April 1, 2011
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Question
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Ken,
I have purchase all my business contracts from you including monitoring and the standard security equipment service Contract. I have a few questions you may can help me with.
First question with the language in the monitoring contract specific to the length of five years, if the customers chooses to go with another provider, does my contract give me the ability to compel the customer to buyout the contract? Is it enforceable through the monitoring contact? The customer has only honored two years of the five year agreement. Therefore, how many months can I charge to the customer for the balance?
Same for the service contract. Every customer signs a service contract and 90% choose to pay as we come in by the hour. For example, a typical fire alarm system has two inspections per year and in some cases a number of service calls. With that said can I calculate an average of the yearly expenditure (the last two years) and charge a portion of the time remaining to the customer. How many months can I expect to collect and is it enforceable?
Ed
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Answer
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I am going to address the second question first, the Service Contract. Your example discusses a fire alarm system, and your services include inspection and service. You are using the wrong contract. You should be using the Fire All in One, or if you would need a Service Contract and a Fire Inspection Contract. Since 90% of your subscribers elect to pay as they go for service, and apparently for inspection too, you have no term to enforce; it's an at will contract. If you used the Fire All in One or the Fire Inspection Contract you would have a term of 10 years, and you could enforce it.
The Monitoring Contract you are using has a 5 year term. The term on the Fire All in One monitoring service is 10 years.
One of the reasons you have contracts signed is to ensure performance of the bargain reached with your subscriber. In other words, you get a contract signed to enforce it and hold your subscriber to it. The Standard Form Contracts are designed to maximize your RMR and increase the equity of your business. I'll hedge just a little and put it this way: There is a high expectation of enforcement of these contracts.