KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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more on customer sells business; now what?
September 24, 2025
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more on customer sells business; now what? from article on August 1, 2025
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Ken:
I would like to comment on the August 2, 2025 newsletter about Bryan’s question “customer sells business, now what?”
I believe that Bryan’s question clearly demonstrates an industry wide problem that exists among small independent dealers, and perhaps even some employees of larger dealers. The knowledge of various corporate structures is important for dealers to know and understand. This knowledge is essential at the contract drafting stage so that the dealer knows who is really the customer. Too often I see agreements when we buy a company or accounts where the customer is shown as “Molly’s Tavern” when in reality there is no “Molly” involved and the actual owner is something “1234567 Ontario Inc.”
The knowledge of who is the “owner” is even more important if something goes wrong – like a big loss, statement of claim or there is a need to sue a customer.
An agreement without the proper legal name of the owner doesn’t provide much in the way of legal protection from liability and there is no way you can sue Molly for payment.
Dealers must obtain the legal name of the owner which may be an individual, a partnership or a corporation like “Inc.”, “Incorporated”, “Limited”, “Ltd.” etc., or one that I get a kick out of – “ULC” – Unlimited Liability Corporation.
And of course, dealing with property managers is a real pain in a** because they want to sign the contract despite the fact that they are not the owner. The contract should state that the property manager has the authority to bind the owner to the terms of the contract and the contract continues in full force and effect even if the property manager is replaced.
What happens if the original corporation the dealer signed up with sells its shares to another corporation? You are correct that a new agreement is not required as the purchaser assumes all obligations of the original corporation. But what happens when the two corporations amalgamate?
Lots of equipment manufacturers provide training courses on the technical aspects of the business! Maybe it is time for K & K to develop a training program on the “business” aspects of the alarm business! You have lots of resources available to develop a self-taught on-line course for a reasonable fee.
Dave Currie
Damar Security Systems
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Response
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Dave is correct on many points. You need to know the name of your customer. Most of the time the customer isn't trying to put one over on you; they are just lazy and so are you if you don't take the time to verify your customer when entering into the contract. Checking the proper name of a corporation or LLC can often be accomplished on line by checking the state's Department of State website. Another way to check name the name on a license or notice from a municipal agency - they usually list the correct name. Ask to see a business card, letterhead or, if you are really careful, Articles of Incorporation and filing receipt from the state.
Having the correct name is not fatal to the contract, but you will have some difficulty enforcing the contract if you don't have the correct name. From a liability standpoint, if and when Molly's decides to sue you it will likely rely on the contract with you, even though Molly's isn't the actual corporate name. You will see the complaint read ABC Corp dba Molly's.
Some of Dave's "legal" advice deserves comment to avoid confusing you. His statement "What happens if the original corporation the dealer signed up with sells its shares to another corporation? You are correct that a new agreement is not required as the purchaser assumes all obligations of the original corporation.:"
Dave is correct that a new contract is not required, but not because the other corporation assumed the contract. A new contract isn't required because the corporate customer has not changed. A change in ownership of the stock does not change the entity, which remains a party to the contract.
Dave's question "But what happens when the two corporations amalgamate?" depends on how they "amalgamate", which means merge. Merge might entail a new entity, which would require an assumption of the old contract or new contract.
Dave's advice about dealing with property managers also deserves comment. He wrote "The contract should state that the property manager has the authority to bind the owner to the terms of the contract and the contract continues in full force and effect even if the property manager is replaced."
Neither statement, that the property manager has authority or that the contract continues if the property manager doesn't, is necessary. Why? Because an agent cannot, by itself, validate the agency. Validation needs to come from the principal, or it needs to be implicit from the position the principal has placed the agent in, such as a Property Manager, assuming the Property Manager is really the property manager.
A statement that the contract remains valid if the property manager leaves is unnecessary because a validly executed contract signed by the agent binds the principal even if the agent is later replaced or stripped of the agency, ie authority to act on behalf of the principal.
What should you glean from all this? Dave's suggest that K&K put together a training course on business aspects of the alarm business is intriguing. While it's important to have basic understanding of legal issues affecting the industry it's far more productive and essential that you have sources to turn to for proper advice. K&K has for more than 50 years offered legal advice to the alarm industry, much of it disseminated through our daily legal newsletter articles, The Alarm Exchange listings, the K&K Standard Form Agreements and [more recently] the Concierge Program for the alarm industry. Use these tools and you can "leave the driving to us" so you can concentrate on more important issues, selling alarm systems and growing your RMR.
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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
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