Your Contracts Must Match Your Services
Often our office is contacted by a security business looking for the ‘end-all, be-all’ of contracts.
Often our office is contacted by a security business looking for the “end-all, be-all” of contracts. They want one super contract to encapsulate all services offered. In that way, with each subscriber, that company can capture every service under the sun in one document that only requires one signature.
The problem with this quest is that, similar to the unicorn, such a contract doesn’t exist. Or rather, such a contract that will protect your recurring monthly revenue (RMR) and your company should something go wrong doesn’t exist. While this answer is not what most people want to hear, I find that breaking down the relationship between subscriber and the security company helps explain why different contracts are required for different services.
The need for separate contracts is based on the reality that your relationship with your subscriber is created and defined by your contract. Because there are many different services you provide, set forth in a variety of arrangements, it’s imperative each service is detailed appropriately.
For instance, certain equipment may be sold, whereas others are leased; some subscribers may be residential, while others are commercial. Similarly, services you provide, installation for example, are completely separate and apart from monitoring. Specifically, if you sell and install you need a sales contract that covers the installation. If you provide monitoring, you need a monitoring contract (and you need your own monitoring contract even and especially if you subcontract it to a wholesale monitoring company).
If you provide service, apart from warranty work that is covered by the sales contract, you need a service contract. If you have residential subscribers, their contracts must be different than the commercial subscribers.
Falling victim to believing an “all-in-one” contract could work for you to cover all types of services you may offer to a particular subscriber would likely result in a massive document that would be difficult to understand and potentially unenforceable in a court of law. An additional detriment is creating confusion with subscribers that could lead to them failing to sign on with your company due to unwillingness to read or comprehend your voluminous contract. Thus your company would be better served by adopting several contracts that deal with essentially one type of service at a time and offers an accessible and convenient “fill-in-the-blanks” format.
The reason you should have separate contracts for each service you provide is that you are required to include specific provisions within the governing contract for that specific service. While all alarm and security contracts do contain common provisions protecting against liability, each one is unique because it deals with that particular relationship — i.e. the service you are providing. For example, you can’t use a sales contract and turn it into a lease. By the same token you shouldn’t take a monitoring contract and attempt to turn it into a service contract.
Of course, before you can identify what type of contracts your company needs, you must define the services you provide, which is sometimes easier said than done. Newer technologies may make it difficult to determine whether adding certain services would require a separate contractual and provisional relationship.
No one knows your business better than you do. So the test I recommend is if you find yourself cramming services into a contract that just do not seem to fit, or do not pass the smell test, it’s probably time to expand your contract library.
Also of note, while securing your RMR is important, it is not the only priority. You should also be mindful of those other situations in your day-to-day operations that require contracts as well. This includes employment, subcontractor agreements, stockholder/partnerships, central stations, etc. For additional guidance, visit alarmcontracts.com.
Ken Kirschenbaum is a partner with his daughter, Jennifer, in the law firm Kirschenbaum & Kirschenbaum.
The opinions expressed in this column are not necessarily those of SSI, and the content is informational and not legal advice.
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