L.A. Unified Sch. Dist. v. Great Am. Ins. Co. - 49 Cal. 4th 739, 112 Cal. Rptr. 3d 230, 234 P.3d 490 (2010)

Rule:

A contractor on a public works contract may be entitled to relief for a public entity's nondisclosure in the following limited circumstances: (1) the contractor submitted its bid or undertook to perform without material information that affected performance costs; (2) the public entity was in possession of the information and was aware the contractor had no knowledge of, nor any reason to obtain, such information; (3) any contract specifications or other information furnished by the public entity to the contractor misled the contractor or did not put it on notice to inquire; and (4) the public entity failed to provide the relevant information. The circumstances affecting recovery may include, but are not limited to, positive warranties or disclaimers made by either party, the information provided by the plans and specifications and related documents, the difficulty of detecting the condition in question, any time constraints the public entity imposed on proposed bidders, and any unwarranted assumptions made by the contractor.

Facts:

In an action brought by a school district to recover a disputed payment to a contractor, the superior court granted summary adjudication and judgment on the pleadings in favor of the school district on the contractor's cross-complaint for breach of contract based on nondisclosure of material information. The district had accepted the contractor's bid to complete a school construction project begun by another company. The contractor sought extra compensation for correcting undisclosed defects. The superior court ruled that the contractor could not recover for breach of contract by misrepresentation, nondisclosure, and breach of warranty because the facts it had alleged would not allow a conclusion that the district either actively concealed or intentionally omitted material information.

Issue:

Did the contractor need to prove an affirmative fraudulent intent to conceal to recover for nondisclosure?

Answer:

No

Conclusion:

The court affirmed the judgment of the Court of Appeal and remanded to that court with directions to remand to the superior court for further proceedings. The court adopted the superior knowledge doctrine, under which a contractor on a public works contract could be entitled to relief for a public entity's nondisclosure in the following limited circumstances: (1) the contractor submitted its bid or undertook to perform without material information that affected performance costs; (2) the public entity was in possession of the information and was aware the contractor had no knowledge of, nor any reason to obtain, such information; (3) any contract specifications or other information furnished by the public entity to the contractor misled the contractor or did not put it on notice to inquire; and (4) the public entity failed to provide the relevant information.