7.404
Contract clause
Always include the FAR 52.207-5 Option to Purchase Equipment clause in any rental or lease contract that offers an option to purchase.
Overview
FAR 7.404 requires contracting officers to include a specific contract clause—substantially the same as FAR 52.207-5, Option to Purchase Equipment—in all solicitations and contracts that involve a rental or lease agreement with an option to purchase the equipment. This ensures that the terms and conditions governing the option to purchase are clearly defined and standardized across applicable federal contracts.
Key Rules
- Mandatory Clause Inclusion
- Contracting officers must insert the clause from FAR 52.207-5 (or a substantially similar version) in relevant contracts.
- Applicability
- This requirement applies specifically to contracts involving rental or lease agreements that include an option to purchase the equipment.
Responsibilities
- Contracting Officers: Must ensure the correct clause is included in all applicable solicitations and contracts.
- Contractors: Should review and understand the terms of the option to purchase clause as it will govern their rights and obligations if they choose to exercise the purchase option.
- Agencies: Should oversee compliance with this requirement to ensure consistency and legal sufficiency in equipment acquisition contracts.
Practical Implications
- This section exists to standardize the handling of purchase options in equipment rental or lease contracts, reducing ambiguity and potential disputes.
- It impacts daily contracting by requiring careful review of contract content and ensuring the correct clause is always included.
- Common pitfalls include omitting the clause or using an outdated or incorrect version, which can lead to compliance issues or contract disputes.