Solar Rescue

SOLAR RESCUE

This information is provided for general educational purposes only, does not constitute legal advice, and should not be relied upon as legal advice. If you believe you have been defrauded or misled in any matter, seek the advice of an attorney.

Have you entered into a solar power purchase agreement (“SSP”), only to have the results turn out much different than you anticipated? Perhaps the electric rate from your utility turned out to be different than the solar power provider promised. Perhaps the rate of inflation on your electric bill from your utility provider is different than the solar power provider promised. Perhaps there was some other factor you expected that has not worked out. In any event, you may not be realizing the savings on your energy costs your solar power provider promised.

Many individuals, businesses and government entities, including school districts, are finding that their SSP is not providing the energy cost savings they were promised and are wondering whether there is anything they can do. In fact, if you find yourself in that situation, you may have a legal right to terminate the contract, renegotiate the contract, or even collect a financial judgment, if certain factors exist.

The remedies available to you arise out of the laws regarding school’s procurement of solar power, fraud and misrepresentation. Here are some things to consider:

If you are a school district, you need to determine under which statute you entered into your solar agreement.

·         Prior to August 2, 2012, nearly all solar agreements with school districts were entered into pursuant to A.R.S. 15-213.01. Subsection J of that statute requires the solar provider to guarantee “…that the energy savings will meet or exceed the costs of the energy cost savings measures...” In other words, the solar provider was required by law to guarantee that the school district would not lose money by entering into the solar contract. Provisions of the statute have been amended from time to time, so it is important to know exactly when your solar contract was entered into to determine the exact statutory requirements, but in general, if you entered into a solar contract pursuant to A.R.S. 15-213.01, the solar provider is required to pay you for losses you incur as a result of the contract.

·         A.R.S. 15-213.03 became effective on August 2, 2012. That statute allows school districts to enter into solar contracts, but does not require the solar provider to provide the guarantee set out in Section J of A.R.S. 15-213.01. The solar provider has to guarantee the amount of electricity that will be generated and the price for that electricity, but does not have to guarantee that the school district will not lose money. Most solar providers insisted on contracting pursuant to A.R.S. 15-213.03 once it became effective.

If you are not a school district, or if you are a school district that entered into a solar agreement pursuant to A.R.S. 15-213.03, you may still have remedies for a solar system that is not performing as you expected.

·         There does not have to be any fraud involved.

o   Innocent misrepresentations with respect to material matters may afford grounds for invalidation of a contract induced by the misrepresentation, provided you relied thereon and were misled thereby.

o   Even if you were negligent in your approach, you may be protected. Where one party's false but innocent representations induce another party to contract, the negligence of the other party cannot be raised to bar relief to him or her.

o   Failure to tell you about an important fact is just as bad as providing you with false information. A person's non-disclosure of a fact known to him is equivalent to an assertion that the fact does not exist in the following cases only: (a) where he knows that disclosure of the fact is necessary to prevent some previous assertion from being a misrepresentation or from being fraudulent or material. (b) where he knows that disclosure of the fact would correct a mistake of the other party as to a basic assumption on which that party is making the contract and if non-disclosure of the fact amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing. (c) where he knows that disclosure of the fact would correct a mistake of the other party as to the contents or effect of a writing, evidencing or embodying an agreement in whole or in part. Restatement (Second) of Contracts § 161 (1981).

·         Although there may be fraud.

o   When one is asked a question that fairly calls for disclosure of a material fact, he or she commits fraud by concealing the truth or otherwise answering in a manner deliberately calculated to mislead. “Unlike simple nondisclosure, a party may be liable for acts taken to conceal, mislead or otherwise deceive, even in the absence of a fiduciary, statutory, or other legal duty to disclose.” Lerner v. DMB Realty, LLC, 234 Ariz. 397, 404, 322 P.3d 909, 916 (Ariz. Ct. App. 2014).

o   A representation stating the truth so far as it goes but which the maker knows or believes to be materially misleading because of his failure to state additional or qualifying matter is a fraudulent misrepresentation. Restatement (Second) of Torts § 529 (1977).

·         The misrepresentation may be the result of subsequently obtained knowledge.

o   One who has made an assertion that is neither a fraudulent nor a material misrepresentation may subsequently acquire knowledge that bears significantly on his earlier assertion. He is expected to speak up and correct the earlier assertion in three cases.

§  First, if his assertion was not a misrepresentation because it was true, he may later learn that it is no longer true.

§  Second, his assertion may have been a misrepresentation but may not have been fraudulent. If this was because he believed that it was true, he may later learn that it was not true. If this was because he did not intend that it be relied upon, he may later learn that the other is about to rely on it.

§  Third, if his assertion was a misrepresentation but was not material because he had no reason to know of the other's special characteristics that made reliance likely, he may later learn of such characteristics.

§  If a person fails to correct his earlier assertion in these situations, the result is the same as it would have been had he had his newly acquired knowledge at the time he made the assertion. Restatement (Second) of Contracts § 161, Comment c (1981).

·         Your decision to enter into a contract did not have to be wholly based on the misrepresentation.

o   A misrepresentation induces a party's manifestation of assent if it substantially contributes to his decision to manifest his assent. Restatement (Second) of Contracts § 167 (1981).

o   If the alleged misrepresentation is only an expression of opinion or a guess on the part of the speaker and the hearer would understand it to be such, it cannot constitute a basis for either actionable fraud or rescission.  Han v. Horwitz, 2 Ariz. App. 245, 248, 407 P.2d 786, 789 (1965).

·         There is more to it than the terms of your contract.

o   A court may look to surrounding circumstances and the conduct of the parties to determine the parties' intent. Johnson Int'l, Inc. v. City of Phoenix, 192 Ariz. 466, 471, 967 P.2d 607, 612 (Ct. App. 1998).

·         You have remedies available.

o   If a party's manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party upon which the recipient is justified in relying, the contract is voidable by the recipient (Restatement (Second) of Contracts § 164 (1981)) but is not automatically void. Morris v. Achen Constr. Co., 155 Ariz. 512, 514, 747 P.2d 1211, 1213 (1987).  

o   If a party's manifestation of assent is induced by the other party's fraudulent misrepresentation as to the contents or effect of a writing evidencing or embodying in whole or in part an agreement, the court at the request of the recipient may reform the writing to express the terms of the agreement as asserted…if the recipient was justified in relying on the misrepresentation… Restatement (Second) of Contracts § 166 (1981).

o   The maker of a fraudulent misrepresentation is subject to liability for pecuniary loss suffered by one who justifiably relies upon the truth of the matter misrepresented, if his reliance is a substantial factor in determining the course of conduct that results in his loss. Restatement (Second) of Torts § 546 (1977).

o   One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information. Restatement (Second) of Torts § 552 (1977).