February 11, 2011
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Question
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Hi Ken,
We have a situation that we've never encountered before, and it's really bugging me. About 18 months ago, we were contracted to install an alarm in a home that was under construction. We signed a 3-year agreement which, like many companies, gives the subscriber a break on the up-front cost. We received the pre-wire payment, and about a month later, we completed the installation, but (at the customer's insistence) never powered up and activated the alarm since the phone lines were not in and the house was not fully complete. We never received the balance of the installation fee, and after 16 months of having our chain jerked around by this customer, I'm fed up. I spoke to him a month ago, and his family has been living in the house for nearly a year, and he is refusing to let us come out and activate the alarm so that we can monitor and begin billing and receive our final completion payment. At this point, it's obvious to me that he's abusing the situation, and we have sent him an invoice for the completion of the work and the entire balance of the 36-month monitoring agreement. Am I in my rights to send him to collections and, if necessary, sue him?
Thanks for your insight,
Sean H
Five Alarm Security
San Diego, CA
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Answer
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Your problem is really not unique, though not typical. Most alarm systems are installed start to finish without interruption, and then monitoring starts. But it is not uncommon in new construction or renovation for pre wiring to be performed and then there is lengthy delay in completing the system and commencement of monitoring. Form contracts are not generally designed for the latter installation; you need to modify the form with a rider.
The Standard Sales Contract and Standard Monitoring Contract [or the All in One] is designed for the more routine installation. Installation starts,work continues until completed and monitoring starts. In fact the Monitoring Contract provides that monitoring charges begin on the first of the month after the contract is signed. Usually the alarm company will not start billing until monitoring is commenced, but the contract does permit charging on the first of the month.
When there is to be a delay in completion because of some conditions the subscriber has created, and not you, such as construction, you should indicate that in the contract, in a rider. With a lawyer's assistance you may not be able to draft terms that anticipate many issues that may arise, such as unforeseen delays or change of plans. Thus, it may not be sufficient for you to write in the contract that "home under construction; pre wire now; install at later date after rough framing or after sheet rock installed, or after finishing, painting, completed, and monitoring services started". Well that's a mouth full, and doesn't really take into consideration several problems that could arise, such as construction delays, change in plans, financial issues, all of which can delay your job for years. Something you surely did not consider when you installed the wiring for below cost and went out and bought the rest of the equipment.
There is no easy answer either. While you may want to provide for incremental payments and an outside date for payment, whether the system is installed or not, it's not likely that your subscriber will agree to this. You may have to meet in the middle, for example, making sure you are paid in advance for the pre wiring and some profit on the job up front. Then a delay works against the subscriber not you. Get ahead in your payments; that's probably the best answer.
If you face a situation where time goes by and the subscriber just changes his mind and refuses to let you finish, you have a breach of contract. Furthermore, unwarranted delay may be considered an 'anticipatory breach" permitting you to hold the subscriber in default. I don't know if you're using my contract, or how you filled it out, so I can't give you more specific advice on this one.
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Ken,
We have a customer that owes us a decent amount of money from installations across multiple locations. In our latest attempt to kindly request the money owed or come to a negotiated settlement the customer, who is also a lawyer, told us that we should be lucky that he does not sue us for consumer fraud. His contention is that none of the equipment we installed works properly. Of course this could not be further from the truth, the equipment works fine and we have no documented requests for service. But he told us that should we send his account to collections or sue him for the money owed that he will counterclaim and wrap us up in litigation that will cost us $20,000. Do you have any recommendations? Unfortunately my salesman did not get anything in writing from this customer before the work began.
On a related note, would your sales contract cover us in a situation like this. And do you recommend that the Sales Contract be signed before the work is begun?
Thanks,
Jamie
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Answer
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Well, here is another fine mess - that you got yourself into. Let's get to the important part first. Yes my Sales Contract would cover you, and yes you have to get it signed before you do any work.
The Standard Sales Contract [and the other standard forms] would prohibit a counterclaim in any action you commenced. This is not permitted in some states and we do remove the provision in states that do not permit it.
Sounds like you have no contract signed. The terms of your deal are therefore undefined. In many states, if not all, you may not even be permitted to sue for your services because you don't have a contract. Where is your 3 day notice of cancellation? That can be exercised any time if you don't give the notice.
And you proceeded in this manner with a lawyer subscriber? Didn't you read the emails last month about the deadbeat lawyer subscriber? Hope this isn't the same one.
The Standard Form Contracts cover every [or try to] service you provide, from installation, service, inspection, monitoring, different categories of systems, different categories of subscribers and these forms are designed to protect you. These contracts have been around and in use for a long time, and through constant updates try to address new issues that come up. Just like burglars are always looking to find ways to defeat your alarm system, there are a class of subscribers who are out there figuring out ways to screw you. You want to help them screw you by not using contracts, then don't complain.
It would be easy for me to tell you to sue this guy - but honestly, with no contract and if he is a litigious lawyer, you will be miserable very quickly. Use the month to by my contracts and move on.
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Ken,
I have several defaults in NJ and I am ready to sue several customers. I use all your burg contracts: sales/service/monitoring/completion/cancellation/disclaimer.
I know that the liquidated damages in your contract are 80% of the unpaid monitoring balance, the value of the software is whatever I write in.
In value of the software I wrote in $2,000.00 which is pre-printed.
I just wanted to ensure myself; Would I sue for 80% of the unpaid balance AND 80% of the $2000.00 in value of the software?
And my question is what do you say to the judge about value of the software when customer states that they paid for alarm panel or cell unit?
Is $2000 going to fly for the software or should it be lowered? She’s a renter.
Thanks
HSS
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Go for it, though collecting your judgment may prove to be the hard part, not getting it. Yes, you sue for 80% of the balance of the term and 80% of the "agreed value" of the software.
How do you demand 80% of agreed value? Well, first of all, it's agreed. Keep in mind that well over 50% of your lawsuits will go by default, another 30 to 40% will get settled before you get to the courthouse, another 5% will get settled at the courthouse, and less than 5% will actually get tried. With those statistics you want to start with the highest monetary demand permitted, and your contract permits the charges for the agreed amounts.