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, it is important that you 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 licenses you need to start your business and what to look for in your terms of trade and supply agreement.
What Licenses Do I Need?
Before you start your business, make sure that you are licensed to install solar panels. Each state has different licensing requirements.
A building contractor may enter into contracts to install solar panels, but somebody holding an electrical licence must also be hired 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 a qualified supervisor certificate. If you plan to connect 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 will then need to draft your terms of trade. These terms outline the terms and conditions under which you will install the solar panels. You will need to enter into contracts outlining these terms with your clients. Residential building work is governed by different laws in each state, so you may need to prepare separate sets of terms if you are installing solar panels at both residential and commercial premises. Some of the key terms to include are outlined below.
Goods and Services
Your terms should clearly outline the nature of the goods and services you are providing. 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.
If this is left unclear, the goods and services you provide might not meet your clients’ expectations. 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 important 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; and
- when any further costs are due.
What happens if clients fail to make their payments should also be clear.
Warranties are assurances that you should try to obtain from your client. For example, you will want to ensure that the:
- premises are safe for your workers;
- client has the relevant permissions to have the solar panels installed; and
- client is the lawful owner of the premises or has the permission of the lawful owner to install the solar panels.
In most cases, installation of the solar panels will take place as planned. However, you should set out what happens if one party wants to terminate the terms. The termination clause should outline:
- when a party may terminate the terms; and
- what the consequences will be.
Most owners of a solar installation business will need to source their solar panels from a supplier. 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.
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 specifically indicates that this is the agreed price.
A forecast clause requires you to provide the supplier with an estimate of how many solar panels you will need in the future. This can work in your favour, as the supplier will be aware of how many solar panels you are likely to need. The supplier can then ensure they have enough stock.
Order and Delivery Process
Be very clear what happens after you have placed an order with your supplier. Your order should set out:
- how many solar panels or parts are being ordered;
- what the specifications of the model are;
- where the solar panels are being delivered to; and
- when the solar panels are being delivered.
Receiving defective solar panels from your supplier could damage your business. It is very important that your supply agreement addresses what will happen 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.
It is important these warranties are set out in writing so you can rely on them if the goods do not meet such criteria.
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 you start 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, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.
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