How should a photovoltaic purchase contract cover risks as effectively as possible while remaining balanced? Learn about contract procedure, and which points need to be clarified before signing.

Once you have found an attractive PV project and expressed your interest in buying, the seller will usually present you with a purchase contract. Before signing, you should first establish maximum transparency regarding the object of purchase by way of a technical and legal project review (due diligence). The results of these reviews are then incorporated into the purchase agreement by renegotiating contract contents or amending clauses. The number of changes that need to be made is at your discretion as the buyer.

The most important points in the purchase agreement are outlined below; first for new systems, then for existing systems.

Purchase agreement for a planned or new system

Object of purchase: The system technology, its payment claim, and its location must be specified as precisely as possible (including output, module type, inverter type, amount to be fed-in, site plan). Otherwise, the contract may be invalid due to lack of clarity. If individual pieces of evidence, contracts, or documents are not yet available at the time that the contract is concluded, they may nevertheless still be included and submitted later if sufficiently specific.

Payment dates: After signing the contract, the negotiated purchase price should not be paid all at once but rather in instalments. The final payment should only be made after there are no longer any significant risks, i.e. the new system is now connected to the grid and you are registered as system operator with the grid operator.

Warranty rights: You should ensure that the seller cedes the contractual warranty rights from the system installer to you, parallel to the transfer of ownership. This is particularly important when purchasing a new system. In return, warranty rights against the seller can be done away with. Technical due diligence, in which the technical condition of the system has been made transparent, is required for this.

Withdrawal from contract: For systems that have not yet been fully constructed, delays may occur or commissioning and/or grid connection may not even take place. For this reason, you should be granted a right of withdrawal in the event that commissioning and grid connection have not occurred by a certain specified date.

Exceptional case: tender offer

When purchasing tender offer of a new or not yet constructed system, the legal specifications of the “bidder identity” cannot be violated. This means that at the time of authority to pay, the bidder must also be the system operator. If this is not the case, then there is no claim for EEG remuneration. It should therefore be ensured that the system only becomes the property of the buyer after authority to pay comes into effect; at an even later date if possible.

Purchase agreement for an existing system

Object of purchase: Purchased along with the existing system itself are the technical accessories, the complete system documentation, and the following documents, which are absolutely necessary for the operation of the system:

• Contracts (e.g. leasing contract for the open space/roof)
• Rights (e.g. authority to pay for the tender offer of a system)
• Permits (e.g. building permit)
• Verifications (e.g. system certificate)

Payment dates: The purchase price to be negotiated should not be paid all at once, but rather in instalments. A first instalment is typically due immediately after the contract has been concluded. At the very least, the final payment for an existing installation should only be made once there are no longer any significant risks for you. This is the case when you have received confirmation from the grid operator regarding the change of operator, among other criteria. In the case of tender offers, the original authority to pay should be available.

Warranty rights: If after the purchase has been made the existing system reveals itself to be defective, you’ll want to be adequately protected. On the other hand, the seller has a vested interest in avoiding liability after the purchase agreement has been concluded. In order to do justice to both sides, it is a customary practice for the buyer to closely examine the system and other purchased components before concluding the purchase agreement (see Legal Due Diligence). This way, warranty rights can be precluded and guarantees granted. For example, ensure that the seller is actually the owner or holder of the object of purchase and that all contracts vital to the operation of the system (such land or roof use contracts) have been validly concluded and not simply terminated.

Withdrawal from contract: Both parties should be granted a right of withdrawal in the event that one of the contracting parties does not fulfil its obligations. One reason for withdrawal may be that no easement was made for you in the land register by a defined date. The seller should also be able to withdraw from the contract if you do not pay the purchase price despite warnings.
At this stage, we would like to emphasise that the contractual contents listed here are only intended to provide a rough overview, and are in no way conclusive and must always be adapted to fit each individual case.

This article was written with the assistance of Paul Reich, LL.M., counsellor-at-law at Arnecke Sibeth Dabelstein.

This article was published in our investment guide. For all other articles and information on Direct investment in commercial-sized photovoltaic systems, please visit: Milk the Sun – PV Investment Guide.