Green Design and Construction:
Litigation Planted for the Future?
Not If You Have the Right Contract
According to Joel Makower in the State of Green Business 2008, “Green building is becoming less the exception than the norm, embraced by sectors ranging from hotels to health care to housing.” Likewise, market research firm SBI asserts, “The market for green or environmentally efficient buildings has been growing at 23% annually. It will double to $4.7 billion over the next four years.”
Apparently, the “green” train has left the station, and it appears to be roaring full steam ahead—at least for the moment. But with such rapid movement comes risk if expectations are not managed appropriately.
Green buildings intentionally are designed and constructed to perform differently than their non-green counterparts. But what objective tool can an owner use to prove that a green building performs in an energy-efficient manner so that it will save money on operating and maintenance costs and is otherwise environmentally friendly to its occupants? The answer should lie in two places: the contract between the owner and architect, and the contract between the owner and contractor.
All parties to a green construction project should give careful consideration to the contracts they enter into. Contracts should be thought of as a tool to define and manage building performance expectations and risk by identifying intended results, warranty issues and dispute resolution procedures.
Intended results. If any aspect of the project is intended to achieve certain financial savings, reduce operating costs or decrease consumption of energy or electricity, then the contract should clearly state the anticipated goal or savings. It is also important to consider whether the goal or projected savings is reasonable. Has the goal been clearly expressed to the architect and contractor? Have the architect and contractor agreed to the goal? Does the contract provide an objective benchmark for measuring the goal?
Warranty issues. Express warranties are another important part of every construction contract. They are a tool an owner can use to protect the building’s bottom line. Some questions to ask include the following: Have all warranties been properly analyzed? Is the enforceability of any warranty contingent upon the performance of certain operations and maintenance procedures by the owner’s employees? Are the owner’s employees qualified or have they been properly trained to perform any necessary operation and maintenance? How will the owner properly document such operations and procedures in order to make the warranty effective? Has the contractor agreed to the owner’s documentation procedures?
Dispute resolution procedures. Finally, if a disagreement arises, does the contract provide a mechanism that will allow the parties to resolve the dispute quickly, fairly and at little cost? A well-crafted contract in this area can help ensure that any money actually saved by going green remains just that—money saved and not spent on costly attorneys' fees.
Using appropriate contracts will help owners, architects and contractors manage the risk and expectations for greener building, increase the likelihood of success for all parties involved and, perhaps most importantly, help avoid costly and protracted litigation.
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