What general risks should I be aware of in equipment rental agreements? Do I have to send it to you? Isn't it standard?

Provided by:  Jennifer Kirschenbaum, Esq.

May 31, 2017

Question:

 
Hi Jennifer, 

I received an equipment contract from a vendor that sells a special piece of equipment that is new to the market.  Its not reimbursable by any insurance, and there are only a few other people in the state that have it. It seems pretty standard, can I just sign it? Do I have to send it to you?
 
Thanks,
Dr. P

Answer: 

Well, I don't want to start too preachy because you are asking whether it needs to be reviewed, as opposed to just signing it and calling me after the fact...The concept of a "standard" contract in general is a total misnomer. Each deal is different, and ALL vendors (i haven't seen an exception to this one) put draconian and potentially harmful protections in their favor in equipment leases. So, yes, all should be reviewed by counsel, even if you do not believe a word is negotiable. Sometimes there are contracts you just shouldn't sign as a business decision - this may even be for your copier!  (60 month term, limited maintenance responsibility by company - copier breaks you have to pay for full term) - it happens!

Here, you specified in your brief description a scenario that raises a lot of red flags - we have a vendor with a new technology introducing into a state.This vendor is presumably not another licensed individual, and is marketing to licensed practitioners.  So, a few questions immediately pop into my head BEFORE I even ask to see the presented agreement, which, yes, I need to see.  (1) Is this vendor compliant with Federal, State and Local laws, rules and regulations?  (2) Is the equipment authorized for the use you intend to use it for - by the FDA and by your state? (have to check FDA AND State licensing Board for prohibitions on use)  (3) Is the arrangement structured in compliance with fee splitting, kickback and self referral laws on the Federal, State and Local level?  These compliance questions can take substantial resources (eh hem, my time and your money to answer), so the way I like to start my inquiry is asking the vendor upfront for their support.  If they are structured compliantly and committed to doing right by their customers, they should have already had their counsel and team investigate and prepare compliance materials on the ready for distribution to answer these questions.  Now, since I live in the real world and not Alice's Wonderland, I know most vendors just don't bother with the compliance end. They get an exclusive on a product from a manufacturer, then they peddle it.  The problem is as the practitioner, you have severely increased exposure from your State(s) licensing board.  

Caveat emptor!  In my experience, the resources needed to properly enter you into the relationship will be substantially less painful then extracting after signing.