Tag Archives: alarm sales

How An Alarm Company Can Handle Bad Debt in Small Claims Court

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.

 

How an Alarm Company Should Handle Requests to Take A Person Off the Alarm Contract.

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.

Three Things An Alarm Company Should Do Before Signing a Subcontractor Agreement.

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 →

What Should You Tell Your Customers About Contract Terms That Limit Liability

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.

 

Who Has Authority to Sign the Customer’s Contract?

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.

Four Steps to Avoid Deceptive Trade Practices Claims

Two high profile legal matters have been in the news involving allegations of alarm companies’ unfair and deceptive practices. What are these cases about? And what can you learn from them to protect your business from such claims? Read on to find out. Continue reading →

Thinking of Selling DIY Security Systems?

Ask the Attorney:  I am thinking about selling DIY security systems. Is there anything I need to do legally to sell DIY?

Even though your customer is doing the installation with a DIY security system, your business is subject to security alarm provider licensing requirements in many states (approximately 18) so if you plan to sell outside of the state where you are licensed, you might need to get additional licenses.

You will also need a new contract that is tailored towards the DIY product.   The contract will have the same basic terms—including limitation of liability and damages—but the wording is slightly different for DIY contracts and you’ll want to include language protecting you from defects in the customer’s self-installation.

Do I Need to Give Existing Customers Notice of the Right to Cancel?

Ask the Attorney:  Do I need to give the customer a right to cancel notice if he or she is an existing customer and I am merely servicing the system?

Whether you need to give notice of the right to cancel will depend on whether you are simply doing routine maintenance or service, or more (such as upgrading the system).

First, a refresher on the right to cancel: The Federal Trade Commission’s Cooling-Off Rule gives consumers three days to cancel purchases over $25.

The Cooling-Off Rule applies to sales at the buyer’s home, workplace or dormitory, or at facilities rented by the seller on a temporary or short-term basis, such as hotel or motel rooms, convention centers, fairgrounds and restaurants. The Cooling-Off Rule applies even if the consumer invites the salesperson to make a presentation in their home.

Under the Cooling-Off Rule, the consumer’s right to cancel for a full refund extends until midnight of the third business day after the sale.

Under the Cooling-Off Rule, the salesperson must tell the consumer about the cancellation rights at the time of sale. The salesperson also must give the consumer two copies of a cancellation form (one to keep and one to send if they decide to cancel) and a copy of the contract. You should also have a third copy of the form that the customer signs acknowledging receipt of the form, which you keep.   Further, the customer’s contract should explain the right to cancel directly by the place for the customer’s signature, in at least 10-point, bold font.

Getting back to the question: One of the exceptions to the Cooling-Off Rule is where a consumer’s purchase is made as part of a request for the seller to do repairs or maintenance on personal property.

So, if you are performing regular service or maintenance for a customer, you probably do not need to give the customer notice of the right to cancel, even if the amount owed is over $25. If, however, you are doing more than routine maintenance or service—say, for example, upgrading a system, or installing new equipment—then you will want to give the customer notice of the right to cancel.

Do You Need a Contract When you Are Selling and Installing But Not Monitoring?

Ask the Attorney:  I have some customers that just want equipment sold and installed for them but not monitoring service, what, if anything, should I do to protect my business?

Just as your monitored customers could experience as loss, so could a customer to whom you sold and installed alarm equipment. So, even if you are not facilitating third-party monitoring, you will still want a contract to protect your business.  This contract won’t be the same as a typical monitoring agreement, but will still have some of the same essential elements:

  1. A detailed description (type, manufacturer, model) of the equipment sold and installed.
  2. An Indemnity agreement.
  3. Limitations of liability and damages.
  4. A subrogation waiver.
  5. A notice of the right to cancel.
  6. The customer’s signature.

 

 

6 Small Contract Mistakes That Can Sink Your Business

Sometimes it’s the little details that can make or break your contract.  Attorneys pay a lot of attention to the larger—seemingly more important—contract terms, such as limitation of liability and damages, subrogation waiver and indemnity.  But oftentimes it is something small, but no less important, that can spell doom (or at least a major headache). Continue reading →