Rely on Contracts to Safeguard Company, RMR

May 31, 2009 Peter Giacalone

My objective in presenting this column each month is to bring to light new and traditional service-related recurring revenue opportunities. After reading the headline of this month’s installment, some of you might be asking, “What does that have

to do with it?”

Well, after decades of fielding questions from dealers concerning why monitoring companies mandate the subscriber, dealer and central station executed contract, I thought this important topic would be appropriate to explore here.

It’s imperative to understand that proper contracts will assist you in maintaining recurring revenue, but also protect and help you hold on to those profits.

Peace of Mind … for the Dealer

I have personally witnessed how a well-executed contract can protect and actually dismiss you from a lawsuit. Although it’s not always that cut and dry, I asked Ken Kirschenbaum, a 2009 SSI Hall of Fame inductee who has provided legal counsel to the electrononic security industry for more than 30 years, for a brief summary on how these agreements actually protect a dealer.

He stated the first area of consequence is the recurring revenue or installation/sales fee portion of an agreement. It’s very important to memorialize the financial basis, warranties and other expectations of the relationship with your client.

When you deliver all you state in your agreement, the client must pay you as outlined. Sales, monitoring and service agreements never state a system is guaranteed it won’t be compromised or that the system will save lives or property.

Although this is only one of many expectations set, it is an extremely important one. This segment relates to all aspects of your relationship with the client including the hardware, installation, monitoring and servicing of the system.

You should never be in a position where a client can state they refuse to pay for the monitoring or service because they were burglarized, or something worse and they also plan on suing you for losses. Kirschenbaum also says that a properly executed agreement with all the necessary terms and conditions should be an alarm dealer’s security blanket that allows them to sleep soundly each night.

3-Way Contracts Are Common

Dealers are sometimes taken aback when their central station requires a signed monitoring agreement for each client. Although I have heard a variety of reasons for this push-back, a common rationale is they have an agreement of their own. While this may be true, through the years I have found very few two-party agreements between the dealer and client that protect the monitoring center. Obviously it is vital the monitoring center be protected, but it’s also important to the alarm dealer that they are all protected equally.

To address this concern and to work toward a reduction in paperwork, I am starting to see more three-party agreements that encompass all aspects of the client, dealer and central station relationship. This would include the financial terms, separation of liability and outline of the client’s central station data.

Another aspect that must be considered in this time of fast-evolving technologies is to assure that old contracts encompass the protection for new services and technologies. Along with specifics related to IP networks, utilization of the Internet and wireless networks, and deployment of medical alert monitoring systems should be clearly outlined in the Terms & Conditions portion of your contracts.

Maintaining the proper insurance coverage with rated carriers, while maintaining that all clients are bound by your contracts, is not optional or “only for the large dealers.” It’s the only way to operate!

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