A recent post in Construction Contracts by Craig Martin of Lamson, Dungan, and Murray, LLP discusses the case of Fidelity And Deposit Co of Maryland v Casey Industrial Inc.

“In this case, Fidelity And Deposit Co of Maryland v Casey Industrial Inc. to supply and install piping for a power plant. Topps Mechanical estimated that it would need 10,000 linear feet to complete the job. In actuality, 35,000 linear feet were required to complete the job, resulting in a cost overrun of $4 million. Topps bonding company assisted in getting the job completed and litigation ensued.

Topps, through its surety, claimed that Casey Industrial breached an implied duty of good faith and that Casey Industrial had superior knowledge such that it should have told Topps that its bid was too low. The superior knowledge doctrine is an exception to the general rule that contractors in a firm, fixed price contract assume the risk of increased performance costs.

The superior knowledge doctrine typically applies to those situations where:

  • the contractor takes on a project without vital knowledge of a fact that impacts performance costs or duration;
  • the owner is aware that contractor has no knowledge of this fact;
  • any contract specifications supplied misled the contractor or did not put it on notice to inquire; and
  • the owner failed to provide the relevant information.”

Martin concludes that a General Contractor does not have the right to tell a Subcontractor that his or her bid was too low if he or she was given all the information required to submit an accurate bid.

Read the full article…