This month, we mix things up a bit by tackling a few recent inquiries pertaining to unreasonable subscriber contract demands that can result in your security business losing money or other hardships.
Q: An apartment complex refuses to pay us until we fork over $75 for their compliance company. This customer has been with us since the early 2000s so it’s not like we were able to price them accordingly when we signed them up. What do you recommend? Another issue is forcing us to sign their vendor agreements. We have actually told some to cancel because we are not willing to sign their agreements with their wide covering indemnification/subrogation clauses.
A: This is a serious and unfortunately common problem. Holding the subscriber to the contract could cost you the business ultimately. That’s the tough decision. Of course, you are completely right. You could continue to monitor without paying the processing fee; you could invoice one year in advance and pay the fee once; your contract may permit increases. Balancing a reasonable charge for your services with what the market will bear is an acquired skill learned after much hard lessons.
Vendor agreements are another issue. You have to be careful what you agree to. Alarm contracts are carefully drafted to provide the legal protection permitted in a jurisdiction, but by not using your contract you won’t have that contractual protection. Vendor or institutional subscriber contracts will not protect you, and more likely will expose you to liability that you can’t afford to risk. As you mention, the indemnification provision is typically a clause you need to avoid; it directly contravenes the indemnity provision in the alarm contract.
Q: I have received a new vendor packet from a builder. I know these subcontractor packets are common but what should the builder sign so I can protect myself?
A: A “vendor packet” that reads like an American Institute of Architects (AIA) contract is loaded with provisions that you don’t want to agree to. Indemnity is one of the provisions, but there are plenty more. Almost anything that can go wrong, from plans, specification, construction, building conditions during construction, insurance, choice of law and venue, are all weighted in favor of the owner or general contractor, whoever is presenting you with the contract. These provisions are antithetical to the provisions in your alarm contract. I know you are at times constrained to sign these “vendor” contracts. Just understand your exposure and what you’ve agreed to. You can often soften the risk with proper insurance. Have your broker compare the risks that you assume in the contract with your insurance coverage. Understand your uninsured risk.
Q: Some large communication companies have attached legal jargon to their purchase orders. Some of it changes the terms of our contract and claims that acceptance of the purchase order supersedes the contract itself. How should we handle?
A: You do have to keep an eye on the battle of the forms. The last one signed that states it supersedes the prior contracts most likely will govern. During the past 40-plus years the alarm industry has evolved in technology and as an industry, and the legal issues have evolved as well. The alarm contract forms are designed to protect you. It should come as no surprise that vendor, institutional, AIA, builder and subscriber forms are designed to protect someone other than you.
Most contractors, owners or subscribers don’t understand the enormous scope of exposure you face in the security industry. Alarms designed to detect certain (emergency) conditions are often confused to be preventative devices, and when these conditions cause damage to persons or property one easy target is the alarm installer or monitoring company.
I recently saw an alarm company van advertising “prevention.” That company, like yours, is not in the prevention business and shouldn’t advertise such systems or services. Similar terminology in contracts is even worse. So be careful forms you are presented don’t bind you to terms you should not be agreeing to.
Ken Kirschenbaum has been a recognized counsel to the alarm industry for 35 years and is principal of Kirschenbaum & Kirschenbaum, P.C. His team of attorneys, which includes daughter Jennifer, specialize in transactional, defense litigation, regulatory compliance and collection matters.
The opinions expressed in this column are not necessarily those of SSI, and not intended as legal advice.