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Question 

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Ken, 

    I have a question. You always talk about the importance of having contracts, but have you ever look at some of the contracts we need to sign  (Alarm.com / total-connect / connect-24) in order to use their program?   Is there any language in those contracts that you would not sign!  For instance what if their system is down they cannot be held liable / responsible for them not getting the signal. I know we always try to protect ourselves but is this not another area to watch out for.

Norm

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Answer

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    Alarm dealers are asked and required to sign all kinds of agreements in their personal and professional lives.  Of course it's prudent to read the fine print and understand your commitments,  But it's not always practical and I plead guilty to sometimes preferring "not knowing".  Best example that comes to mind is my recent car rental agreement which I signed in multiple places without reading so that I wouldn't aggravate myself or the clerk who has absolutely no authority to change a single letter, let alone word.  I need the car.

    Here is the hard reality.  You demand that your subscriber agree to lots of terms favorable to you, such as an indemnity provision.  Your central station requires you to agree to lots of favorable terms to it, such as an indemnity provision.  Third party communication pathways, providers of POTS, radio and cellular requires your central station to agree to lots of favorable terms, to the communication provider, such as indemnity.          Manufacturers who provide after sale services, such as data pathways, require lots of terms in their agreement, such as indemnity.  So, look at it as a totem pole, and you're pretty close to the bottom.  You know what flows downhill.

        There are circumstances when you can actually negotiate some of these agreements, and it pays to try. Your bargaining strength may be more than you think, and even if it's not, someone with enough bargaining strength may have recently gotten some contractual concessions and you may be able to tag along.  

    Keep in mind that it may be entirely appropriate for those above you in the food chain to demand the same protective provisions that you demand of your subscriber.  The same arguments are made - why should they assume great risk and exposure when they are getting such a small amount for their services.  It's a good argument.  

    But besides protective provisions there are other provisions that may be asked of you that may not make business sense.  For example, a central station demanding that you place all of your accounts with it, or that you agree to maintain a minimum of xxxx amount of accounts for a minimum of 5 years, or that you agree that you can't sell your accounts without first offering the accounts to the central for a well below market multiple.  What would justify these types of provisions?  Perhaps a sign on bonus from the central, or guaranteed reduced pricing or some other concession that is very advantageous to you.  These types of provisions need to be carefully considered, but first they need to be recognized and understood so you can make an intelligent assessment.  That's what experienced lawyers are for - to help you with the agreements you are asked to sign.  The days of a handshake and my word is my bond may have had its place, but you need to be more careful now.

 

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