Legal Question in Business Law in California

Re: Contract

You don't have to disclose what you don't know about. The main reason for this rule is that it's impossible to disclose what you don't know about (except for a lucky guess, I suppose). A minor exception to this rule is that in some deal situations, someone may have a duty to investigate and report the findings of the investigation. An example of this is a broker in a residential real property transaction. Here, I doubt the seller of the route owed you a duty to investigate; that would have been your responsibility.

Of course, if the seller knew about the possibility of a suit, and the suit would have a material impact on the value of your route, then disclosure would be required.

So, the legal issues at trial would be (1) did the seller already know about the pending litigation; and (2) does the litigation materially affect the value of the route to be sold?

If he knew and the undisclosed information was material, I'd say this is more a case of fraud than of breach of contract, although there is also a breach of contract issue along with the fraud.