A case recently decided by the United States District Court for the District of New Hampshire — although not an alarm company case — relied heavily on law created in cases involving alarm companies.

The case included an animal hospital and a supplier of laboratory services and medical equipment. The dispute concerned the plaintiffs’ dissatisfaction with the quality of certain services and equipment provided to it by the defendant, and its unhappiness over the plaintiffs’ termination of the business relationship. The plaintiffs’ claim against defendant was for breach of contract, breach of the covenant of good faith and fair dealing, and unjust enrichment. The defendant’s counterclaim against the plaintiffs was for breach of contract and breach of the covenant of good faith and fair dealing, plus a claim for unjust enrichment against the plaintiffs and certain related corporate entities.

The plaintiffs filed a motion for partial summary judgment in which it asked the court to rule that the damages to which the defendant might be entitled on its counterclaim be limited by several provisions in the service agreement that covered the parties’ business relationship. Each service agreement required the plaintiff to use the defendant as its exclusive provider of laboratory services for six years and also required the plaintiffs to use and pay for $1.2 million worth of the defendant’s services over those six years.

The loan agreement provided, among other things, that if the plaintiffs breached the exclusivity provisions set forth in the note, it would constitute an event of default, at which time the defendant could declare the entire amount of the loan to be due and payable.

The plaintiffs notified the defendant that they had entered into an agreement with another party to provide the services it had been getting, and included a check for services rendered to date and a check to cover the amount of the loan it had not yet repaid.

In the action, the plaintiffs contended that the defendant could not recover (1) lost profits; (2) laboratory fee discounts; and (3) equipment, further claiming that the defendant’s remedies were limited to (1) repayment of the loan balance, (2) return of the sound equipment; and (3) payment of outstanding invoices. The plaintiffs’ primary argument was that it was entitled to all of the relief because the two service agreements provided that the defendant's remedies were limited to liquidated damages, which would preclude the recovery of lost profits, laboratory fee discounts, and money damages for the value of the sound equipment.

The court indicated that the plaintiffs’ arguement that the loan agreement and the equipment agreement, taken together, included a provision that limited the defendant’s recovery to liquidated damages in the form of repayment of the loan, return of the sound equipment, and payment of the outstanding invoices.

The court pointed out that a fundamental problem with the plaintiffs’ argument was its conflation of two different kinds of contractual provisions —for example, liquidated damages provisions and those that limit the liability of the defendant or the remedies available to a successful plaintiff. The real issue was whether the agreement limited the plaintiffs’ liability or the remedies available to the defendant. The court said it did not.

When a contract is reduced to writing, the parties’ intention is determined from the writing alone, if possible. The court then pointed out that the plaintiffs relied on the case of H.S. Perlin Co. versus Morse Signal Devices of San Diego, as a case in which a plaintiff’s recovery was limited by a liquidated damages provision.

The opinion in H.S. Perlin quoted extensively from the agreement between the shop owner and the alarm service, and based upon the language of the agreement, it was clear that the court’s decision was not based upon the agreement’s reference to liquidated damages, but rather its express limitation of the alarm service’s liability to liquidated damages.

The court pointed out, that here, there was no language in either the loan agreement or the equipment agreement included anything about limiting the plaintiffs’ liability for a breach and neither purported to limit the remedies available to the defendant, so the plaintiffs’ motion for partial summary judgment on the issue of damages was denied.


To ask Les Gold a question, e-mail sdm@bnpmedia.com.

Q: Our central station received a phone order for the installation of a residential alarm system. A salesman went to the home and left a contract with the subscriber, which the subscriber did not sign, but subsequently signed and then emailed back to us. Is the email signature sufficient and do we have to personally deliver a three-day notice of the right to rescind to the subscriber?

Answer:  Normally an email signature is sufficient, although you should always attempt to get an original signature and keep it in your files. If the matter ever comes to court, an original signature always has a greater impact on a judge or jury. 

 With reference to your second question, if the contract was negotiated at a place other than the principal place of business of the customer, you should assume that the requirement of a three-day notice of the right to rescind is required. Although the subscriber called your office, you then sent a company representative to the subscriber’s home to negotiate the contract. Under the circumstances, you can assume that the contract was entered into at the subscriber’s residence and therefore the requirement for a three-day notice would be in effect. When your company representative makes their first visit to the homeowner’s premises, the contract and the appropriate legal notice of right to rescind should be left with the homeowner. The important thing is that you leave the notice at the same time you leave the contract, whether the contract is signed on that date or not. Keep in mind that various states may have various laws which govern and there is also a federal law which requires the giving of the three-day notice of the right to rescind and also a requirement that the notice of rescission must also be left with the customer.