Question:

 

Ken-

We recently purchased your monitoring and service agreement for replacement

of our previous contracts. At this time, we have sent new contracts to our

entire customer base to provide continuity of current contracts. I have

been interested to find the following items present stumbling blocks for

about 5% of our customers. I would appreciate if you could speak to the

importance of their inclusion.

1. Exclusive Remedy

2. Insurance (Additional insured aspect)

3. Exculpatory Clause

4. Third Party Claims

Although our previous contract contained some similar items, I am seeing

customers exclude all of these items. We have chosen not to accept these

customer revisions, and are settling for continuing on with the contract we

had on file. How do we handle these customers, without canceling their

service? Is there an acceptable way to continue using a pre-existing

contract rather than deal with their exclusions on the new contract?

I appreciate your assistance in this matter.

Louise E. R

Business Manager

Superior Alarm

 

 

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Answer:

The standard alarm contracts are designed to protect you from

liability, comply with existing legal requirements, build your recurring

revenue and increase and stabilize the value of your business. Though each

of the contract provisions have been carefully selected, worded and placed

in the contracts, not all provisions are off limits to changes or omission.

These contracts are designed to help, not hinder, your business. Of course

it's helpful if you understand your contracts and why the contracts read as

they do. Marketing and selling these contracts can be approached in

different ways by your sales personnel. They can claim not to know or

understand anything about the contract terms, merely suggesting that the

subscriber read the contracts, or they can explain the contract terms, in

which event they must still tell the subscriber that it's the subscriber's

responsibility to read and understand the contract terms.

The Exclusivity provision is a defense remedy, primarily in regards to

warranty issues. You can modify this provision to the extend that you

understand your modification. For example, you can limit replacement parts

to new as opposed to used.

Additional Insurance:

There are two insurance provisions. Neither are essential and you can agree

to omit them. One requires the subscriber to insure your security equipment

[this is where you retain ownership, as in a lease]. The other insurance

clause is an insurance procurement clause that requires your subscriber to

get insurance and add you as an additional insured. Rarely do subscribers

comply with this provision. It's a protective provision that is not

necessary as long as you keep other protective provisions.

Exculpatory clause

This provision cannot be changed, except you may agree to the following:

alarm company will be liable for any property damage caused by its

employees while on subscriber's premises." If you are in a state that will

not enforce the exculpatory clause if there is gross negligence then you

can exclude that from the clause as well.

Third Party claims

Your contract is with your subscriber and you want to exclude claims by

third parties who may have property on your subscribers premises or who may

be on your subscriber's premises. A waiver of subrogation will be

enforceable. Other third party claims will be hard to stop since you have

no contract with the third party, but courts generally recognize that your

contract does not benefit third parties, and that limits their rights to

sue you. There are too many factual patterns to address here, but you do

want to retain the no third party language in your contracts.

 

You will find that most subscribers do not take the time to read the

contracts, much less understand them. If you have an important subscriber

it may be appropriate for you to engage counsel to explain the contract

terms and significance to the subscriber or its counsel.

One thing you can be confident in representing is that the contract terms

have been selected after careful consideration and most provisions have

survived judicial scrutiny and have been enforced.