Commercial solar contract disputes: what remedies do you have?

This is general information, not legal advice. If you have a live dispute, ask a construction solicitor to read your contract before you act.

If your solar installer misses a deadline or the system underperforms, you have four main routes. They run from quickest and cheapest to slowest and costliest, although every case differs:

1. Use the remedies written into your contract, such as liquidated damages or a performance guarantee.
2. Refer the dispute to adjudication, if it is available.
3. Try mediation.
4. Go to court.

What is open to you depends mostly on your contract, because it sets the terms. Read it first.

Start with the contract

Remedies written into the contract are the easiest to use, because both sides agreed them. Look for:

• A performance guarantee. A stated yield, checked against metered output.
• Liquidated damages. A pre-agreed sum payable for delay or a missed guarantee, so you do not have to prove your loss from scratch.
• A termination clause. It should say whether damages survive termination.
• A dispute clause. It should say how disputes are escalated and whether adjudication applies.

If none of these exists, your fallback is a plain breach of contract claim. You then have to prove what the breach cost you. That is slower and less sure, because you start from scratch.

Can you use adjudication?

Adjudication is a fast process. Its decision binds both sides until a court says otherwise. The right comes from the Housing Grants, Construction and Regeneration Act 1996. That Act lets parties to a “construction contract” refer a dispute at any time.

Whether your solar contract counts depends on where the panels go. The Act has one key exception. Section 105(2)(c) leaves out installing plant or machinery on a site whose main activity is power generation. So:

• A rooftop array on a warehouse, office or factory is generally caught by the Act, because the building’s main activity is something else.
• A ground-mounted solar farm is often outside it, because generation is the site’s purpose.

“Generally” and “often” are doing real work there, because your facts decide. A lawyer should confirm. Although the Act may not apply, many well-drafted contracts give you a right to adjudicate anyway.

How quick is it?

Under section 108, the adjudicator must decide within 28 days of referral, or a longer time the parties agree. The adjudicator can add up to 14 days, but only if the referring party agrees. If your contract falls short of the Act, the Scheme for Construction Contracts fills the gap. Preparing the case takes time too, so allow longer.

Liquidated damages: a solar example

A liquidated damages clause only works if it is in the contract. Courts will not enforce a sum that works as a penalty. A genuine estimate of loss is fine, although it must be real.

GPP Big Field LLP v Solar EPC Solutions SL [2018] EWHC 2866 (Comm) is worth knowing. It concerned five contracts to build UK solar plants. The contractor went into administration, so the owners sued its parent company as guarantor. The court rejected the claim that the delay damages were an unlawful penalty. It held the parent liable. The lesson is about drafting, since the parent’s promise held because it sat in a signed contract.

When the installer cannot pay

A claim is only as good as the party you can collect from. Two protections help if the contractor fails, because a judgment against an empty company is worthless:

• A parent company guarantee, where a stronger group company stands behind the contractor.
• A collateral warranty, which gives you a direct right against a manufacturer or sub-contractor.

Neither exists unless it is signed at the start, since you cannot add them once a dispute begins. Our due diligence checklist lists what to check before signing.

Mediation

Mediation is voluntary and usually takes about a day. It produces a settlement, not a ruling, so it suits parties who want to fix the problem. CEDR runs a fixed-fee scheme for two-party money disputes worth under £250,000. When we checked, each party paid:

• £650 plus VAT for claims up to £100,000
• £1,350 plus VAT for claims from £100,001 to £250,000

Fees change, so check the current figures.

Court

If nothing else works, the claim goes to the civil courts. The Ministry of Justice describes four tracks: small claims, fast track, intermediate track and multi-track. As a rough guide, while the exact rules vary:

• Claims up to £10,000 are small claims.
• Claims of £10,000 to £25,000 are fast track.
• Claims of £25,000 to £100,000 can be intermediate track, for money-only claims with a short trial.

Bigger or more complex claims go to the multi-track, while the tracks above suit smaller ones. Construction cases are often heard in the Technology and Construction Court.

For construction and engineering disputes, the Pre-Action Protocol applies first, before any claim is issued. In outline:

• You send a letter of claim.
• The other side acknowledges within 14 days and responds within 28 days.
• A pre-action meeting follows within 21 days of the response, where ADR is to be considered.

Costs sanctions for ignoring the protocol are likely only in exceptional cases. Still, skipping it is a poor start.

Time limits

A breach of contract claim must normally start within six years of the breach. The limit is twelve years if the contract was a deed. After that the claim is barred, whatever its merits, so take advice early.

What to put in the contract

Every route above is easier if you planned for it, because the contract then does the work. Aim for:

• a stated annual yield with a way to measure it
• liquidated damages that are a genuine estimate of loss, with a clear statement on termination
• a parent company guarantee or collateral warranties for larger contracts
• a dispute clause naming adjudication and the steps before litigation
• named equipment and a method for assessing underperformance

Underperformance is easier to prove when the system was well specified. Our article on independent advice explains why that matters early. Our procurement and tender support writes the spec and tests each bidder. It also negotiates these protections before you sign.

Most disputes start with a weak contract, so the cheapest fix comes before signing. Our procurement and tender support writes clear specifications and performance terms. A feasibility study sets the yield you should expect, while energy and ROI modelling shows what a shortfall costs. Under a PPA, PPA and financing advice reviews the remedies before you commit.