KEN KIRSCHENBAUM, ESQ ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE You can read all of our articles on our website. Having trouble getting our emails? Change your spam controls and whitelist ken@kirschenbaumesq.com ****************************** How alarm company can break the alarm contract during the original term October 8, 2025 ******************** How alarm company can break the alarm contract during the original term ********************* Ken. We have a question regarding what “outs” we might have on a contract; what are legitimate reasons we can use to cancel on a customer. Example 1: We changed the term on your contracts to 3 years. When I read this section it appears that when this 3 year term is in effect it cannot be cancelled with a 30 day notice; that 30 day notice comes into play after the initial term during renewal terms. However there is other language regarding non performance and unsafe conditions that seem to present possible opportunities for an “out”. So we are looking for contractual reasons we can use to cancel within the initial term and how we should go about doing this. Example 2: We recently took some action to cancel a customer where we are inside the 3 year term. We were continually having to follow up on payment More importantly, despite our communication in writing that their system is impaired and they failed to follow a repair plan, they have not fixed anything, so we sent them a 30 day notice email (copied to the AHJ) to cancel and we have also sent via certified mail. After further thought, I wish I would have checked with you first, but now asking if this presents an issue how we have handled this? That said, going forward would like to ensure we understand what we can and cannot do in this type of situation. Example 3: We notified a subscriber we were canceling monitoring on a specific date. We advised that there is too much liability monitoring a building’s fire alarm panel when the rest of the building’s fire and life safety systems are deficient and/or impaired. After a domestic water leak we were unable to run the fire pump since the fire pump controller was damaged. Therefore we could not perform monthly pump runs and could not run the pump to flush the hydrants and winterize them as well. We could not test the building’s backflows and the fire extinguishers tests are past due. Example 4: For another customer we are also inside the 3-year term. Our pricing for some inspections was way too low. So wondering if there is an out here as well. I understand we can increase pricing the 9% annually but its not enough. Additionally, I have suggested presenting a change order as well just asking for more money. Are we stuck or do we have an out? Thank you, Jennifer *********************** Response *********************** You packed a lot of questions into this one, but generally they have the common goal of you wanting to terminate the contract with the customer. In Example 1 you are correct that a customer has no right to cancel during the initial term absent your breach of the contract first. The cancellation provision in the Term paragraph describes how the customer, not you, can cancel. Your ability to cancel without breaching the agreement can be found in other provisions of the contract. Two effective ways is when the customer fails to make payment on time, or at all, and you default the customer; you get to terminate the services and go after what's owed and 80% of what will be owed for future services during the term of the contract. Another effective way out is to ask the customer for the COI [certificate of insurance] with "additional insured" endorsement. Unless you removed this provision it is required. The customer's failure to get you named as an additional insured is a non-curable breach and you can cancel the contract. These are the two best ways to cancel without breach on your part. So Example 2 is easy, you default the customer when there is non-payment. You are not obligated to re-instate or excuse late or no payment. Example 3 is a bit more complicated. You can continue to provide whatever level service you are able to provide after notifying the customer of equipment or system deficiencies, and the AHJ too for fire alarm systems or environmental systems regulated by the AHJ. But once you notify the customer I don't know if that permits you to decide to cancel. Here is an extreme example much simpler than your scenario, and one that pops up from time to time. You install the system, set it up for monitoring and the customer does not arrange for communication pathway [and you haven't agreed to provide it]. You begin sending monitoring invoices and customer pays it. You continuously remind the customer that no monitoring is possible, though customer is responsible for continued payment. I suppose you can cancel and customer is not likely to raise a fuss, but technically its you, not the customer, who decided to terminate the contract. This doesn't come up because the customer won't care. Example 4 is a mistake in pricing that you made. Unless the mistake is so obvious you are stuck with the price and the service. If you decide to cancel you are the one in breach [assuming you've already asked for the insurance COI]. The customer could "cover" by seeking out another alarm company to perform the exact same services and then hold you liable for the difference in pricing, assuming it is more. Alarm companies rarely "fire" or cancel their customer's contract. The common ending is a breach by the customer, ending up with K&K's collection department, where it belongs. ******************* STANDARD FORM AGREEMENTS: To order up to date Standard Form Alarm / Security / Fire and related Agreements click here: www.alarmcontracts.com *************************** CONCIERGE LAWYER SERVICE PROGRAM FOR THE ALARM INDUSTRY - You can check out the program and sign up here: https://www.kirschenbaumesq.com/page/concierge or contact our Program Coordinator Stacy Spector, Esq at 516 747 6700 x 304. *********************** WEBINARS: https://www.kirschenbaumesq.com/page/alarm-webinars *********************** ALARM ARTICLES: You can always read our Articles on our website at www.kirschenbaumesq.com/page/alarm-articles updated daily ******************** Wondering how much your alarm company is worth? Click here: https://www.kirschenbaumesq.com/page/what-is-my-alarm-company-worth *********************** THE ALARM EXCHANGE - the alarm industries leading classified and business exchange - updated daily ************************* PODCASTS: https://podcasts.apple.com/us/podcast/ken-kirschenbaum-presents/id1794851477 ************************* Getting on our email list / Articles archived: Many of you are forwarding these emails to friends or asking that others be added to the list. Sign up for our daily newsletter here: Sign Up. ************************** 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
