Lots of things are said during a sales presentation; sales puffery is common in all industries, and the alarm industry is no exception. However, not every industry is governed by contract the way the alarm industry is.

As you are well aware, every relationship your company has should be defined by contract. And those contracts you have in place pretty much negate all the sales puffery in your promotional statements, advertisements and brochures.

The easiest way to illustrate this is to set forth a simple premise that your company is likely attempting to convey through marketing materials. For example, a subscriber sees a TV advertisement from your company, and reads your brochure or sees other promotional material and is quickly convinced that your alarm is going to provide the foolproof protection that’s advertised. Once the subscriber has your system installed, should the subscriber’s alarm go off, the central station is immediately called and the cops are on their way as the intruder flees. In this perfect world, nothing ever goes wrong and the subscriber and family are always safe.

Creating a stark contrast between the alarm industry and other industries with potential risk, the promotional materials referenced do not contain any disclaimers like those you would see in an ad for prescription drugs. In those ads the disclaimer is usually longer than the sales pitch! Here, no disclaimers, just a happy subscriber, safe from potential threats from the outside world.

Of course, we know that when the sales pitch is over and it’s time to negotiate a system and sign that contract, all pretense of preventative protection quickly goes out the window. In fact, preventative protection verbiage won’t be found in the fine print of a properly drafted contract. This is because while the system being installed is there to keep the subscriber safe, the contract is there to keep your company safe.

Your company is not concerned about your system working as indicated in the promotional materials. Instead your company is bracing for your system not working anywhere close to that “perfect world” operation. This is why in standard alarm contracts you will find no guarantees that a loss won’t occur; no warranty that the subscriber won’t suffer a burglary, a fire, loss of temperature, water damage, etc. You also won’t find representations of no loss. You will find a disclaimer of any statement made any time prior to signing the contract that was inconsistent with the contract provisions.

So when do you have to be concerned with crossing the line with your sales puffery? You know why you need to rely upon the contractual provisions – to protect your company – and you don’t want to do anything to vitiate the contract. The legal issues raised by subscribers with misrepresentations in your promotional materials are fraudulent misrepresentation, fraudulent inducement and, you guessed it, fraud.

All basically boil down to you contradicting the contract terms through your advertisements to such an extent that the court refuses to enforce the contract. Once you recognize the low sophistication regard the courts have for consumers, you may better understand how a court may interpret the things you said or representations you made in advertising were sufficient to confuse a subscriber so that he/she could later claim foul, or fraud. Since courts apply the lowest common denominator where it comes to consumers, you have to realize that not much is expected of them. Whereas since you’re a business, you’ll be held to a much higher standard, no matter how unsophisticated you may be.

There is no bright line rule defining when puffery is tantamount to fraudulent misrepresentation, but there are plenty of examples where specific claims can do it. For instance, it’s one thing to say that your alarm system is “one of the best on the market” or “designed to guard and protect your family.” It’s another thing to say “guaranteed to prevent intrusion” or “guaranteed to guard against” this or that. Of course, outright lies, such as boasting where it’s not true that “our subscribers have never suffered a loss,” cross the line.

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.

 

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