This article originally appeared in the February 2024 issue of Security Business magazine. Don’t forget to mention Security Business magazine on LinkedIn and @SecBusinessMag on Twitter if you share it.
Security integrators with even a minimum amount of sophistication use written contracts with their customers. Those with more sophistication use better contracts. Those with even more sophistication regularly review and update their contracts – particularly with the help of counsel.
Contracts in the security industry usually have some standard terms – such as a description of the services, the price to be paid, the equipment to be supplied, etc. They also should contain some key limiting conditions – such as a limitation of liability, indemnification, waiver of subrogation, forum selection, choice of law, waiver of jury trial, etc.
The quality and enforceability of these limiting conditions can often be the difference between a successful defense in litigation and a protracted, expensive, and perhaps unsuccessful defense. Therefore, your company should hire capable counsel and conduct regular reviews of your contract. Your business must evolve to succeed. So, must your contract.
While attention must be paid to the standard terms and the limiting conditions, there are other things that your company can do with its contract to help take it to the next level. Being creative and thoughtful with your contract may make a real difference someday if you are sued.
Provisions for Protecting All Access Points
Imagine that you are sued by a residential security customer who suffers a loss during a home invasion. The customer alleges that your company failed to install a device on the access point (a window) through which the perpetrator entered the home. Common sense may dictate that it was the customer’s choice not to buy an additional device for that access point – rather than the failure of your company to sell that device.
Common sense may be all you need to surmount this type of claim; however, it may be appropriate to include a provision in your contract that expressly addresses this scenario and explains that your company is not responsible for the customer’s choice not to buy enough equipment to fully protect their residence.
The contract ought to impose on the customer the exclusive responsibility for purchasing equipment for all access points. The customer should also acknowledge that they have the right to buy additional equipment – not just during the initial installation but at any time. Security companies cannot compel their customers to buy additional devices. The customer must be willing to pay for it.
Stating this expressly in a contract is not necessary – but it may help dispel an otherwise nonsensical claim by a customer that seeks to shift the blame for their choices to the security company. Customers very frequently do this after suffering a loss – because they do not intend to blame themselves.
Provisions on Instructing the Customer
Imagine another scenario where the customer claims that a particular device did not function as the customer thought it should. This happens regularly in litigation – mostly because the customer simply misunderstands their system.
In litigation, the customer will shift the blame for their own misunderstanding to the security provider, claiming that the instructions were unclear or that they were misled by the installing technician when he/she explained the system.
In a trial years ago, an opposing expert claimed my client should have provided written instructions to the customer as to the functionality of the system. I promptly showed him my client’s instructions – which were previously admitted into evidence. He quickly acquiesced and agreed that our instructions were adequate for this purpose. Not great testimony for the plaintiff, but good for us. Justice demanded that we prevail, and we did.
Thinking a sensor is armed when it is not or otherwise misunderstanding the functionality of a system is not earnestly excusable when the system is immediately available for your use and inspection every hour of every day for weeks, or months, or years. Nevertheless, customers routinely do not get to know their system.
This reality and the legal risk it presents can be mitigated, at least partially, by a creative contract provision that imposes an affirmative obligation on the customer to test their system regularly, to get to know their system, to consult the instructions for the system, to learn how it operates, and to ensure it is operating properly. Imposing this as an express obligation of every customer in your contract will help you later convince a judge or jury that the customer must be held to account for failing to understand how their system works.
These are just a few examples that your company must consider when preparing and updating any consumer-facing contract. Many other common-sense provisions can be added to your contract to protect against a variety of risks.
If you do not hire counsel to review and update your contract to account for these evolving issues, then your company may be subjected to claims that otherwise could be dismissed on the strength of a well-developed and updated contract.
Timothy J. Pastore Esq., is a Partner in the New York office of Montgomery McCracken Walker & Rhoads LLP (www.mmwr.com), where he is Vice-Chair of the Litigation Department. Before entering private practice, he was an officer and Judge Advocate General (JAG) in the U.S. Air Force and Attorney with the DOJ. [email protected] • (212) 551-7707
