Clean energy is becoming increasingly important to many households and businesses. If you have previously worked in a related industry, you may be looking to capitalise on the trend and start a solar installation business. If so, you must establish your new business with sound legal documents in place. Doing so allows you to:
- clearly state how your commercial relationships with suppliers and consumers will operate;
- limit your liability; and
- reduce the risk of a dispute arising.
This article will outline what licences you need to start your business and what to look for in your terms of trade and supply agreement.
What Licences Do I Need?
Before starting your business, ensure you are licensed to install solar panels. Each state has different licensing requirements.
For example, in New South Wales, you must hold building and electrical contractor licences to install solar panels on the roof of a residential property or other premises.
A building contractor may enter into contracts to install solar panels. In addition, you must also hire somebody holding an electrical licence under the contract. This person must carry out all required electrical wiring work. Regardless of whether the premises are residential, commercial or industrial, it is illegal to carry out electrical wiring work without:
- an electrical contractor licence or an electrical qualified supervisor certificate; or
- under the supervision of the holder of an electrical qualified supervisor certificate.
In addition, if you plan to connect the premises to the electricity distribution network, you must:
- meet further qualification requirements; and
- be an accredited service provider.
What Will My Terms of Trade Be?
Once you have confirmed that you meet your state’s licensing requirements, you should prepare a business plan. You must then draft your terms of trade. These terms outline the terms and conditions under which you will install the solar panels. Finally, you must enter into contracts outlining these terms with your clients. Each state has different laws governing residential building work, so you may need to prepare separate terms if installing solar panels at both residential and commercial premises.
Let us explore some of the key terms to include.
In New South Wales, there are mandatory requirements for what you should include in a residential building contract. These requirements depend on the price of the contract. For example, you will need a small jobs contract if the residential building work is worth between $5,000 and $20,000. If the work is worth over $20,000, it requires a more detailed home building contract.
Goods and Services
Your terms should clearly outline the nature of your goods and services. In this case:
- the goods will be the solar panels, assuming you are also selling these to the client; and
- the services will be the installation of the solar panels.
Your goods and services might not meet your client’s expectations if your terms are unclear. If this happens, your clients may request that you provide additional goods and services at no further cost.
Pricing, Invoicing and Payment
Getting paid is essential to all business owners. Your terms should clearly set out how payment will work. Consider:
- what price is due upfront;
- what price is due over the course of the project;
- when any further costs are due; and
- what happens if clients fail to make payments.
For example, if a client fails to make payment, you could cease to provide the goods and services until they pay the amount owed. Additionally, you could also charge interest on any outstanding amounts.
Warranties
Warranties are assurances that you should try to obtain from your client. For example, you will want to ensure the following:
- the premises are safe for your workers;
- the client has the relevant permissions to have the solar panels installed; and
- the client is the lawful owner of the premises or has the permission of the lawful owner to install the solar panels.
Termination
In most cases, the installation of the solar panels will take place as planned. However, you should determine what happens if one party wants to terminate the terms. The termination clause should outline the following:
- when a party may terminate the terms; and
- what the consequences will be.
For example, if your client terminates the contract, you will need to know whether you can:
- retrieve the solar panels from the premises; and
- charge your client your additional costs for doing so.
Supply Agreement
Most owners of a solar installation business will need to source their solar panels from a supplier. Accordingly, finding a good supplier is crucial. Your supplier will directly affect the reputation of your business. Once you have found a supplier you are happy with, you will enter into a supply agreement with them. Some of the key clauses to consider in your agreement are outlined below.
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Product Appointment Types
You should negotiate whether the agreement will be:
- exclusive (i.e. your business is the only solar installation business that can sell these solar panels in the area); or
- non-exclusive (i.e. the supplier can sell to your competitors).
This is a key clause. Make sure that you discuss it with your supplier before having any contracts drawn up.
Goods and Price
A key concern will be what goods you are getting and for what price. You may need to order a wide range of goods from your supplier. Goods and prices may vary from order to order. If you have negotiated a good price for the goods, it is important to ensure that your agreement indicates that this is the agreed price.
Forecast
A forecast clause requires you to provide the supplier with an estimate of how many solar panels you will need. This can work in your favour, as the supplier will likely know how many solar panels you need. Accordingly, they can then ensure they have enough stock.
Order and Delivery Process
Be clear about what happens after placing an order with your supplier. Your order should outline:
- how many solar panels or parts are being ordered;
- what the specifications of the model are;
- where the solar panels are being delivered; and
- when the solar panels are being delivered.
Defects
Receiving defective solar panels from your supplier could damage your business. Accordingly, your supply agreement must address what happens if the supplied goods are defective. Usually, you must notify the supplier that the goods are defective within a set time. The supplier may then resupply the goods or provide a refund.
You should also ensure that the supplier provides warranties assuring you of the quality of the goods they are supplying.
For example, the supply agreement should expressly provide warranties relating to the following:
- the quality of the goods;
- whether the goods are fit for purpose; and
- whether the goods are of merchantable quality (i.e. generally of suitable quality).
These warranties must be written so you can rely on them if the goods do not meet such criteria.
Key Takeaways
Starting your own solar installation business may be a profitable decision. Before you start your business, ensure that you:
- are licensed to carry out the work;
- have found an appropriate supplier; and
- have clients that want your services.
When engaging suppliers and clients, you should already have your business’s terms of trade drafted, and your supplier agreement formalised in a contract. This ensures that how your business relationships will work is clear to all parties.
If you have any questions, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
The requirements will differ based on the price of the contract. You will need a small jobs contract if the residential building work is worth between $5,000 and $20,000. If the work is worth over $20,000, it requires a more detailed home building contract.
You will want to ensure that the premises are safe for your workers, that the client has the relevant permissions to have the solar panels installed and that the client is the lawful owner of the premises or has the permission of the lawful owner to install the solar panels.
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