I am pleased to announce that an article I co-authored with Professor Darren Prum of Regis University has been published as the lead feature article in Volume 23, Issue 2 of the Loyola Consumer Law Review. The pinpoint citation is 23 Loy. Consumer L. Rev. 113 (2010).

Green Building Contracts: Considering the Roles of Consequential Damages & Limitation of Liability Provisions begins by tracing the development of the legal concept of consequential damages at common law through modern decisions applying those concepts to construction disputes. It proceeds to analyze the competing concerns of construction project participants when negotiating consequential damages and limitation of liability provisions, underscoring those that are particularly salient for green building projects. The article then considers those concerns in the context of pertinent provisions in various AIA, EJCDC, ConsensusDOCS, and Design-Build Institute of America form documents. It concludes by providing a set of recommendations for owners, design professionals, contractors, and consultants to consider when negotiating similar provisions, most of which are relevant for any type of construction project whether green or not.

A copy of the article is available for download here; Professor Prum and I look forward to any feedback in the comments below.

Assume for a moment that the owner had never counterclaimed against the contractor, but that the contractor never secured the tax credits and the loss of those same credits were what ultimately drove the project into foreclosure. Would the bankruptcy trustee have the ability to assert any claims that the owner might have, including those against the contractor? Probably, so it seems to me that the potential exposure for the contractor – in the absence of language in its agreement with the owner that limited its liability for consequential damages – would be significantly higher. The damages flowing from the contractor’s failure to secure the tax credits would no longer be just the $635,000.00 in credits, but those incidental to the bankruptcy filing itself, which, arguably, would include the decrease in sales prices during the course of the automatic stay that is imposed over the property, any other sales that were lost due to the bankruptcy reorganization, and associated professional fees and other carrying costs that the owner/trustee incurred during the course of the stay.

This line of analysis should reinforce – once again – the notion that contract documents on green construction projects must account for all potential legal permutations in the event that the project does not proceed as planned. The absence of a cap on consequential damages in the contractor’s agreement with the owner in this scenario could expose it to significant liability; on the other hand, if the owner simply signed a form AIA agreement waiving its right to consequential damages, it too would be barred from attempting to recover the damages that flowed from the contractor’s breach. The next question – which I will reserve considering for a separate post on consequential damages in green construction – is whether the damages incidental to a bankruptcy filing were foreseeable by the parties and therefore recoverable in any action asserted by the owner or the bankruptcy trustee on its behalf.

Finally, just a quick word of thanks to Brian Anderson for forwarding me the link below noting the bankruptcy filing.

• Owner of Captain’s Galley Condominiums in Crisfield Bankrupt (ESH.com)
• The Anatomy of America’s First Green Building Litigation (gbNYC)