the need for and means of doing so?
  6. Was it tagged out (or were any warning labels affixed or attached to the lift)?
  7. What was the lift’s proximity to hazards, including power lines, when the rental was called off?  Was it there originally, or did the customer, or perhaps the “borrower,” move it there?  Did the rental company know it was left near a power line?  Should the rental company have inquired or suspected that it might be?
  8. How busy (heavily trafficked) was the area where the lift was located when the rental was called off?
  9. Had this type if incident happened in the past?  How recently? How many times?
  10. Was it reasonable to assume that an unrelated party (the deceased) would be tempted to enter and use the lift?
  11. What else could the customer and/or the rental company have done to avoid the incident?

These are just a few of the many potential questions that might be asked by a judge and/or opposing attorney depending on the facts of, and claims raised in, the case.  

In the end, whether the delay in retrieving the lift was reasonable may bear on a host of legal issues and outcomes for the parties, including:

  1. Who is liable for the deceased’s injuries (the deceased, the customer, the rental company, or some combination)?  Remember, the deceased’s surviving family members and the rental customer will almost certainly view the retrieval delay as unreasonable, a view with which the rental company will likely strongly disagree.
  2. Who is liable for the damage to the lift (the deceased, the customer and/or the rental company)?
  3. What other damages might be awarded (e.g., pain, suffering, wrongful death, property damage, financial losses, attorneys’ fees, interest, transportation and storage costs, impound fees, fines, etc.) 

Ultimately, as indicated above, a litigant’s view of what was “reasonable” tends to depend largely on the litigant’s position relative to the other parties.  To the rental company, “reasonable” might mean “as long as it takes” (with the possible exception of extraordinary delays resulting from gross negligence or willful misconduct).  To the customer, and certainly to the deceased’s family, it’s going to mean something less than the time it took the deceased to find the parked lift.  Unfortunately for everyone, this means the parties may be in litigation for a very long time trying to determine whose definition of “reasonable” is most correct.

So, is it Unreasonable to Use the Term “Reasonable” in a Contract?:  If the term “reasonable” is so vague that it raises more questions than it answers, should the contract form have included a reference to “reasonableness” at all?   

Answer:  Actually … yes.  In over 25 years of practicing law, I have encountered few contracting parties who would object to inclusion of the word “reasonable” in a contract.  Why? One reason is that it can be difficult for people to understand why a lawyer would want to delete a term that sounds so . . . well . . . reasonable (“What, you refuse to be reasonable?”).  Any answer to that question has to start with an explanation that, to most people, sounds like an effort (weakly) to be obscure in order to support taking an unreasonable position.  

More importantly, remember, we’re talking about a “form” contract – i.e., one that must be flexible enough to deal with timing and other issues in a wide array of environments and circumstances.  For example, the appropriate timing for retrieving a parked lift from an intersection in Los Angeles may be vastly different from the appropriate timing in Las Cruces, Las Vegas, or Los Gatos.  This makes using flexible terms essential when using a “form” contract, which by its very nature, must accommodate all of them.  

The Real Question:  The real question, then, is: 

Why would a rental company with millions of dollars’ worth of equipment, and perhaps tens of millions of dollars’ worth of potential liabilities, use a form rental contract, rather than one written for its specific equipment, location(s), environment and customer(s)?

The answer (which probably went something like: “Because doing so was quick, easy, and saved the rental company several hundred dollars”) probably sounded pretty good a few months ago.  

Conclusion:

Renting equipment was once thought of as a fairly simple endeavor.  But the world has changed.  Equipment is, in many cases, far more complex, powerful, expensive, and in some ways (certainly legally), dangerous than it was in the past.  As evidenced by the looming legal catastrophe described above, saving a few hundred dollars by using a “standard form” rental contract no longer makes any sense for even the smallest of rental operations.  The potential for injuries is too great, and the associated liabilities and equipment losses can be ruinous.  Saving money on something like this is a little like hiring the cheapest brain surgeon in town. 

On a serious note, our thoughts and prayers go out to the family of the young man who made this tragic miscalculation.  If nothing else, hopefully, we can all learn something from it.

About the Author:

James R. Waite is a business lawyer with over 20 years in the equipment rental industry. He authored the American Rental Association’s book on rental contracts, and represents equipment lessors throughout North America on a wide range of issues, including corporate law, employment issues, negotiating and drafting rental contracts, purchase options and other rental-related agreements, as well as buying, selling and financing rental companies and their equipment.  He is a veteran of the United States Air Force, has a BBA in Finance from the University of Texas at San Antonio, a Juris Doctor from St. Mary’s University, and an MBA from Northwestern University.  He can be reached at (866) 582-2586, or via email at j.waite@wwlegal.net.