Arkansas: (a) No contract for professional home security services that is
entered into after August 1, 2003, shall state that the term of the
contract will automatically be renewed for any additional period beyond the
initial term of the contract. (b) No contract under subsection (a) of this
section shall be renewed for any additional period beyond the initial term
of the contract unless the person receiving the professional home security
service affirmatively notifies the person offering the service that he or
she wishes to renew the contract.
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So how does the alarm industry deal with this thoughtful legislation?
The law is clear enough. All alarm service contracts terminate at the end
of the initial term. The law does not impose any notice on the alarm
company before terminating service. [unless there is a statute that we
missed].
The contract itself is not permitted to contain a renewal provision, and
therefore even the month to month renewal which is now in all of the
standard alarm contracts is not proper. No doubt there is a deceptive
business practice statute lurking somewhere in Arkansas that could be
invoked against alarm companies who violate this contract provision and
mislead their subscribers into thinking that the contract automatically
renews, for any period.
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The statute does permit the home owner to notify the alarm company that the
subscriber wishes the contract to renew. Unfortunately that would seem to
suggest that the contract renews on all of its terms, which does not
include a renewal period. So one problem is what is the lenght of time of
the renewal? Are all services and charges to remain the same?
Alarm companies have several options. First, let the contract expire and
terminate service. Second, notify the subscriber that service is gonig to
cancel unless the subscriber returns a form notice that you provide [or
their own letter] requesting service to continue, and on what terms. If
it's your notice that the subsciber signs you can include your terms of
renewal. If not returned by the subscriber the contact terminates. Third,
notify your subscriber that the contract will terminate unless they request
renewal [which is really an extension period and not a renewal]. This would
extend the contract on the existing terms. A fourth option would be to send
a subscriber a new contract before the contract expires, advising that
unless it is signed the existing contract will expire and all services
terminate.
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Unless Arkansas has a statute limiting the initial term of the contract
alarm companies could also increase the term. Right now residential
contracts have 5 year terms in my standard forms. For Arkansas we will be
removing the month to month renewal.
For those of you concerned with liability issues, it would not be wise to
continue servicing a subscriber with a terminated contract. Though you
could take the position that the effect of the statute would be merely to
permit the subscriber to cancel at any time, a more prudent analysis would
be that the contract terminated and your services were provided without
benefit of the contractual protective provisions.
Insurance carriers need to be careful writing E&O in Arkansas and need to
get even more serious about requiring proper contracts as a condition of
coverage.
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Here is the Alarm Law Issues page link.
http://www.kirschenbaumesq.com/legal.htm
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We will of course update our standard form contracts to include new state
requirements
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