October 29, 2011
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Question
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Ken
A potential customer contacted us hoping to switch their installed system to us. Her call was initiated because she had just received a letter from her provider that they had sold their business to another monitoring company. Looking at her contract, it indicates that she needed to contact her provider about 60 days ago or the three year contract would automatically renew. The contract, however, has no language regarding either party's ability to assign the contract to another entity. Does this omission give the customer adequate grounds to bail out?
Thanks!
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Answer
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Some states have statutes that govern automatic renewal provisions. You can check those out at https://www.kirschenbaumesq.com/autorenewal.htm
Assuming you are in a state that does not restrict or prohibit the automatic renewal provision, and assuming that the provision is clear and automatically renewed the contract term, you want to know if the assignment of the contract to another alarm company would be grounds for termination of the contract.
The answer, in my opinion, is no.
The issue is, are alarm contracts non assignable absent a provision specifically permitting assignment? Or, as an alarm company owner who may eventually want to sell the alarm contracts, do you need a right to assign provision? Most alarm company owners would answer in the affirmative. But the answer, again in my opinion, is no.
Contracts are non assignable when they have some element of personal performance. An entertainer's contract for a performance is a good example. However, unless there is that element of personal performance contracts are generally assignable. So the general rule is that contracts are assignable absent a prohibition of assignment. Most of the Standard Form Contracts prohibit the subscriber from assigning the contract.
Most alarm company owners think they need an assignment clause in their contract, so I include it. Saves lot of discussion. But the real reason I include it is that although a contract can generally be assigned, the party making that assignment is not off the hook unless the contracts says so. The Standard Form Contracts permit assignment by the alarm company and specifically states that upon such assignment the alarm company has no further contractual obligations under the contract. At least that assignment clause has some purpose.
If the contract merely states that the alarm company can assign it, then both the assignor and the assignee are liable for performance. Obviously when selling your alarm contracts, and assigning them to the new owner, you don't want to have continued exposure under the contract. Make sure your contract language is worded properly with not a simple assignment clause, but also ending your further liability under the contract after the assignment.
I just had a thought why its such a good idea for these articles to come out first thing in the morning. That way you can forget them and get a good nights sleep.