What is a Borrowed Vehicle Agreement?
A borrowed vehicle agreement is a written document that states the terms agreed to by the automobile loaner and the borrower before handing over a car. The agreement usually contains a list of dates and times the car will be in the possession of the borrower, as well as how far the car can approximately travel. Lenders often ask their borrowers to sign an agreement because it helps minimize any potential misunderstandings between the lender and the borrower. This is crucially important when someone else drives a car.
A borrowed vehicle agreement may not be formally required for some insurance companies, but if something happens and you do not have one, you could have a problem. For instance , if someone borrowed your vehicle and then got into an accident and someone were to sue the borrower, the lawsuit could legally name you as a defendant even though you did not get into an accident. If you had a written contract, you could potentially have evidence to show that you were not at fault, and the insurance company would likely terminate the lawsuit instead of defending it in court.
If a car is in the care of an adult, the terms should apply to all authorized adult drivers of the automobile. In general, this form is used when an automobile is lent out for a limited time or under special circumstances, such as to a family member who needs a car while his or her car is in the shop.
Essential Components of a Borrowed Vehicle Agreement
When navigating the complexities of lending and borrowing vehicles, it’s crucial to have a framework in place. Enter the borrowed vehicle agreement, a legal contract that lays out the terms and conditions for sharing your car, truck, or motorcycle. Let’s break down its key elements, so you know what to include.
Identification of Parties: Be specific. List the full names, addresses, and contact information of both the lender (the owner) and the borrower (the person borrowing the vehicle).
Vehicle Details: This section is the heart of the agreement. Include vital statistics about the vehicle, such as:
a) Year, Make, and Model
b) Vehicle Identification Number (VIN)
c) License Plate Number
Purpose of Use: Clearly state the purpose for which the vehicle is being borrowed. Is it for a one-time trip to the grocery store, or will it be used for the year?
Term of the Loan: Specify for how long the vehicle can be used. Is it for a week, a month, or an unspecified period until another time? Be clear to avoid misunderstandings.
Conditions of Use: This should include:
a) Provisions for keeping the vehicle clean
b) Rules on smoking in the vehicle
c) Conditions around pets
d) Provisions for personal use versus commercial use
Insurance: Who is responsible for insurance coverage during the loan period? Do you need to show proof of insurance before the vehicle is loaned?
Liability Clause: This is perhaps the most critical part of the agreement. Clearly state who is liable in the event of an accident or damage to the vehicle. Typically, the borrower is liable for any damage to the vehicle, but exemptions can be made for wear and tear.
Return Conditions: Specify the vehicle’s condition upon return. What is considered "reasonable wear and tear"? Also, clarify where the vehicle should be returned and if it is to be returned with a full tank of gas.
Governing Law: Indicate what state’s laws govern the agreement in case of any disputes.
By covering these essential components, you can customize the borrowed vehicle agreement to tailor it to your specific needs and concerns. Both parties should sign the agreement in the presence of a notary public. Having everything on paper will offer you peace of mind and serve to protect both your assets and your relationships.
Legal Aspects and Responsibilities
When engaging in a vehicle loan agreement, it’s essential to understand the legal context under which they fall. While loans can be preferenced to gifts in some cases, on the whole a written and/or verbal contract is typically used when it comes to lending a vehicle to someone else. The one borrow mustn’t provide for any consideration/interest in order to be a valid vehicle loan.
The reason behind this is that if an accident occurs whilst the vehicle is being used by the borrower, liability will fall directly upon the owner unless that driver is listed as someone who is insured to use the vehicle. This means that if the driver isn’t licenced, or otherwise registered to use the car, the owner will have to deal with the consequences of the accident in monetary terms. Driving without insurance will also invalidate the insurance used to cover the car, and it may be found that the car was forbidden to be used for commercial purposes by the terms of the insurance policy, invalidating it as well.
Under the Road Traffic Act 1988 (section 202), it’s illegal to lend a vehicle to someone not insured to drive it. Supplementary to this is the idea that the owner mustn’t knowingly allow a non-insured to use their vehicle, for fear that they could be deemed to be reckless to the safety of others; the primary duty of any driver. If he or she had been aware that their vehicle was going to be used by an uninsured person, they may be held accountable if damage to the vehicle or to someone’s property is caused. This is known as vicarious liability.
A vehicle loan agreement can be more of a safeguard than an obligation; between family, friends, or even just acquaintances, it’s always best practice to have a written document detailing the obligations of both parties. In the eyes of the law, this then becomes the terms of the agreement, rather than any verbal agreements. It’s also a good way to prevent any potential issues later down the line, should you need to request the vehicle back. Although this does not eliminate the risk completely, it adds security to both parties, knowing that all has been laid on the line explicitly beforehand. Plus, if any eventuality does arise, it’s better to have something that shows patterns of responsibility, for you are more likely to hold up your side of the bargain when the need arises.
Protection and Insurance: What You Should Know
As with any agreement, the loan agreement should include provisions that properly allocate risk and responsibility for losses. Any loan agreement for a commercial motor vehicle should address the following: 1) the borrower’s duty to maintain insurance on the vehicle; 2) the types of coverage required and limits for each type; 3) requirements that the lender be included on the policy as an additional insured; 4) the borrower’s duty to provide lender with copies of renewal certificates; 5) the lender’s required actions in the event of a potential loss; and 6) the lender’s permission to inspect the vehicle when warranted.
The loan agreement should include the borrower’s representations to the lender that its insurance policy: (a) includes a waiver of the insurance company’s subrogation rights against the lender; (b) provides coverage for any loss arising out of the lender’s negligence to the same extent that it would exist in the absence of the lender’s negligence; (c) includes a provision prohibiting cancellation without prior written notice to the lender; and (d) does not limit coverage for negligent maintenance or the negligent acts of a mechanic.
The loan agreement should also require the borrower to provide the lender with copies of the loan agreement, the insurance policy and all amendments and extensions made to either. If the vehicle is already registered or it is expected that the vehicle will be registered in a state with separate insurance requirements, the loan agreement should identify that state’s minimum requirements.
How to Create a Borrowed Vehicle Agreement
Here are the basic steps to drafting a standard borrowed vehicle agreement this is how I generally do it:
- Information about the Owner of the Vehicle: Full Name, Address and telephone number.
- Information about the person borrowing the vehicle: Full Name, address, DL Number and/or insurance information.
- Identify the vehicle: Make, Model, year, color and license plate number or VIN.
- Identify the individuals immediate family members: Name, Address and telephone number.
- Identify the purpose for which the vehicle will be used – this should be specific and reasonable.
- Is the vehicle’s owner a member of the Armed Forces?
If so, the vehicle can be repossessed only if the person holding the security interest obtains authorization for the repossession in writing from the commanding officer of the member’s unit .
This is a good time to confirm whether the member is stationed in Texas. If so, it will no longer be a legal requirement that the commanding officer approve the repossession so long as the same is done without breaching the peace. Or if the member has transferred out of state, this is typically not considered a breach of the peace unless it can be clearly shown that the repossession was being conducted for retaliatory reasons.
7. If the borrower does not have his or her own personal insurance, it may be wise to obtain written evidence of insurance from the borrower’s parent(s) or other source who has their own insurance to cover their child or relative borrowing the vehicle.
Pitfalls to Avoid
Common mistakes that people make with a borrowed vehicle agreement and how to avoid them include:
A simpler but more effective language is as follows:
• I ____ (your name) hereby affirm that I have voluntarily and at my own risk borrowed the vehicle described as ______ (make, model, year and plate #)
• I agree to pay all parking tickets, tickets, radar traps , and any other moving violations which occur between the time of borrowing the vehicle and the time that I return it, or I will advise the owner of the vehicle of same and offer to pay for same.
These two simple statements essentially cover all of the important terms that are necessary for a binding and enforceable loan agreement and avoid many of the pitfalls that are commonly found in other loan agreements.
Sample Borrowed Vehicle Agreement
Below is a simple example of a Borrowed Vehicle Agreement which can be adapted for anyone’s individual needs, bear in mind that some insurances may not honour the contract if not used in the exact manner intended. I therefore strongly recommend having all terms and conditions of any borrowed vehicle agreement clearly stated as part of the agreement and discussed with any other parties before signing.
Borrowed Vehicle Agreement
Make/Type/Restrictions/1st Registered/Reg. No:_Colour/Year:_VIN/Plate No:(
Mileage at time of agreement: R.O.LT:U.M.B.C&T::Accidents:
Accidents:
- I do hereby accept full responsibility for the care and custody of the vehicle until it is returned to the owner undamaged and without any delay.
- I do hereby agree to pay in full for any damages which might be inflicted on the above-described vehicle by another vehicle or object, notwithstanding my fault or negligence, in the event that either my insurance carrier or the insurance carrier of the offending vehicle denies my liability claim.
- I do further certify that I hold a valid and unrestricted driver’s license , that I am of legal driving age in the state of
- I do further acknowledge that I understand that any violations of the laws of my resident and/or nonresident state probably will not extend to protect me in cases of liability arising from accidental damage to the borrowed vehicle or the other vehicle involved in an accident.
- I hereby assign to the owner of the vehicle the right to collect such sums as the owner shall be entitled to, and to institute and maintain such actions in my name as needed to recover damages and to take in my name such steps as might be advisable toward recovering any property from tort-feasors.
- I do finally agree to hold harmless and fully indemnify the owner of the borrowed vehicle for any and all damages and losses suffered by him/her as a result of my inaction.
Additional Comments/Agreements:_
Owner Witness
Signature:.ig:.ig:..
Witness:.ig:-ig:-ig:.
Borrower:.ig:-ig:-ig:
This agreement is entered into this day of ______________ 20_____.
________________________ _________________________
Borrower Owner