While the potential to increase business for a green subcontractor is clear, it should be noted that green building is not without risk. Owner expectations are often heightened in green building. Often the general contractor or developer has promised a certain level of “green” that may or may not be able to be achieved on a particular project. Arguably, the most likely claim to arise will be that the finished building is not as “green” as promised by the contractor. In order to protect the subcontractor from overstated promises erroneously made or implied by the general contractor or developer, there are certain contract provisions that must be in every subcontract.
As always, a clear and well-defined contract will be critical to protect the subcontractor from potential risks on such projects. It is imperative that green subcontractors include clear definitions and performance standards, clear disclosures, and exercise greater caution in bid and contract negotiation. Of particular importance will be express contract provisions to protect the subcontractor should the general contractor or developer fail to deliver as “green” a building as was initially promised. A green sub-contract should include language stating that ordinary skill and care will be used to achieve the project’s green objective; however, the subcontractor does not warrant or guarantee that those objectives will be met beyond the subcontractor’s limited scope of work.
Further, the sub-contract should also contain express disclosures to protect against unrealistic expectations of the owner or user. One such disclosure should be that a green building does not equate to a “defect-free” building. Similarly, it should be clear that no specific level of energy efficiency or performance is guaranteed. The sub-contract should also include a standard disclosure that new and innovative products and/or technologies may be used and that those products and technologies may lack a proven history. The subcontractor should not expressly guaranty any new product or technology.
As with all projects, the parties to a green contract or sub-contract must contractually account for the uncertainty that may occur during a green building project. It is important to minimize risk where possible.
Although a green building design may carry with it the potential for increased claims and liabilities, taking the precautionary measure of creating a clear contract — which defines realistic performance criteria — provides a simple way to protect both the subcontractor and the owner from disputes arising from unrealistic expectations or ill-defined terms.
This article contains a general discussion of the law. This article does not constitute and should not be treated as legal advice as to any particular situation. You should always consult your attorney with regard to contract issues.