Contracts– When in Doubt, Write it Out

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Contracts– When in Doubt, Write it Out

A cup of coffee and a handshake. That’s how my grandfather did business. He was a prominent real estate investor in South Texas and contracts were absolutely foreign to him. My grandfather would finance hundreds of thousands of dollars for someone to buy a property on a handshake and a coffee-stained  napkin. But that’s how it was, a man’s word was his bond and in small town south Texas, that was enough back then.


Today, when a lawsuit is a mere ticked off customer away, it is imperative that contracts be clear and concise. Not to mention, cover everything including the kitchen sink, it seems.

I know the contract process can seem quite laborious, but it truly is your first line of defense when it comes to claims being made against you. Your contract can make or break your case. Here are some things to consider when looking at your contracts.

Indemnification Clauses

Indemnification clauses are used in contracts to shift exposure from one party to another. I like to break them down into 2 types – mutual and one-way. In a mutual indemnification, both parties agree to compensate the other party for losses arising out of the agreement, when such losses are caused by the other.

On the other hand, a one-way indemnification clause can be in your favor or in the favor of the other party. In these instances, only one party provides indemnification. The indemnification clause is one of the primary areas of a contract that people will attempt to change. It is always ideal to have the indemnification clause be one way in your favor and have your worst case scenario be a mutual indemnification. Make sure that you are extremely thorough when you first review the contract and also when you finalize with your signature – make sure changes haven’t been written in.


Limitation of Liability Clauses

We all know what the intent is here – to limit the exposure you face in the event a claim is made against you. When Limitations of Liability are enforceable, they cap your damages. The amount is up to you as a business. Just remember, not all claims are covered by insurance so you could very well be looking at taking on that liability uninsured and that is something to consider when evaluating what amount you put in your contracts. This is also another section of your contract to watch out for when people send you back a contract for your countersignature. Make sure it hasn’t been changed.


Get an Expert’s Opinion and Help

You should always get legal advice as it relates to contracts. I have found the best expert in the alarm industry for contracts is Ken Kirschenbaum. Ken has represented the alarm industry since 1977. Not only can he provide advice, but he has standardized contracts that have been tailored to the alarm industry and the specific scenarios that may be unique to your business model. His standardized contract forms are used by thousands of alarm companies in the US and internationally. Reach out to Ken at (516) 747-6700 or visit


Contracts Can Save You Money

Having good contracts in place not only saves you money when there is a dispute related to your services, but also can save you money on your insurance. Utilizing Ken’s contracts could also get you a discount on your insurance premiums with Security America. As a leader in the market when it comes to insurance for the security industry, we consider the contracts you use the most important tool to manage your risk exposures. We regularly provide contract reviews for clients and review insurance requirements they receive from other companies.

We try to go deeper than “do you carry the required limit.” We look at additional insured and other special exception requirements to make sure that you are making decisions appropriate for your business. Ensuring that you are in a good position before a claim happens is our priority.

At the end of the day, the agreements you have in writing will far outweigh any alleged verbal agreement. If someone is asking for something to be a condition of the work you do with them or vice versa, put it in writing. You sign it and they sign it. Remember, when in doubt – write it out!

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Security America Risk Purchasing Group (RPG) is an insurance company developed by the Electronic Security Association (ESA).



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