Guard services start with a contract

Feb 1, 1999 12:00 PM, CHRISTOPHER A. HERTIG, CPP, CPO

As any asset protection professional can attest, contracts are an extensive part of protective services. As the services provided by contract firms continue to diversify into such areas as risk assessment, time and attendance, scheduling and training, the use of contracts will increase to regulate the provision of these services.

Contracts are essentially agreements among two or more parties to perform an act or not to perform an act and are legally enforceable.

There must be an agreement that is not a mere offer or invitation to negotiate. The offer must be accepted. Agreements can be either "express" - declarations of the intent of the parties and the terms of the transaction - or "implied" - where the contact is demonstrated by the acts and conduct of the parties. Examples include promises made by supervisory personnel during employment interviews or passages from employee handbooks (a mention of the annual salary can be construed as a promise of a full year's employment). Similar implied agreements can be interpreted in service contracts through advertising literature and promises by sales representatives.

Agreements are reached after negotiation. The process can consist of distributive (competitive) bargaining, integrative (collaborative) bargaining or contingency (variation) bargaining.

Negotiations cover the substance of the contract and are followed by the conclusion, where the parties have agreed to the terms and conditions in principle, with minor provisions to be carried out as performance takes place. Finally, there is follow-up, where contingencies or new conditions come into play.

Contracts must be signed by competent parties who have the capacity to understand the contract. Minors, intoxicated persons or mental incompetents cannot make contracts. Agreements cannot be made when one party is under duress.

The promise or performance of the parties must be legally sufficient, and the promise must be of value in the eyes of the law. Something of legal value or a benefit must be presented, and it must be received. Releases from liability signed by persons who have been detained must have some consideration in the form of substantial money or goods. Additionally, a third party must witness the agreements.

Both parties must genuinely agree, called "mutuality of agreement."

Both parties are bound or neither is bound, called "mutuality of obligation. "

The contract must be for a lawful objective and in the form required by law. In some cases there are statutory requirements for contract design.

For contracts to be used effectively, adhere to the following guidelines: - Contract language should be specific. If ambiguity exists, the intent of the parties can be taken from the "four corners" rule - the instrument as a whole. Intent may also be taken from the circumstances surrounding the execution of the contract. The contract should spell out what particular asset protection services are meant by "security." In this way, there are no implied duties. - Third parties - such as patrons at a shopping center - can be beneficiaries of a contract and can bring an action for breach of contract. Examples include patrons of a shopping mall, theme park or office building. - Contracts must be in writing! An old law school saying goes: "An oral contract is not worth the paper it's written on." Contracts also must be written in accordance with prevailing legal standards. There are, however, circumstances where courts will find that a contract existed even without a written contract. In these cases, the courts will look at other documents that imply an agreement. They will also consider oral agreements and customary practices. An example: when an employee has been promised a job, taken the offer and relocated, only to be laid off in a short time. - Contracts are invalid if there is a lack of voluntary assent, fraud, duress, mutual mistake, impossibility or unconscionability. - Limitations of liability appear in many alarm and security service contracts, imposing a cap on the amount of liability the contractor will assume. Courts generally validate these clauses because they recognize that alarm companies are not insurance companies. Where such agreements are valid and enforceable, they may expose the client firm to extensive liability. In some cases the limitations on liability are struck down as being against public policy, unconscionable or unclear. Findings of gross negligence or willful and wanton misconduct on the part of the contractor are usually not enforceable. Actions in these cases can be brought for breach of contract as well as for negligence. Exculpatory clauses also must not grow out of unequal bargaining power, or attempt to remove from the vendor a public duty to perform. Clauses cannot be hidden or obscured within the contract. - Releases from liability are of great psychological value, as are waivers. Liability releases should be supported by considerations such as cash payment. These agreements allow first offenders to have a clean record after a specified period of time if there are no future arrests or convictions for other crimes. The agreements should be noted in the court of record. - Service agreements are another cause of concern in contracts covering equipment maintenance and repair.

Checklist for service contracts

- Is the contract lawful, meeting the requirements of local, state and federal law? - Is the contract enforceable, containing the essential elements of a contract (mutual agreement, supported by consideration, made between competent parties, genuine assent of the parties), and is it in the form required by law? - Are conditions in the contract spelled out in sufficient detail? These can include conditions precedent: those that must be fulfilled before a party's performance can be required, such as a contractor providing proof of licensing or insurance; conditions concurrent: those which must be fulfilled simultaneously by each party such as payment for services; or conditions subsequent: a condition to terminate a party's absolute promise, due to actions such as failure to provide service. - What is the time of performance? If time is of the essence, it must be in the contract. - Are standards of performance in place that require the parties to perform to a measurable standard and to develop controls to monitor such standards? - Are rates for service; method of payment; and credit terms specified? - Are performance and behavioral liabilities of the parties specified? These include financial responsibilities, proof of insurance and limitations of liability. - Is a mechanism for resolving disputes identified? This could be in-house, via third-party negotiation or arbitration such as that provided by members of the American Arbitration Association. - Are there provisions for contract modification, extension or cancellation? There should be some flexibility to account for legal changes such as wage rate increases. - Is there a contract forum selection clause designating the forum in which disputes will be litigated? This relates to legal jurisdiction and is very important when business is conducted between entities operating in multiple states or countries.

The author of this month's column, Christopher A. Hertig, teaches in the Behaviorial Sciences Department of York College of Pennsylvania, York, Pa. He serves as director of education for the Professional Security Television Network and director of accreditation for the International Foundation for Protection Officers. Hertig writes a monthly column on educational issues titled "A Few Words" for the PTSN Web site, www.pstn.pwpl.com. The column was adapted from a chapter in a forthcoming book tentatively titled "Security Supervisor Handbook." The book, to be published by Butterworth-Heinemann, is part of the Security Supervisor Program, administered by the International Foundation for Protection Officers.

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