Why Energy Ace's LEED Guarantee is Brilliant

When I first read about Energy Ace's LEED certification guarantee, I thought it was nuts.

Then I read a Co-Star article and realized Energy Ace's guarantee was brilliant.   

When I read a green building regulation, I always look at the enforcement mechanism.  And when I look at a green building contract, I always focus on the potential damages.  Energy Ace's LEED certification guarantee is brilliant because it limits potential damages if certification is not achieved:

"If a project misses its LEED target level (like Silver or Gold) or fails to earn certification altogether, Energy Ace would refund its LEED administration fee, which is between 30 percent and 45 percent of its total fees, Robertson said.

Simply brilliant.  Energy Ace provides a LEED certification guarantee that reassures owners while simultaneously limiting Energy Ace's potential damages. 

The potential damages stemming from a project's LEED certification failure are much greater than the limit described by Energy Ace.  For example, in Shaw Development v. Southern Builders, the owner sued for $635,000 when the project failed to achieve certification by a certain time.  I have never heard of a triple digit LEED administration fee. 

Brilliant, right? 

By the way, I can help you write a similar contract...

Guaranteeing LEED Certification (CoStar)
Southern Builders v. Shaw Development: Green Building Damages (GBLU)

Photo: ejpphoto

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Comments (3) Read through and enter the discussion with the form at the end
Leigh Monette - August 21, 2009 3:06 PM

I agree on the brilliance of limiting damages.

Will it hold up?

If the language you quoted is all there is, I think it needs to be written as a more explicit limitation of damages.

If I were attacking the clause, I would go after the fact that it seems like an offer, or a minimum amount of damages. There's nothing that makes it the defined and agreed cap on damages for failure to achieve the certification goal.

As with any out-of-context clause analysis, though, there's always more at play behind the scenes. I'd be curious to see the entire contract.

Robert Newcomer - August 21, 2009 6:30 PM

As with any "limited" guaranty - and I think that is the way to think of this one - if the contract language is properly crafted and Energy Ace has an internal process in place to make an informed decision following the charrette about whether the design and the commitment of the project team (owner, designers and contractors) warrants this guaranty, then I'm not so sure their actual risk is all that great. And they still get the marketing buzz.

Their challenge will be to have the courage to refuse to give the guaranty when the owner demands it, but the project design and/or commitment do not warrant it . . . and Energy Ace wants or needs the work.

Christopher Hill - August 24, 2009 1:33 PM

Interesting take on this Chris. I am curious as to the whole contract as well. Also, I agree that Energy Ace should have a way to back out if necessary and it should have the courage to do so to avoid potential pitfalls.

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