KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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Contract negotiations with your central station
January 27, 2022
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Contract negotiations with your central station
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Ken,
I contacted a new central station looking for options and when I received their contract it was one of your central station contracts. After I omitted what I thought was appropriate to omit there was hardly anything left of that contract.
Of course the owner of the central station wasn't comfortable with what was left in the contract and declined the changes.
So I figured I would call you and ask you if I should sign the central station contract as it was written and you advised me not to sign it. Instead you advised me to purchase a rider for $500. (and as you put it, if I could get the central station to agree to sign that rider (otherwise that would have been a waste of $500).
I'm wondering what I should do. I'm really interested in dealing with this central station as I think they are a great fit for my company but I won't (and you clearly advised me not to) sign my rights away and leave myself wide open for damages.
Regards,
Andrew
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Response
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Your recollection of event is most likely clouded by all the time you spend on-line trying to complete your law school education. No doubt your hours of scrutinizing the central station’s contract has left you fatigued, mentally exhausted and such.
You are correct on a few counts though. The central station’s dealer agreement, whether written by me or someone else, is written for the central station. There are provisions that should probably be changed. I didn’t see the central station contract you read and therefore I’d have no idea what was in it unless it was my Standard Central Station Dealer Agreement, unaltered. You wouldn’t know if it was “unaltered” because any change made by the central station would have been a change in the form and not a strike through on its dealer form.
But central station dealer agreements are written for central stations and some of these dealer contracts require more negotiation and change than others. Negotiating with your existing central station or shopping for a new central station, as you report you were doing, is not the same as haggling over the price of a car at a car dealership. As a matter of fact, unless you are skilled at negotiating a matrimonial prenuptial agreement or a complex shareholder agreement, which I happen to know you’re not, you aren’t equipped to negotiate a contract with a central station, even if you've done it before. Crossing out every provision you don’t like isn’t going to work, just like a customer crossing out all of your contract provisions in the Standard Form Agreements isn’t going to work for you.
You walk into a car dealership and want to negotiate your contract of sale. Maybe you want to add a bunch of after-market items and not pay the asking price; maybe you want an extended warranty; maybe you want a free service plan included; maybe you want a free loaner car and pick-up and return of your car when you need service. This negotiation is after your negotiation on the purchase price. You’re buying one car. Last time you were at that dealership was either never or many years ago.
Another guy walks into the dealership. He is from the municipality the dealership is located in and he wants to buy 200 cars. Have you got the message yet? No? Well let me spell it out. Here’s what goes into your negotiations with your central station:
* the size of your company
* the number of accounts you have now and number you can commit to in the future
* type of changes you want in the dealer agreement
Even the largest dealer isn’t going to get the central station to change enough provisions in its dealer agreement to put the central station at risk; at risk of losing money on the monitoring services or at risk of being financially destroyed by a customer claim or, perhaps less of a risk, at risk of not getting paid by the dealer. The central station’s appetite for accepting more risk and accepting more changes to its Standard Dealer agreement is going to depend on the changes requested and who is making the request for the change. Keep in mind that from a central station’s perspective in order for a dealer to really make a difference that dealer would need to have several thousand accounts. That is not to imply that dealers with several hundred or even a few score of accounts are not important and valuable to the central station; every dealer is important and valuable, but not every dealer can make a significant impact financially to the central station who is likely monitoring hundreds of thousands of accounts for hundreds, if not thousands, of dealers.
The Rider to Central Station Dealer Agreement is designed for several purposes. The Rider identifies 10 or so issues that the dealer needs to focus on and make sure that the Dealer Agreement does not require. One example is a right of first refusal. Why should a central station have a right of first refusal to purchase your monitoring accounts, usually at a set price? Well, there might be a good reason that the central station can express, but the Rider will seek to strike that provision. If the central station refuses then at the very least you will now be entering into that dealer agreement with your eyes open on that issue, knowing that it’s something you had to be leery of, at the very least.
There are many central stations listed on The Alarm Exchange. I believe every one of these central stations would accept most if not all of the changes requested on the Rider, and those that don't would have a very good reason for rejecting the requested change. If that's not your experience then you shouldn't be dealing with that central station, and maybe that central station shouldn't be recommended on The Alarm Exchange if it is taking advantage of dealers. Your first step in negotiations with the central station about its dealer agreement should be the Rider.
The Rider identifies provisions you shouldn’t be agreeing to unless there are unusual circumstances that justify the provision. The Rider will save you loads of time on the Internet and more time scrutinizing the Dealer Agreement. It will also save you a few hours of legal time, which I assure you will cost more than $500.
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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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