Limitation of liability clause when you breach the contract August 26, 2024

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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Limitation of liability clause when you breach the contract
August 26,  2024

Limitation of liability clause when you breach the contract

          What is the extent of the limitation of liability provision in the alarm contract?  I am referring to the provision in the Kirschenbaum Contracts™ as updated from time to time.  If you don’t have a K&K contract then I have no idea what you have.
          The limitation of liability provision is pretty clear, limiting your liability if you are found liable for a tort [negligence] or breach of contract to $250 or 6 months RMR, which is often less than the $250.  So if your subscriber suffers a loss because the alarm equipment or alarm services didn’t work, for any reason, and that loss is for millions of dollars or whatever, your exposure is limited.  That seems fair because you are not an insurance company, you don’t guarantee no loss and the terms of your engagement should not extend your obligations and exposure.  This will be the case if your subscriber sues you for breaching your contract, your negligent performance or your non-performance.
          But what if you take your subscriber’s money, upfront, and simply fail to install the system; you don’t even try to install the system.  It’s a cut and dry breach of the contract.  Maybe the subscriber gave you a down payment of $99 or $25,000 or more.  Maybe the entire installation is going to be $99, $900 or $100,000 or more.  You actually do install the system but for whatever reason you can’t get it to work or the AHJ simply won’t approve your work and it has to be removed.  Should your exposure be limited to the limitation of liability provision?
          There is no question that the limitation of liability provision limits exposure for your breach of contract.  However is that breach contemplated resulting in a loss from alarm failure or even damage caused by you during installation?  Does it apply to your out and out breach by failing to even try and perform?
          This comes up by way of challenge to the contract as drafted.  I routinely make changes because I agree, that’s not what the provision was drafted to protect.  I doubt I would seek to enforce a contract, even a K&K contract, if my client told me he didn’t even try to perform and just wants to collect on the contract.  I don’t recall any case like that.  I do recall a case where patrol service was supposed to be performed and the customer claimed, and the alarm company admitted, that it never did any of the services; we lost that case.  [there was an issue whether the customer prevented performance, but since the customer was a known celebrity the arbitrator was probably awestruck].
          I think the better practice would be not to test the limitation of liability provision if there is total failure of performance.  Bad facts make for bad law and even the worst judges usually follow precedent from prior cases, one bad decision supporting the next and next.  Don’t give them the opportunity.
          One other thought.  A decent size company mentioned to be the other day that it sends it’s collections to a collection agency.  I asked how that is working out and got the answer I expected, “not well, almost no recoveries”.  The one lucky point was that this collection agency didn’t start any lawsuits, so I guess it only called and wrote customers, hopefully within statutory limits to avoid harassment claims.  This is an alarm company that uses K&K contracts.  I looked at this company owner and simply told him he was foolish not sending the delinquent accounts to K&K’s collection department.  Why?  We get results. Our expectation, mine and yours, should be 50 to 80% recovery rate.  This is on accounts you’re ready to toss in the trash can; we are not doing your current billing for you.  When to send to us?  When 60, certainly 90 days, in arrears, unless the customer has a history of paying late and you don’t mind waiting.  What’s the difference between K&K and any collection agency?  K&K specializes and concentrates on alarm collection accounts and is also experienced with complex litigation, in the alarm industry and other industries.  Collection issues sometimes involve bankruptcy and debtor-creditor law and K&K bankruptcy department brings its expertise to that as well.  Choice is clear to me and it should be to you too.   And cost?  You’re probably find K&K is cheaper than whoever you are using, especially when you consider you rarely if ever collect when you use someone else.
          Finally, and what actually got me started on the collection issue, K&K will know when to bring a collection case, and more importantly when not to.  K&K is not going to get you involved in consumer complaints and agency proceedings; when we are faced with those we have the skill and experience to defuse the issue quickly, and that’s because we are expert in the alarm law arena and regulatory agency proceedings.
          For K&K collection department, contact Kathleen Lampert at 516 747 6700 x 319 or KLampert@Kirschebaumesq.com.

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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