Why is there such a problem with this topic?

Alarm contracts have automatic renewal clauses in them. Some contracts are

for an initial term of 3 to 5 years, some 10 or more. The renewal can be

for 1 year, 5 years, or whatever you make it.

An automatic renewal clause should and will be enforced (its legal) unless:

 

1. there is a statute that prohibits it

 

2. there is legal case law that refuses to enforce it (usually on the

grounds that the particular provision is unconscionable [shocks the

conscience of the court).

 

I am not aware of a Federal law that deals with the automatic renewal

clause (if you know of one let me know the statute). Some states do have

statutes that deal with the issue. In New York for example an automatic

renewal clause is not enforceable unless the provider of the service (the

alarm company) sends a separate notice advising the customer of the

provision. The notice has to be sent by certified mail or personally

delivered between 15 and 30 days prior to the renewal date. Failure to give

the notice renders the automatic renewal provision unenforceable.

Check the statutes in your state to find out if there is a similar

provision that you must comply with. I have posted the laws in states where

we found statutes dealing with automatic renewal on my web site, under

Alarm Law Issues. You can get there with this link:

 

         http://www.kirschenbaumesq.com/autorenewal.htm

 

This list may not be up to date so make sure you check carefully. If you

find a statute in your state please send it to me for posting.

 

If there is no state law provision then you only need to be concerned that

your contract term does not run afoul of common sense or decency. A 5 year

initial term with a 10 year renewal written in obscure print buried in the

contract may not be enforced. I think you get the idea.

The standardized contracts that I offer to the trade for residential are 5

year initial term month to month renewal. Commercial contract are 10 year

initial term with month to month renewal. I switched to month to month

because almost no companies comply with the notice provisions and most

states do not require any notice if the renewal is month to month.

We have not had difficulty with those terms. We have also had success with

10 year initial term contracts with 5 year renewals, but you must comply

with statutory notice.

For a list of the standardized contracts see our web site at

www.alarmcontracts.com.

 

Some alarm companies have a policy of sending out new contracts rather than

relying on their renewal provision, and that's a good idea. Years ago I

advised that you could and should rely on the renewal provision rather than

send out a new contract, but too many states are enacting notice

requirements and some are prohibiting renewal at all. A new contract makes

more sense from an enforcement perspective.

Another little mistake I think some companies make is to send out a new

contract and call it a renewal contract. The phrase "renewal contract" has

caused many different types of problems in litigation. One thing you need

to be mindful of is that the contract, now labeled a "renewal contract" may

have several provisions in it that have triggering events that will not be

taking place with the renewal contract, such as an installation of

equipment, or a provision that says the contract is for 5 years after the

installation of equipment. In a renewal situation that provision can cause

the subscriber to claim that the equipment was installed long time ago when

the first contract was signed and therefore the 5 years ran before the

renewal contract was even signed, thereby permitting the subscriber to

cancel anytime; not a position you need to litigate and one you can easily

avoid by knowing what is in your contract.

 

If your contract has an automatic renewal provision in it then rely on it

only if you know and comply with your state requirements. If you want to

have a new contract signed during the term of an existing contract that is

fine. You should probably offer some incentive for a subscriber to sign a

new contract, such as a free inspection, free piece of equipment, an

upgrade in equipment or a rate freeze or decrease.

Giving something for the new contract will help establish your

consideration and avoid an issue that the subscriber was duped into signing

a new long term contract.

 

Let a sense of fairness be your guide.