If you are thinking about becoming a Certified Dealer for a security alarm system manufacturer or service provider (e.g., Honeywell or Alarm.com), there are several important things you should know that may affect your business and your own contracts with your customers. Continue reading
A small business client went out of business and is now refusing to pay the balance of the contract. What can I do now, and is there any way to avoid this situation in the future?
Assuming you did everything you could to negotiate the balance due, unless the company has filed for bankruptcy protection, small claims court is your best bet. You don’t need an attorney for this; it is very easy. Many jurisdictions have the forms online and instructions for filing. The maximum amount of the claims handled by small claims court differs by jurisdiction, but is typically $5,000. You will want to reference and attach your contract to your filing. In the section where you describe your lawsuit, say something like this:
[Customer] entered into contracts with [Security Company] for security alarm installation and monitoring at [location(s)]. The contracts are dated________, _______, ________, and __________ . The term of each contract is for ____ years, with $___ due per month under each contract; giving a $____ total monthly payment due for all contracts.
[Customer] paid under the contracts for _____ months, but stopped paying on ______, ___ months before the contract terms expired. [Customer] is therefore in default under the terms of the contract with [Security Company].
The terms of the contract provide that [Customer] is obligated for ______ of the remaining term of the contract if it defaults on its payments under the contract. [put in the contract language]
[Security Company] has sent [Customer] invoices and has tried to work out this issue with [Customer]. [Customer] has refused to pay the balance owed to [Security Company], which totals $ ____ for all contracts.
Unfortunately, bad debt is a part of doing business. One potential protection—if you can get it—is a personal guarantee from the business owner or other willing party (the “guarantor”). To do this, you will need to add a second signature line to your customer’s contract. Above it, it should say something like: “The undersigned personally guarantees Customer’s performance under this Agreement.” Have the guarantor sign it. Then, in your small claims case, you can go after the guarantor personally, not just the business.
Ask the Attorney: I sometimes have customers ask to remove their spouse or significant other from the account due to divorce or domestic violence allegations. How should I handle these requests?
Tread carefully here because if you make the wrong move, you are opening your company up to potential liability. There are a few things you need to consider. You need to determine whose name is on the contract. If both spouses or significant others are on the contract (which is the best practice), then you can make the change, and get a new contract from person requesting the change. I would notify the other party in writing that s/he is being removed from the account. If the person requesting the change is not listed on the contract, you need to investigate further. Determine if there is legal authority for the change—is there a divorce decree, or a restraining order? I find it helpful to do a little extra sleuthing sometimes as well. For example, can you find anything from online property records about whether the person making the request owns the property? If you have legal authority that the person seeking the change has ownership or possession of the property, you can get a new contract with the person requesting the change. Be aware, however, that, while unlikely, there is the risk that person dropped from the account could sue for breach of contract. Save all correspondence and documentation regarding the change and your decision-making. If you really want to be extra cautious, you could ask for indemnity from the new account holder for any claims made by the person being dropped from the account.
Ask the Attorney: I frequently do work for builders who want me to sign a subcontractor agreement with an indemnity clause. Should I sign it? Continue reading
Ask the Attorney: It feels like I just bought a new contract, but it’s actually been years ago. Is it still good? How often should I update my contract?
Whenever I speak to at alarm company events, it never fails that someone tells me their contract is more than 20 years old! I hope you’re not in that boat. It may seem self-serving coming from an attorney, but the law really does change fairly often, necessitating everything from minor tweaks to outright revisions. Not only do the laws on the books (statutes) change, but also every time a court case is decided involving an alarm company, there’s usually something to learn from it. It’s also important to pay attention to not just what’s happening in your state, but others as well, as those court cases can be persuasive in your state. So, that’s my long way of saying, don’t wait 20 years—or even five. Best-case scenario, you should have a relationship with an attorney and regular (at least yearly) check-ins on changes or updates to your contracts. If you can’t stomach that, at least update your contract every two to three years.
Ask the Attorney: I have a customer who is just awful. She is belligerent and hateful to my employees and me. I would like to fire her as a customer. Can I do that?
This is a terrible situation to be in, and one that I hope does not happen often. I know your goal is to gain customers, and that you strive to make even the grumpiest of people happy. The customer is always right, as the saying goes. Despite your best efforts, unfortunately, there are times when a customer crosses the line. When a customer is verbally or physically abusive or is disturbing to your business due to his or her constant complaints—and you just cannot make the customer happy, no matter what—it is time to part ways. This is easy if your contract has a clause concerning situations such as this:
Alarm Company has the right to cancel this Agreement if, at Alarm Company’s sole discretion, it believes Customer is verbally or physically abusive to Alarm Company’s employees, subcontractors, or representatives.
If you don’t have a similar clause in your agreement, it can be trickier. After all, if you have a contract with this customer, you have obligations under the contract too.
As a practical matter, however, it likely won’t be worth your customer’s time, effort or money to sue you on your contract especially if they can find another provider for a similar price. You can help ensure the customer doesn’t sue you by giving the customer ample time to find another provider (60 days should be sufficient), and provide no cost monitoring during that time. In the right circumstances, you may also be wise to refund the customer for equipment they paid for but can no longer use. In the end, just remember that should you have to go to court, you want to be able to show that you treated the customer more than fairly—so that you look good, and so that the customer has no claim for damages. Oh, and along those lines, if you’ve got a written record of your customer’s bad actions (in emails, for example) hang on to it, in case you need to show the court why you backed out of the contract.
My customer had a loss. What should I do now? Continue reading
Ask the Attorney: I’d like to go paperless. If I have my client sign the contract electronically, is that valid?
Yes, electronic signatures are valid. The laws, E-SIGN and UETA , require that the signature be attributable to the customer. That is, the signature is valid even if it is electronic, but you must still be able to show that it was the customer who signed and not someone else who didn’t have authority to sign. Here is what the UETA says:
“An electronic record or electronic signature is attributable to a person if it was the act of the person. The act of the person may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.”
So, if your customers are signing via iPad, or other portable electronic device, you can prove it is the customer’s signature in any manner, including your security procedures. That gives you a lot of leeway to craft your own procedures, such as writing down the license or ID number or taking a photo of the customer’s driver’s license or ID card.
In conjunction with these security procedures, you need your customer’s signed consent for the electronic contract and electronic signature, which also states that the customer is providing a driver’s license/ID card or photo while signing as proof that the contract is attributable to him or her.
Ask the Attorney: My customer is questioning why there are limitations of liability and damages in my contract. How can I explain this, and can I change it?
First explain to the customer that the limitation of liability provision doesn’t protect you from all If an alleged failure of the alarm system is caused by the alarm company’s intentional, willful, or grossly negligent conduct, the limitation of liability will not apply.
The reason that you limit your liability is that the amount that an alarm customer pays for service is insufficient for the alarm company to insure the property protected. That is why the alarm company asks its customers to look to their own insurer should they suffer a loss. Insurance companies base their premiums on their assessment of the value of the property and the vulnerability of the premises. By contrast, alarm service fees are unrelated to the value of the property. Thus, an alarm company cannot undertake to provide an identical type of insurance coverage should the alarm fail to prevent a loss. The contract terms are designed to prevent that from happening. With any reputable alarm company, you will find similar contract language.
You can blame your insurer and attorney for the fact that you cannot negotiate the fact that your company’s liability is limited. You can, however, negotiate the amount of the limitation of damages—say from $500 to $1,000 (or even more). But don’t make it as high as your insurance policy limit.
Ask the Attorney: I sold an alarm system to a local business. The business owner wasn’t available to sign the contract, but she told me to have the assistant manager sign the contract instead. Is that OK?
The agreement is enforceable if the person who signed it had apparent authority to sign. If the company told you (or the circumstances reasonably led you to believe) that whoever signed had authority to do so, the customer cannot later claim the contract is unenforceable because the “appropriate” person didn’t sign it. If you can, document the situation—save the emails or write a memo explaining who signed and why and keep it in your customer’s file.