The Importance of Futureproofing Automatic Renewals for Alarm Companies

Don’t allow your company or your subscriber to get exposed by a termination of services from a lack of an auto renewal.

A PROPERLY DRAFTED ALARM CONTRACT will contain an automatic renewal provision. Besides the obvious economic and financial considerations important to the alarm company, the issue of continuity and continuation of services is essential to both the provider and subscriber. Without automatic renewal, alarm services would (or at least should) terminate abruptly. The consequences of such termination of services for fire alarm protection, personal emergency response, environmental alarms and intrusion alarms expose not only the subscriber but the alarm company.

Sure, the contract could impose a notice duty on the alarm company to notify the subscriber that the services will be terminated. But why should the alarm company accept that additional responsibility and exposure to risk when the Standard Form Agreements already provide for automatic renewal and it would be the subscriber trying to negotiate the terms of that provision?

Knowing that you need the automatic renewal provision is the first step. Making sure you have an enforceable provision is the next step. A third step would be knowing and complying with any laws in your jurisdiction regarding notice to the subscriber that affects the enforcement of the automatic renewal clause.

A case in Mississippi (Intrepid Inc. v. Joseph S. Asa Bennett) illustrates how lawyers manage to commit malpractice messing with a simple automatic renewal provision. The case involves a lease for land and the automatic renewal provision became an issue on renewal for the same reason the court refused to enforce it, and the tenant lost the presumably valuable lease. The renewal rent was not stated and there was no clear agreed upon method of establishing the rent.

CHECK OUT NEXT: As Technology Becomes More Complex, Expect Alarm Contract Forms to Be Complex

Similarly, if your RMR contract provides for a renewal term with the monthly charge “to be determined” or “to be agreed upon,” then you won’t have an enforceable renewal term. As the case also explains, a vague procedure for establishing a new charge, such as “customary” or “similar rates that are being charged” isn’t going to work.

To be enforceable, an agreement must contain all material provisions that belong in that type of agreement. Length of term and price are essential in the alarm agreement. Courts will not fill in blanks for you once the dispute arises. 

If you don’t have a stated new charge, then you need to have a precise method of arriving at the charge. For example, you can have a percentage increase based on a starting rate, or set up a negotiating process that establishes a formula or specific person (or category of persons) to fix the charge. This method of future negotiation, even with a definite way of arriving at the rate, is most likely a waste of time and money in the alarm industry. It’s too cumbersome and costly, and the increase on renewal just isn’t going to be that dramatic to warrant the process.

What you need to remember when negotiating and accepting an agreement is that a future “agreement to agree” renders the pact unenforceable, or in Mississippi, nugatory (having no force). To be enforceable, an agreement must contain all material provisions that belong in that type of agreement. Length of term and price are essential in the alarm agreement. Courts will not fill in blanks for you once the dispute arises. Courts may interpret language that is ambiguous, and may deem certain language added when clearly implied in context of the agreement. But courts should not be rewording an agreement it addresses as an issue, even when the terms of that agreement turn out to be unenforceable.

We sometimes see this effort by draftsmen of agreements who include language to the effect that “the court shall enforce so much of the terms or change the terms so as to be enforceable.” We see that language sometimes in noncompete agreements. It’s risky because the court may decline to rewrite the agreement and just refuse enforcement.

Better to know what is enforceable and draft the agreement so that it’s within the bounds of what is likely to be enforced, and perhaps at that point add a savings provision allowing the court to redraft it if necessary and if the court is willing to do it. Even without that, however, the court may enforce such a provision to the extent necessary.

About the Author

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Security Sales & Integration’s “Legal Briefing” columnist 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.

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