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Public Entity Liable For Concealing Costly Project Facts Even Without Intent

Friday, September 03, 2010 02:52 am


A government contractor whose bid is based on incorrect specifications can usually recover for extra work or expenses associated with the true scope of the construction project. But what happens when the specs were correct but the government failed to disclose additional information that materially affected the cost of performance? According to a recent California supreme court ruling, recovery is appropriate in that case as well.

'Careless failure' to disclose is a liability

In prior cases addressing nondisclosure in public construction contracts, California's highest court has recognized that a public entity's nondisclosure is grounds for relief. In Warner Constr. Corp. v. City of Los Angeles (1970) 2 Cal.3d 294, the court identified three scenarios in which a contractor may recover from a public entity for nondisclosure: (1) The public entity discloses some facts but not others, rendering the disclosure likely to mislead; (2) the public entity has unique knowledge of/access to facts that it knows the contractor cannot know/access; or (3) the public entity actively conceals discovery from the contractor.

Importantly, California courts have also established that intent to deceive is not a prerequisite for a damages award in cases of a public entity's nondisclosure. The court in Welch v. State of California (1983) 139 Cal. App. 3d 546 found that the contractor did not need to prove a city had "actively and intentionally" concealed information. According to the ruling in Thompson Pacific Construction, Inc. v. City of Sunnyvale (2007) 155 Cal. App.4th 525, 552, what's necessary to support an implied warranty claim where the public entity possesses unique, superior knowledge is "careless failure" to disclose that information.

Misleading silence as bad as deceptive words 

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