ConstructionPro Week, Volume: Construction Advisor Today - Issue: 65 - 07/23/2010

Project Owner Liablility for Nondisclosure of Superior Information

The concept of “superior knowledge” or “superior information” is unique to construction contracting. Contract law in general holds a party responsible for intentionally withholding significant information in order to mislead the other party. This is usually characterized as “fraudulent misrepresentation” or “fraudulent inducement.”  With construction contracting, a project owner may be liable to a contractor for failing to disclose significant information even though the nondisclosure was not intentional or fraudulent.


The California Supreme Court recently issued an important decision on nondisclosure of superior information by public project owners. If a public project owner (1) possesses information which will affect the contractor’s bid price or performance cost; (2) knows the contractor does not possess that information; and (3) includes nothing in the contract documents which would cause the contractor to inquire about the information; then (4) the owner can be liable for nondisclosure of the information for any reason. No intent is required.

 

A dissenting opinion in the California case argued that public project owners, and the taxpayers, should not be exposed to liability for accidental or unintentional nondisclosure of information. The dissent said the majority’s ruling absolved contractors of any responsibility for independently investigating contract performance conditions and would foster extensive claims litigation.

 

What do you think? Should project owners be responsible for undisclosed information even when the failure to disclose was merely careless or accidental? Or should there be a standard, in effect, of strict liability for nondisclosure of significant superior information?

Featured in next week's issue of Construction Claims Advisor . . .

  • Public Works Contractor Could Not Sponsor Subcontractor “Pass-Through” Claim
  • Excavator Held Responsible for Utility Damage in “Hand-Dig Zone”
  • Court Addresses Change Order Pricing Formula

 

Bruce Jervis, Editor
Construction Claims Advisor

 

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