Alarm companies are often asked (required) to sign contracts presented by a general contractor (GC) or the subscriber’s form contract. These contract forms almost never have the protective provisions properly drafted alarm contracts have, and in fact contain many provisions that either contradict provisions in the alarm contract or create new issues. Some alarm companies simply won’t sign any form other than their own, which is the best practice, and others seek counsel before signing a contract form other than their own, a prudent practice. Still others just sign and hope for the best.
A case decided by the Second Appellate Division of the Court of Appeals of California illustrates two issues to watch for, one covered by the alarm contract and the other issue not addressed in the alarm contract. A fire alarm company contracted with a GC for installation of a fire alarm system. The city of Los Angeles was the subscriber and there was a contract between the city and Metro Builders and Engineers. This contract had a delay in performance provision, with liquidated damage penalty provision, and a prevailing wage requirement.
Delay in performance is addressed by the Standard Fire Alarm All-in-One [Kirschenbaum & Kirschenbaum Standardized Alarm Contracts]. There is no time of the essence in performance. Prevailing wage requirements is not mentioned in the Standard form, except a reference to compliance with AHJ requirements (referring to the fire marshal).
The fire alarm company, National Security Systems, completed the installation of the $93,800 commercial fire alarm. There was a dispute whether the installation complied with the plans and AHJ requirements. Before final approval by the AHJ, the GC fired the alarm company. Still owed $18,670 for the work, the alarm firm sued the GC. The GC counterclaimed, demanding damages for delayed performance and failure to comply with prevailing wages.
For those of you not familiar with prevailing wages, typically municipal jobs and sometimes private contracts with institutional subscribers will include a provision in the contract that you agree to pay your employees a minimum wage based on a published standard of payment. In this case, the GC did not raise the issue of prevailing wage until the fire alarm company started the lawsuit. The alarm firm underpaid several of its employees and the city imposed penalties. The GC paid the employees the amounts they were due and a small fine to the city for a total of $10,000.
The GC also claimed damages as a result of delayed performance. Your contract terms can have performance criteria, not only a completion date by a performance schedule designed to ensure your work schedule does not delay performance by other contractors on the job. In this case, the fire alarm company was terminated and it took time to find another one. The court determined there was 21 days of delay; the penalty was $1,200/day for a total of $25,200.
An important issue in the case was the termination of the fire alarm company. The court’s decision is interesting (read the entire case at kirschenbaumesq.com). Departure from the Standard Fire All-in-One subjected this fire alarm company to prevailing wage (which could not be avoided because it was a city job, but the alarm company should have known about the wage issue and complied in the first instance) and penalties for delayed performance. Furthermore, in hindsight, the fire alarm company should have better assessed its chances at trial. Its legal fees could have and may have been in excess of the damages awarded against it. So now it faces loss of its $18,000, an award against it for $25,000 and unknown legal fees.
Ken Kirschenbaum has been a recognized counsel to the alarm industry for 35 years and is principal of Kirschenbaum & Kirschenbaum, P.C. (www.kirschenbaumesq.com). 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.