How you handle equipment that is added after the initial contract can make or break your business… literally.
It is a common practice for a homeowner to request additional equipment or services during the course of a project, sometimes many months after the initial contract is signed. Most integrators simply have the client sign a Purchase Order (PO).
But courts are finding that services and equipment covered simply by a PO are not necessarily covered by the initial contract, which includes all the proper liability protections.
“You need to be careful because other agreements that you sign may be inconsistent and have contradictory provisions that specify that that document supersedes prior documents,” says legal expert Ken Kirschenbaum of Kirschenbaum & Kirschenbaum and columnist for CE Pro’s sister publication Security Sales & Integration. “Also, even though you don't sign a subsequent Purchase Order or expressly consent to contradictory terms and conditions, your acquiescence to the changed terms may be implied and you may end up being bound by unintended terms.”
And the consequences can be disastrous. For example, these are real cases from the Security America Risk Retention Group (SARRG):
Ouch! A client wanted a water detector in a “problem basement” sump pit. The water detector was installed after the initial installation and covered simply by a “work order” from the integrator with no legal language referenced or included. The basement flooded and the homeowner’s lawyer successfully argued that the water sensor was not covered by the initial contract.
The result: The case was settled for $25,000 plus $10,000 in legal fees paid by the integrator.
Double Ouch! In another case, during the installation the integrator removed window screens. There was subsequent water leakage through the windows that ruined the wood floor just below the window. But the wood flooring carried across the entire house and could not be matched, so a full replacement throughout the entire house was required by state statute.
The result: The integrators “settled” for half the damage… $9,500.
Triple Ouch! It gets worse. A claim currently under investigation involves an installation in a luxury residence that was done on an email approval from the customer… no contract and no terms. There was a fire. The property damage far exceeds the coverage under the homeowner’s fire insurance policy (well over $6 million).
The result: The damages from the claim against the integrator are more than the net worth of the company.
How to Protect Yourself
So, what can you do? According to Kirschenbaum, it is not as simple as just having legal language on your POs that references the initial contract. But that is a good start.
At the very minimum, Kirschenbaum says that every Work Order should include a confirmation signature from the integrator and returned to the customer, and include language noting that only the terms of your initial contract are governed.
That is a good first step to make sure your POs do not supersede your original contract. He says integrators need to make sure their original contract has language in it that specifically refers to Riders and Supplemental Work Orders.