Contractor May Recover Against Public Entity for Failure to Disclose Material Information Without Proving Fraud

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It has long been the rule in California that a contractor on a fixed price public works project generally cannot recover additional compensation simply because unanticipated difficulties are encountered. However, consistent with long standing federal authority, United States v. Spearin (1918) 248 U.S. 132, a contractor may have an avenue for redress when its performance is more expensive than contemplated at bid time due to faulty plans and specifications or the public entity's failure to disclose material information regarding the project.

Until recently, there was much uncertainty in California about when and under what circumstances a contractor may recover based upon a non disclosure theory. In Los Angeles Unified School Dist. (LAUSD) v. Great American Insurance Co. (2010) 49 Cal.4th 739, the California Supreme Court articulated the circumstances under which a contractor can maintain an action against a public entity for failure to disclose material information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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