Did Contractor Have the Right to Claim Extra Compensation for Constructive Fraud ?
Did the Contractor Have the Right to Claim Extra Compensation for Constructive Fraud as He Relied on Assurances of Engineers of DOT Which Caused Increased Expenses ?
In Acchione & Canuso, Inc. v. Commonwealth, Dep't of Transp., 501 Pa. 337, 343-44, 461 A.2d 765, 768 (1983), the contractor discovered a discrepancy in a particular measurement and consulted with the Department of Transportation's (DOT) engineers, who gave assurances to the contractor, and, ultimately, those assurances formed the basis of the contractor's bid. Id. at 340, 461 A.2d at 766.
Once DOT awarded the contract, DOT ordered additional tests which effectively undermined those assurances.
The contractor brought a claim for extra compensation, and the Court found constructive fraud because the contractor justifiably relied on DOT's positive representations, directly causing the increased expenses. Id. at 343-44, 461 A.2d at 768-69.
The Court characterized DOT's representations as nothing "more than an educated guess" and arbitrary under the fourth element of the five-factor test, rendering DOT's conduct misrepresentations. See id. at 344, 461 A.2d at 769.
While, in Acchione, constructive fraud was found where there was an affirmative misrepresentation, the holding in Acchione does not limit constructive fraud to only those situations.
The holding in Acchione involved the application of the fourth element in the five-factor test, determining whether the "representations later prove to be false and/or misleading either due to actual misrepresentation on the part of the agency or its engineer or, by what amounts to a misrepresentation through either gross mistake or arbitrary action on the part of the agency or its engineer." Acchione, 501 Pa. at 343-44, 461 A.2d at 768.