Question:
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Ken,
I apologize for dragging this out, but my boss wants to know if it is written anywhere that there is a maximum length of contract. They are looking for legal precedence in the statute of limitations.... I agree that it should be what is reasonable, but that did not answer the question for them. can you tell me where the maximum length of contract would be covered?
Regards,
Rich W
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Answer:
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There is no Federal Law that limits the length of the contract term. Any limit would be imposed by state or perhaps local law. Most jurisdictions do not have any such laws, and in fact I don't know of any jurisdiction where there is a statutory limit on the length of the term for a contract.
There have been proceedings brought by state Attorney Generals against alarm companies and those companies have resolved those proceedings by consenting to a limit on the term for their consumer contracts. That however does not affect any other alarm company.
Of course the longer the term the more valuable the contract. The term should make some economic sense to at least one of the parties. To justify the length of the term at least one of the parties would have to show some benefit. Subscribers may benefit by locking in a price long term [a stretch I admit, especially since the contracts usually allow for increases]. But a subscriber who received an installation for below cost derived benefit and the longer term contract would be justified. In fact, that same example benefits the alarm company, who shows that a longer term is required to recoup its investment in the installation and providing the continuous service.
The Standard Form Contracts call for a 5 year term for residential contracts; 10 years for commercial.