When the stakes are high, certainty is king. Hell or high water contracts—once a niche feature in Australian asset finance—are now front and centre for many businesses seeking equipment, vehicles, or even large-scale energy solutions. As we move through 2025, understanding these contracts is essential for anyone navigating Australia’s evolving finance and leasing markets.
What Is a Hell or High Water Contract?
A hell or high water (HOHW) contract is a binding agreement in which the lessee must continue to make payments to the lessor, no matter what happens. This means that, even if the leased asset is destroyed, lost, faulty, or circumstances change drastically, the lessee is still responsible for fulfilling the financial obligations. The phrase ‘hell or high water’ signals the absolute nature of the commitment.
Common in equipment leasing, infrastructure finance, and large-scale project funding, these contracts provide maximum assurance for lenders and lessors. But for businesses signing on the dotted line, the risks—and rewards—can be substantial.
Why Are Hell or High Water Clauses Trending in 2025?
- Rising Equipment Financing: With capital expenditure on the rise across construction, renewable energy, and logistics, lenders are seeking ways to de-risk their positions amid economic uncertainty.
- Policy Shifts: The federal government’s 2025 updates to insolvency laws have made it easier for lessors to enforce HOHW clauses, especially for critical assets. This is particularly relevant under the Personal Property Securities Act (PPSA), where lessors are increasingly protected even if the lessee enters administration.
- Insurance and Supply Chain Pressures: After the supply shocks and natural disasters of recent years, lessors want to ensure their cash flows are insulated from the unpredictable.
For example, a mining company leasing $5 million worth of heavy equipment in the Pilbara might enter a HOHW contract. If a cyclone damages the equipment beyond repair, the lessee is still on the hook for payments—even if insurance is delayed or denied.
Legal and Financial Implications: What to Watch Out For
HOHW clauses are legally enforceable in Australia, but they’re not immune to challenge. Courts will scrutinise the fairness of the contract and whether the lessee entered the agreement with full understanding of the risks.
- Transparency is Critical: In 2025, updated ASIC guidelines require finance providers to clearly disclose the presence and meaning of HOHW clauses, especially for SMEs and small business borrowers.
- Insurance Gaps: If your insurance policy doesn’t cover every scenario, you could be paying for an asset that’s unusable. Some recent court cases have sided with lessors, enforcing HOHW provisions even when equipment was destroyed by an ‘act of God’.
- Negotiation Power: Major corporates may negotiate carve-outs or limits to HOHW clauses, but SMEs have less leverage. Some lessors may offer a lower rate in exchange for a HOHW commitment, reflecting the reduced risk for the lender.
Recent real-world example: In early 2025, a Sydney-based solar installation company entered a HOHW lease for imported battery storage systems. When a port strike delayed delivery for six months, the company was still required to make payments—even though the batteries hadn’t arrived. The case highlighted how HOHW contracts can shift significant risk to lessees, especially when supply chains are disrupted.
Should You Sign a Hell or High Water Contract?
Signing a HOHW contract is a major commitment. Here are key questions to ask before agreeing:
- Does your insurance fully cover all risks associated with the asset?
- Are there alternative contract structures (such as ‘force majeure’ carve-outs) available?
- Can you negotiate payment suspensions or early termination rights for catastrophic events?
- How will this obligation affect your cash flow if the worst happens?
For lessors and lenders, HOHW clauses make sense—especially in volatile sectors. For lessees, it’s about weighing the certainty of finance against the risk of paying for an asset you can’t use. As with any major financial decision, understanding the fine print is everything.
Conclusion
Hell or high water contracts are here to stay in Australia’s finance landscape, especially as lenders seek certainty in an unpredictable world. If you’re considering such an agreement in 2025, be proactive: scrutinise every clause, model the worst-case scenario, and negotiate where you can. The right advice and a clear-eyed approach will ensure you’re not caught out—come hell or high water.
