KEN KIRSCHENBAUM, ESQ ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE You can read all of our articles on our website. Having trouble getting our emails? Change your spam controls and whitelist ken@kirschenbaumesq.com ****************************** Is 80% an enforceable liquidated damage for subscriber breach July 6, 2024 ************************* Is 80% an enforceable liquidated damage for subscriber breach *********************** Ken We are negotiating a Commercial All in One and the subscriber is challenging the 80% of balance of contract if there is termination, especially by us. What is proper response? AJ ************************* Response ************************* The 80% liquidated damage comes into play only when the subscriber defaults and breaches the contract. The alarm company can't simply demand 80% once the contract starts or anytime thereafter unless the subscriber defaults. The simple solution for the subscriber is, don't default. The issue seems to be is 80% of balance of payments a reasonable liquidated damage in the event of a default. The answer is yes. The corollary question is whether the 80% constitutes a penalty and is thus unenforceable in court. The answer is no, though in in some scenarios it may be more difficult to argue in support of the 80%, When any work installing a new system or repairing an existing system is part of the contract it is common for the "after-install" services to required for a minimum time so that all the payments can be anticipated. So if there is a $2500 installation and then a 60 month monitoring and repair plan with monthly payment of $100, the alarm company expects to get $6000 over the 5 years in addition to the $2500 on installation. The cost of the installation may be less, or more than the $2500. The cost of the monitoring with or without a repair or inspection plan, may be a fixed cost, if only monitoring, or a risk cost component if there is repair service and inspection; certainly there is a cost and not all of the $8500 is profit. In this scenario the $2500 is paid on installation. If the subscriber defaults in the 60 month term the contract calls for all RMR due as of the breach and 80% of the balance of the term. Liquidated damages should be used when proving actual damages is likely to be impossible or difficult to prove; guessing is not generally accepted as dispositive testimony. Without the liquidated damage of 80% the alarm company would be required to prove actual damage, requiring a trial or hearing, even if the subscriber defaulted in the lawsuit. If there was a trial the alarm company would likely testify that it's cost of providing the services was less than 20% and therefore it was entitled to more than 80% of the balance of the contract. Alarm companies are providing the service, presenting the contract to the subscriber, and entitled to contract terms as long as they are reasonable. There are a slew of court cases where liquidated damages of 80% of balance of contract have been enforced. Historically the alarm industry used to seek 100% of the balance of contract but courts began objecting since the alarm companies were not continuing to provide the services, a reasonable consideration. At least one business model in the industry requires subscribers to pay for the installation and the entire term of the contract payments at time of installation which I suppose eliminates the issue of collecting on the RMR. **************************** STANDARD FORMS Alarm / Security / Fire and related Agreements click here: www.alarmcontracts.com *************************** CONCIERGE LAWYER SERVICE PROGRAM FOR THE ALARM INDUSTRY - You can check out the program and sign up here: https://www.kirschenbaumesq.com/page/concierge or contact our Program Coordinator Stacy Spector, Esq at 516 747 6700 x 304. *********************** ALARM ARTICLES: You can always read our Articles on our website at ww.kirschenbaumesq.com/page/alarm-articles updated daily ******************** THE ALARM EXCHANGE - the alarm industries leading classified and business exchange - updated daily ************************* Wondering how much your alarm company is worth? Click here: https://www.kirschenbaumesq.com/page/what-is-my-alarm-company-worth ****************************** Getting on our Email List / Email Articles archived: Many of you are forwarding these emails to friends or asking that others be added to the list. Sign up for our daily newsletter here: Sign Up. You can read articles and order alarm contracts on our web site www.alarmcontracts.com ************************** Ken Kirschenbaum,Esq Kirschenbaum & Kirschenbaum PC Attorneys at Law 200 Garden City Plaza Garden City, NY 11530 516 747 6700 x 301 ken@kirschenbaumesq.com www.KirschenbaumEsq.com
