March 3, 2012

 

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Question

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Ken:

I appreciate your wise words of wisdom, and would appreciate some of those words on the following.

I recently changed Internet service providers to the local cable company. They sent a huge document entitled Terms of Service. Not unlike many of the alarm service contracts that are available from you  at least in the length. My question pertains to wording in the ISP agreement that essentially says  you continue to use the Internet service we (cable company) are providing you are deemed to have accepted these terms of service in their entirety. If you do not accept these terms of service you should immediately cease using the service and notify us in writing.

For those alarm monitoring or service customers who absolutely refuse to sign the alarm company's agreement  contract I propose that the alarm company send their standard agreement for service with a similar statement as above, but without any contract term, by registered mail or courier (for proof of delivery). Would this give the alarm company any liability protection and/or third party indemnity? If there was an issue of non payment would this stand up in court should the alarm company sue the customer for payment?

I figure that this approach would be better than going forward with absolutely no contact. I appreciate that at any point in the future the customer could decide he didn't agree with the terms of service and he could go to another provider  but without a contract he can do that anyways.

Would you favor us with your comments please?

Thank you!

Dave Currie

Damar Security Systems

Sarnia Ontario Canada

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Answer

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Terms of Service is not an acceptable substitute for a proper alarm contract. The kind of protection that alarm companies require from the contracts, and the RMR growth that provides equity for the business, cannot be achieved with Terms of Service. It's one thing for an alarm company to send out a notice that it will now call for verification before dispatching, or invoice every other month, and another thing for an alarm company to send out an Exculpatory Clause or Limitation of Liability Provision and advise the subscriber that those provisions now govern the relationship. Or that the current month to month or "at will" relationship is now a 5 year commitment.

No alarm company would prosper working with Terms of Service instead of contracts and it simply would not be practical. Every subscriber would be an "at will" subscriber. Establishing the agreement would be difficult. Furthermore, consumer laws require written contracts, so it's not really a lawful option either.

Alarm dealers [or installers] who install and monitor alarm and security systems without contracts are foolish; so are central stations that don't get a signed contract from the subscriber that protects the central station, whether it's the central station's contract or the installer's contract that extends protection to the central station.

Even if you carry E&O insurance and you think it's sufficient to cover your potential claims, that may provide some comfort if you accept a handful of accounts without contracts, but a customer wide policy of no contracts isn't going to work. For one thing, any insurance carrier worth dealing with is not going to want to write you without contracts. Keep in mind that the insurance carriers depend on your contracts to keep losses down.

I think it a mistake for alarm companies to conceive of reasons not to use contracts or ways to find a substitute for the contracts. I've said it many times, you're in the contract business. Selling contracts with recurring revenue is your business. Using Terms of Service instead of contracts means, to me, that you have no business, at least not one that you're going to be able to sell to anyone.

 

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