Unreasonable subscriber contract demands that cost you money
May 29, 2012
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Question
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Ken
Once again, I get an apartment complex that refuses to pay us until we pay
$75 for their compliance company. They owe us from January until now and say they can't/won't pay. Several complexes we passed the cost on to them in a monthly fee but others refuse. This customer has been with us since the early 2000's so it's not like we were able to price them accordingly when we signed them up.
What do you recommend and what do others do? I hate to lose a customer, but $75 is almost 3 months of service fees for us.
They are under contract with us, how can they get by with holding our payment hostage?
Another issue with all this is forcing us to sign their vendor agreements.
We have actually told some to cancel because we are not willing to sign their
agreements with their wide covering indemnification/subrogation clauses.
Donnetta Byrd
Office Manager
Security One, Inc.
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Answer
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This is a serious and unfortunately common problem. Holding the subscriber to the contract could cost you the business ultimately. That's the tough decision. Of course you are completely right. You could continue to monitor without paying the processing fee; you could invoice one year in advance and pay the fee once; your contract [not sure if its mine] may permit increases [my contracts do]. I don't know how others handle this but balancing a reasonable charge for your services with what the market will bare is probably an acquired skill learned after much hard lessons.
Vendor agreements is another issue. You have to be careful what you agree to. Alarm contracts are carefully drafted to provide the legal protection permitted in a jurisdiction. But by not using your contract you won't have that contractual protection. Vendor or institutional subscriber contracts will not protect you, and more likely will expose you to liability that you can't afford to risk. As you mention, the indemnification provision is typically a clause you need to avoid; it directly contravenes the indemnity provision in the alarm contract.
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Question
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Ken,
I have received a New Vendor packet from a builder here in Kansas. I know these sub contractor packets are common but what should the builder sign so I can protect myself? Please let me know if you have any advice before I agree to any of the terms.
Thanks
Laura Reece, Vice President
A-Tec Security Systems, Inc
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Answer
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A "vendor packet" that reads like the AIA contract is loaded with provisions that you don't want to agree to. Indemnity is one of the provisions, but there are plenty more. Almost anything that can go wrong, from plans, specification, construction, building conditions during construction, insurance, choice of law and venue, are all weighted in favor of the Owner or general contractor, whoever is presenting you with the contract. These provisions are antithetical to the provisions in your alarm contract. I know you are at times constrained to sign these "vendor" contracts. Just be careful to understand your exposure and what you've agreed to. You can often soften the risk by carrying proper insurance. Have your broker compare the risks that you assume in the contract with your insurance coverage. Understand your uninsured risk.
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Question
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Hi Ken,
I have enjoyed reading your newsletter.
Recently, some large communication companies have attached a lot of legal jargon to their purchase orders. Some of the jargon changes the terms of our contract and claims that acceptance of the purchase order supersedes the contact itself. (Without submitting the PO number our invoices are not accepted and processed for payment).
You thoughts and response on how to handle this?
Rodger Roth
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Answer
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You do have to keep on eye on the battle of the forms. Last one signed that states it supersedes the prior contracts most likely will govern. Over the past 40 plus years the alarm industry has evolved in technology, as an industry and the legal issues have evolved as well. The alarm contract forms are designed to protect you. It should come as no surprise that vendor forms, institutional forms, AIA forms, builder forms, and subscriber forms, are designed to protect someone other than you. Most of these contractors, owners or subscribers don't understand the enormous scope of exposure you face in the security industry. Alarms designed to detect certain [emergency] conditions are often confused to be preventative devices, and when these conditions cause damage to person or property one easy target is the alarm installer or monitoring company. As I write this I recall seeing a van owned by an alarm company in my area. It was colorful and had enticing advertising on it. One of the words that stood out to me was "Prevention". That alarm company, like yours, is not in the prevention business. It shouldn't be advertising that it is selling any prevention systems or services. Terminology like that in your contracts is even worse, and you need to be careful that the forms you are presented with don't bind you to terms that you should not be agreeing to.