KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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more on should you provide service before contract is signed
April 1, 2026
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more on should you provide service before contract is signed from article on March 28, 2026
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Ken
What happens when one company any buys another and subscriber hasn’t signed contract or paid for services of the previous owner. Can we terminate services?
Alan R
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Response
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You buy accounts and one or more does not have a contract for the services or owes money to the prior owner, your seller.
The first issue that comes to mind is, what did you agree to buy and what did you agree to do regarding non-contracted customers? Those answers will override my advice on what you should be doing because you have already committed by an agreement to acquire the accounts. If however K&K represented you in the acquisition we would strongly urged you to not acquire or accept, even for free, accounts that were not under contract.
Regarding the money owed to the prior owner, again it can depend on why you care. If you agreed to collect that money, or perhaps you paid for that receivable as part of the purchase price adjustment, you will want to collect those arrears. Of course you might simply be satisfied if the customer just starts paying you for your services after the acquisition. So a customer who is in arrears and one who has not signed a contract is quite different.
As buyer you take considerable risk acquiring an account without a proper contract, even for a day, let alone 6 months, a year, or without any cut off period if a contract is not signed. The customer can experience a loss any time, the night of the sale or next day. Your seller's indemnity, assuming you have an indemnity, is still limited, either by terms of the indemnity or the resources of the indemnitor - seller.
I want you to understand why I keep harping on having a proper contract in place, for every customer, for every service you provide. This silly analogy comes to mind.
You own a very expensive vehicle; you have no driver's license and the vehicle is not registered because you have no auto insurance. Your buddy asks you to drive him to the airport, a short trip for you. You mention to your buddy that you don't have the license, insurance or a registered vehicle, or maybe you don't mention it and your buddy believes you have the license, registration and insurance. Either way, here is what your buddy is actually asking you to do: Take me to the airport, for which I'll pay you nothing or a few bucks. If I get hurt on the way I will look to hold you responsible; if I miss my flight, I'll hold you responsible; if I get there late and have to worry or rush and suffer some distress I'll try to hold you responsible. I will go after you and wipe you out of any and all assets you have that I can legally attach. And one more thing, I don't care that you will have trouble getting insurance or what increase in premium you might have because you have accident while unlicensed, vehicle not registered or insured. So, when do we leave?
Are you crazy or stupid. Why are you sticking your neck out like that? The customer we are talking about isn't your buddy; it's a customer or potential customer and you might make some money with the customer, but nothing like you can lose if something unexpected happens. The customer is your relative or friend? If so, their insurance carriers are not your friends, and if they were your friends they would protect you from yourself, like I am trying to do.
The importance of a proper contract and your E&O coverage is essential. Also, when ready to sell your accounts you'll get a fraction of what they should be worth. Your legacy going right down the drain.
Don't take on accounts without a proper contract, even for a day. Don't wait to update your contracts and to use the K&K contracts to protect you and create value for your business.
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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