Practical Considerations for Drafting Agreements for EV Startups
Updated: Sep 4, 2022
Electric Vehicles (EV) are the future! We see a burgeoning in the number of EV start-ups. The EV sector requires complex infrastructure right from batteries to charging infrastructure. Procurement, development, operation and maintenance of EV infrastructure poses a huge challenge to early-stage founders of EV start-ups. The way an EV start-up functions also throws up a number of legal and regulatory challenges. We bring to you a two-part series, where we would be discussing the contractual and compliance requirements of an EV start-up. This is part I of the series, where we discuss what practical considerations go into drafting agreements for the EV sector.
Typical Agreements Required by EV start-ups
Like all start-ups, EV start-ups too require a set of agreements which they would commonly use. Some of the most commonly-needed contracts by EV start-ups are:
Commercial Lease Agreements
In order to set up an EV infrastructure, typically, EV start-ups would require to obtain some space on lease. Typically, parking lots in residential buildings, malls or hotels are given out on lease to EV start-ups to set up charging infrastructure.
EV start-ups, especially those engaged in manufacturing EV batteries or providing charging infrastructure, require a fool-proof service agreement. Service agreements for EV start-ups are different than those drafted for other sectors. The very nature of EV sector requires a careful customization of service agreements.
Procuring raw materials for setting up EV infrastructure involves entering into diverse procurement agreements. These could range from procuring of construction raw materials to even licensing of software.
Typically for the ease of end-users, EV charging start-ups provide SaaS applications, which the end-users can install and use. Such SaaS applications keep the user informed of the status of its battery charging and also allows them to pay for the services online.
Payment Gateway Agreements
In order to facilitate online payments through their applications, EV start-ups may also require to enter into payment gateway agreements with online payment platforms.
Practical considerations required to draft agreements in the EV sector.
EV sector is a very niche and nascent industry. To draft agreements for such a sector which is just in its embryo stage is extremely challenging. To foresee potential risks becomes a huge challenge, in the absence of on-ground operational knowledge. Hence, it becomes pertinent to understand a few practical considerations which are required to draft agreements in the EV sector:
EV operations are typically long-term in nature. Hence, duration or term of the agreements, especially of the commercial lease agreements should be for such a duration that it is feasible for the EV start-up to run its operations and obtain profitability.
Termination clauses in service agreements of EV start-ups need to be carefully curated. A lot of investment goes into setting up an EV Charging infrastructure and hence, termination for convenience may not be the best way ahead. This could be a potential negotiation clause and hence, it needs to be drafted after taking into account the relevant nature of the industry.
Power shutdowns, internet shutdown or disruption, strikes etc. need to be taken into account while drafting a force majeure clause for an EV start-up. A copy paste force majeure clause may land you in trouble and hence, it is pertinent that you get an attorney to carefully curate the same.
Contractual documentation for an EV start-up should be carefully curated. The operational activities of the start-up should be taken into account, before pertinent agreements are drafted. If you are an EV start-up and do not know what kind of agreements you require, just click on the button below and we would help you out!