113 Misrepresentations, Disclaimers, and Fraud

• Jurisdiction: Arizona

A representation as to a materials source pit designated in the contract documents may, if false, be grounds for an action by the contractor. Where, however, the state furnishes a contractor with information and disclaims any guaranty of the accuracy of the information, the disclaimer will normally control.

A subcontractor was allowed to recover its total cost because of fraudulent representations resulting in a breach of contract in Hunter Contracting Co. v. Sanner Contracting Co., supra. The contractor, who previously had tests performed on core samples from a proposed gravel pit known as the Last Chance Mine, took the subcontractor to a different site for a quotation for furnishing gravel for construction of a road. The contractor said: “Here are the core samples, here is the pit. How much are you going to charge me§” The subcontractor was not told that the core samples and tests applied to the Last Chance Mine, not this new site.

The subcontractor, after entering into the subcontract, found that the material at the new site was not suitable. The subcontractor’s right to rely on the contractor’s representation was a question for the jury under the circumstances in this case. The above-quoted statement was held to be a misrepresentation.

On the other hand, the court found no misrepresentation in Ashton Co. v. State, 9 Ariz. App. 564, 454 P.2d 1004 (1969). There, the contractor, “a knowledgeable highway contractor who had entered into prior contracts with the State,” id., contracted with the state to place borrow. The contractor’s bid was based on a weight-to-volume conversion for the amount of borrow in the designated pits...