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Does exculpatory clause continue in contract renewal terms and after termination
August 23, 2019
Does exculpatory clause continue in contract renewal terms and after termination?
            There are some business practices that few in the alarm industry would challenge; they are universally accepted best practices.  Included would be that subscribers are contracted to a term agreement that automatically renews.  Also included is that a properly drafted alarm agreement contains certain protective provisions, of which the exculpatory is prominent.  
            An exculpatory clause provides that the alarm company is not liable for damages suffered by the subscriber in certain circumstances, among them, breach of contract and negligence in the performance of the alarm services.  While the exculpatory clause is not the only protective provision in the properly drafted alarm contract it certainly sets the tone and send the message that the alarm company does not intend to be, and will not be, liable for damages suffered by the subscriber.  Other provisions expand on that notion and address it in various ways.
            So the first question is, will the exculpatory clause carry over and be enforced beyond the original term of the contract and into the renewal terms?  
            The second question is a little harder; will the exculpatory clause carry over and be enforced if the agreement has terminated but the alarm company continues to provide services?  This happens all the time, by the way.
            You may think that the answers are obvious, but lawyers know not to take legal issues for granted and trying to reason out an issue doesn’t always work; in fact it usually won’t.  Also consider the consequences if contract provisions do not carry over to renewal terms or continue after termination of the contract.  The alarm company would be exposed in the same manner as if it had no written contract with the subscriber.  That would violate an essential precept; do no security or fire alarm work without a written contract.
            That the exculpatory clause would carry over in a renewal term should require no legal research.  The agreement is being extended, or renewed, and therefore all of the terms would carry over, assuming the renewal provision is properly drafted.
            But what about a situation where there is no renewal provision.  Occasionally a subscriber will insist on deleting the automatic renewal provision.  I routinely counsel against it, explaining that the alarm company is not going to assume the responsibility of notifying the subscriber that the contract is over and services have terminated.  But contracts are sometimes written with the auto renewal provision deleted.  Too often the alarm company will continue to provide service even though the contract has terminated by its terms. 
            Another termination scenario is where either the subscriber or alarm company notifies the other that the contract is terminated.  Despite the termination announcement the alarm company continues to provide services, typically monitoring service.  Is the alarm company providing its services without benefit of a contract?
            Well, at least in Indiana we have an idea of how the court will hold.  One Indiana case: “concluded that an exculpatory clause in the original lease carried over into the holdover tenancy, reasoning that “[i]t has been held that where a tenant holds over after the lease has expired the inference that the parties consent to a continuation of the same terms is so strong that it is adopted as a rule of law.” 
            Another Indiana landlord – tenant case held that “In the absence of an agreement to the contrary, when a tenant holds over beyond the expiration of the lease and continues to make rental payments, and the lessor does not treat the tenant as a trespasser by evicting him, the parties are deemed to have continued the tenancy under the terms of the expired lease.”
            The same analysis would apply to the relationship of alarm company and subscriber regarding a automatically renewed or terminated contract.

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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