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Holding new company to old company’s alarm contract / Problem getting contract signed   
October 29, 2020
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Holding new company to old company’s alarm contract
            We have a customer who sold its business to another company,  but did not inform us of the transaction.  We continued to provide services and the new company continued to pay the bill.  Today we got an email from their A/P dept saying they were cancelling services and where not paying the current bill.  
            When they purchased the company they acquired it and made it a subsidiary of their company (didn't change the name, etc).  There is 2.5 years left on the agreement (10 year agreement).  Does our alarm contract still cover us in this situation?
Name withheld
This is a common issue with a bunch of twists here and there.  In this statement of facts we know that:
  *  there is a Commercial All in One
  *  subscriber sold its business to another entity
  *  the new entity bought the old company and made it a subsidiary
  *  the new entity paid for alarm services post-closing
            Under these circumstances the new entity would be liable and would have to continue with the contract; or you can pursue it for collection.  It’s unusual that one company would buy the old company; normally it’s an asset purchase deal excluding liability of the selling company.  Keep in mind that in your case the buying entity could have purchased the assets and then changed its name to the name of the selling company.  
            But in your case you also have continued payment after closing.  You have excellent argument for liability on more than one theory:  transferee liability; assumption of the contract; 
            Seems like it’s worth a shot.  We would likely bring an arbitration proceeding against the old and new companies.
Problem getting contract signed
            I have purchased your agreements for both fire alarm and fire sprinkler and attended several of your seminars which I found to be very informative and enlightening and the agreements you provide are wonderful and very protective. You have spoken of this before and I’ve actually used your services to negotiate with my customers over the years in the hopes that the author of these contracts could somehow negotiate what I have never been able to. They (my clients) have never relented and every single time this put me in the position of signing the contract, which your response has been basically sign it if you want to. 
            Never have you been able to negotiate a customer into signing my (your) agreement. At best they might add it as an addendum with their own contract worded very clearly that it is the prevailing contract making my contract null and void. 
            In the commercial fire alarm / sprinkler market, at least in the area I am in, you will not find a commercial customer that will sign my (your) contract or at least very very few that I have come across. 
             I believe it must be the customer base because literally every single customer I come across and now even the condominium market seems to have your evil doppelgänger writing their contracts which are basically yours in reverse. What I’ve been able to do is have them reward their indemnities to limit my exposure because some of them want me to include not only my own negligence but their own negligence which I find very funny now I’m even getting these contractors as sub vendor form agreements from the general contractors I work with? I get 30 page contracts shoved in my face for $2500 jobs and believe me, I walk away from them all the time but... anything on the RMR side absolutely has a customer provided contract associated with it.
            So if I am to understand this correctly, my company has absolutely no residual value?  Looks like I will be on the government handout line when I am ready to retire. Sorry for the sour grapes but I guess it’s a hard realization to understand the 25 years of hard work amounts to nothing!
Looking forward to getting out of this business
            All is not lost.  The Fire Protective side of your business is likely to sell based on EBITDA, not a multiple of RMR.  So you’ve got that.  But your alarm side, unless you’re lucky enough to get a fire protective company to buy it, will sell based on RMR, and if you don’t have RMR, it’s going to be hard, to say the least, to sell. Rory Russell [listed on The Alarm Exchange] is an alarm industry broker who specializes in Fire Protection companies; so you can him a call when you’re ready.
            Every alarm company [and fire protective company] runs up against potential subscribers who resist or outright refuse to sign the Standard Form Agreements.  Some will agree to discuss the terms and make modifications; others will insist on their form but will incorporate or include provisions from the Standard Form Agreement, and other will insist on their lop-sided agreement and if you don’t like it, take a walk.  Some alarm companies will sign whatever they have to in order to get the job, others will walk and others will run.  It can depend not only on your individual fortitude, tolerance for anxiety or naivety, but on the value of the job, often measured by not only the size of the job but the subscriber and possibility of other work.  
            If you find every subscriber gives you grief and you can’t get your contract signed, then you’re the problem.  It’s not possible that your customer base is that different than the customer base of almost 6000 other alarm companies.  So here are a few things to think about.  
            You have 25 years’ experience in the alarm industry and no doubt great at what you do.  But you haven’t made the transition from being in the alarm industry to being in the RMR contract business.  And, if that’s too much to swallow, then you haven’t added being in the RMR contract business to your current operation; you need to, at least on the alarm side.  
            Fire alarm subscribers should be the easiest sell.  They come to you because they have legal requirements before they can get a CO or open their doors for business.  They need you.  Competitors?  Sure they are out there, but they are all using the same contracts you have.  Most won’t budge when subscribers won’t sign their contract; others will make some accommodation and changes.  How do I know?  Because I negotiate these contracts on a frequent regular basis; successfully, taking into account the tolerance level of the alarm company for increased risk, and the nature an manner of the subscriber.  
            You should try presenting your contract in a different way and address issues in a different way since you report that the old way hasn’t worked for you.  You may want to try letting me assist and see how that goes.  If you have enough need for my intervention then join the Concierge Program and get significant discounts and savings.  
            The good news is that you’ve only been at this for 25 years.  We have another 25 years to turn things around.

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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301