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Trust but verify.

A GOOD CONTRACT SECURITY AGREEMENT PROTECTS BOTH VENDOR AND CLIENT.

In today's legal environment it is imperative that contracts between vendors and consumers of guard services protect and aid all parties involved. Though the participants may be friendly in good times, friendships tend to fade in times of trouble. If that happens, both the vendor and consumer might regret not having a written contract.

What legal terms do vendors and consumers of guard services need to consider in negotiating a general purpose agreement? First, both parties should consider the purpose of the service.

If a guard service is being retained for a particular problem, then the problem should be defined. If the service is for a general business purpose, it too, should be defined. If the vendor has the ability to satisfy the purpose described in a contract, it should provide proof of that ability.

Descriptive provisions. These are simple terms and conditions that often go unmentioned in agreements because both parties think they clearly understand them, and some might think that it is unnecessary to note them in an agreement. However, if a lawsuit for inadequate or negligent security is filed, a written contract that specifically defines and describes the terms and conditions will aid in determining the final judgment.

Examples of these terms and conditions include the following:

Scope of work. The precise service to be provided, locations, number of shifts, and number of people for each location and shift at minimum capacity should be included.

Premises to be patrolled. The location and type of the premises to be guarded and the name used to refer to the property should be noted.

Guard staffing. The number of supervisory and staff personnel required should be noted. Frequently, litigation over services relates to inadequate staffing or inadequate job supervision.

Field supervisors. If field supervisors are used, their duties should be described and the frequency with which they will supervise should be addressed.

Guard replacement. Certain questions should be answered, such as: What are the factors that require security officer replacement? Who decides replacements? Can the customer make the demand? Does he or she have the right to mandate a replacement? Can the vendor make replacements?

Uniforms and equipment. The contract should specify whether uniforms are to be worn or special equipment is needed, and if so, who provides them.

Hours. The specific hours to provide service should be noted.

Force majeure. These are factors that are out of the control of either party, such as acts of God and employee strikes. Define them. This may seem unnecessary, but remember, the Persian Gulf War affected many contractual relationships adversely.

Currency used for satisfying payment. This is obviously only a factor with corporations that can pay in more than one currency. A long-term contract could be of significantly lower value if paid with a foreign currency in a declining dollar market.

Power to execute contract. A representative of each party signing an agreement must have the legal authority from his or her company to do so. If a customer entered into an agreement that he or she later regrets, the vendor does not want to be exposed to the client's claim that the person who signed the agreement lacked the necessary authority to bind the company.

Definitions. The roles of the employer, supervisors, employer representatives, personnel, security director, security officers, and security program should be defined.

Verbal statements. Anything that parties discuss and expect in the agreement should be addressed in writing. If the agreement refers to written documents, they should be attached to the agreement. If an issue is significant enough to discuss, it should be in writing.

Contracts should also have a merger clause. This is a provision that anything said by and between the parties merged into this agreement at the time it was written. Thus, if it is not in writing, it does not exist. It does not matter what was said or meant prior to the signing of the contract.

Responsible party. Each party to the agreement who has the responsibility of carrying out the work and enforcing the contract should be noted. An individual should be specified to help eliminate conflicting directions.

Special skills. Are any special skills needed? If so, they should be addressed. This will be especially helpful if the vendor fails to provide a security officer with the skills required, or the customer demands an officer with certain skills when those skills were not previously negotiated.

Rate of compensation. What is the rate of compensation? How is the vendor going to get paid and how is the customer going to make the payments? The length of time the agreement will be in effect, the terms of payment, when the payments are due, and what happens if they are late or not made at all must be outlined.

The rate of compensation is the most important and the most often disputed topic of any agreement between the parties. The vendor needs timely payments to ensure adequate cash flow, and the customer needs to retain the cash to ensure its cash flow.

Termination. How is the agreement ended? Is there anything that must be done to terminate it formally? When is the agreement terminated? Why? Usually this is where the contract should state whether termination is to be accomplished by written advance notice, or whether and how the agreement expires. For example, it could expire by the passage of time, pursuant to notice, or for cause, due to the actions or inactions of one of the parties.

Here is an example of the importance of addressing this issue: You, the contract guard vendor, are having difficulty getting paid from the customer. Your agreement does not define the exact terms of payment or the mechanism for termination and to whom termination notice must go. You call your contact at the customer's facility and explain that if you do not get your money by Friday, you must terminate services for the customer. When you do not get your money as requested, you cease providing guard services.

The next day someone is attacked on the customer's premises. You are sued for breach of agreement because you did not notify the proper party in the proper manner and failed to specify a time of day when you would cease services. The customer relied on the belief that security guard services were in force when the assault occurred. This now involves your insurance company, not the customer's.

Personnel policies. Does the customer or vendor have personnel policies? Should each party read the policies? Do they conflict with the agreement?

The customer's personnel policies are important if the guard service personnel can stop and detain or arrest employees. Imagine the scenario of the guard agency detaining and arresting an employee when he or she did not violate a written company policy that the officer had not been informed of by the management.

Insurance. Insurance is a critical point of any agreement and usually a costly factor. Consider who will be responsible for the injuries to a security officer while on the premises of the customer, and who is responsible for the injuries to an employee that are attributable to the security officer or the agency.

Once the parties have determined the responsibility for insurance policies for casualty, liability, or comprehensive coverage, do not overlook proof of this coverage's existence. Who are the beneficiaries of the policies, and who are the named insured? What happens if the policies lapse? Is there a mechanism for display of certificates of insurance? The greater the exposure, the greater the risk to all when a claim turns out to be uninsured.

The type of claims that carry the greatest risk for a high jury award relate to negligent security, false arrest, assault, or other torts committed by the security officer as agent of the customer. Both parties should be sure that they are covered for the kinds of claims that they envision.

Indemnification. Closely related to insurance, indemnification is where one party agrees by contract to stand in the shoes of another in the event of a claim or judgment. There are limits to the indemnity. The limits may relate to such issues as type, scope, or dollar value.

Each party should consider which is the real target in the event of a lawsuit. Who is the proverbial deep pocket? If it is the customer, the vendor might want to consider provisions that specifically define the indemnification. The customer should be certain to read the vendor's insurance policy or get a letter from the carrier confirming that the insurance covers the indemnification anticipated.

Certain policies provide that they may become void at the option of the carrier if the insured contracts to indemnification terms that exceed the original obligation the insurer accepted.

The customer, who is often the deep pocket, should require more than just an indemnification. Since indemnification comes into play only after there is a determination of liability or judgment, the party would also want to be covered for legal defense costs.

Indemnification does not require the indemnifying party to defend the case. A party defends the case and seeks compensation from the indemnifier when it is complete. This may be what the client company wants as the deep pocket. The business may want the right to defend the case with its own counsel, especially if the claim exceeds the coverage amount of the agency policy.

Labor relations. Is there anything with respect to in-force labor contracts that may affect a contract guard service agreement? The parties should check whether there is a particular provision in a labor agreement that needs to be considered, and if so, determine whether any conflict exists. A labor strike at other job sites because of the job with this customer would be the small vendor's worst nightmare.

Breach of contract. Unfortunately, there will be disputes between the parties to any contract. A limitation for the filing of a breach of contract claim should be inserted into a contract. The law in many states, unless in writing to the contrary, is that the statute of limitations for a contract claim is six years. Between commercial parties, it is more reasonable to include a contract claim limitation of not more than six months from the date of termination.

In the event of a breach of contract, potential remedies include the required return of any fee and the payment of penalties, costs, or damages. There can be limitations on all of the above or no limitation. A party's position, as vendor or customer, dictates the type of remedy acceptable. This clause should be limited to a breach of the terms of the agreement between the parties and should not conflict with the indemnity terms in the contract.

Guard training. The number of security officer personnel and supervisory staff to be trained and the type of training required should be addressed. Training may either relate to general officer performance or to the services to be performed for a particular assignment.

Training may amount to nothing more than informing the vendor about procedures at the customer's location to ensure that individuals are not unnecessarily detained on the premises.

Proof that the guard service company trains its personnel should be provided and the training should be described. This relates directly to defense against negligent security claims. If no training is described, or worse, if none is provided, the customer is at risk.

Licensing. Are there licensing requirements in the state or county? Does the contractor possess a license? The customer may want proof of the license or at least the option to demand proof if it chooses.

Reference should be made to the license required and the statute or rule that governs the guard service in the state. The contract should specify whether the agency needs to possess a license. The customer should also ascertain whether the vendor's license is currently active pending suspension or whether it has been suspended in the past. Provisions of this type aid the customer in the event of a claim alleging negligence in the hiring of the agency. Such claims usually are in connection with assault or false arrest claims.

Independent contractor status. The position of the guard agency should be clarified as one of contractor and not employee. This is of particular importance if training is necessary by which the customer will train the guard agency. Even five minutes of instruction can be considered training, and that may affect liability.

The customer should maintain the legal position that the guard agency is an independent contractor for whom the customer is not responsible. This is important if a security officer assaults someone or commits another criminal offense or tort.

Performance. How the parties determine if the agreement has been performed should be addressed. For example, is there a standard or measure of performance that will be used? In guard service, this would be time card records. These records are helpful if one of the parties alleges a breach of the agreement.

Cases rarely turn on the total failure to perform. Instead, a customer might allege a breach based on a claim that the time spent by the security officer or officers was not adequate under the contract terms.

Waiving rights. Does one party's failure to enforce a breach of the contract constitute a waiver of its rights to object later? Possibly. Legally, an unredressed breach of the agreement may constitute a waiving of the right to object in the future.

Missing links. The better the contract, the less likely it is that a contractual dispute will result in litigation. The greatest need for a firm contract today is not to protect the parties from themselves but from the claims of others.

THE LAWS OF NEGLIGENCE, NEGLIGENT security, and premises liability are always changing. Security practitioners need to be aware of how the laws are changing to best protect themselves and to prevent future claims that can eat up valuable profits.

Premises liability is a body of law that focuses on the liability of a property owner for what happens on his or her premises. Hotel owners are liable for assaults on their guests, employers are responsible for the safety of their employees, and plant owners are liable for the safety of vendors and delivery people while on site.

The typical legal pleading will allege that the owner, directly or through his or her agent, did not provide adequate security, or it will allege that the security was negligently provided.

During the discovery process in a lawsuit, the following facts are determined:

the crime history and documentation of the location; whether a security survey had been performed, and if so, by what company or individual; what occurred when crime was observed; how newly observed criminal activity was reported and handled; and what records, documents, minutes, notes, and other data were maintained when problems arose during the course of the guard service.

The following are critical factors and should be reviewed and analyzed by an attorney:

* Does each party know the laws of arrest by a civilian in the state?

* What are the laws regarding the use of force?

* Are weapons to be carried by the guard service?

* How and when may weapons be used?

Misunderstanding of these factors frequently causes the greatest problems for litigants who are defendants in security negligence or premises liability litigation.

A cursory review of the list above might lead the customer to say it is none of the vendor's business. But this is not true. Each party has a responsibility to ask these questions or know the answers.

Attention to these sensitive issues, coupled with a carefully crafted agreement that leaves nothing to chance, will go a long way toward ensuring both parties equal protection and a mutually satisfying arrangement. To paraphrase Robert Frost, good contracts make good customers.

Mark B. Rosen is an attorney in New York City who specializes in private security law.
COPYRIGHT 1992 American Society for Industrial Security
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:establishment of contract between guard agencies and clients
Author:Rosen, Mark B.
Publication:Security Management
Date:Nov 1, 1992
Words:2661
Previous Article:Deciphering the fine print.
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