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Pac. Gas & E. Co. v. G. W. Thomas Drayage etc. Co. - 69 Cal. 2d 33, 69 Cal. Rptr. 561, 442 P.2d 641 (1968)

Rule:

The test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible. 

 

Facts:

A utility company hired a contractor to repair its steam turbine. Under the indemnity clause of the contract, the contractor promised to indemnify the utility company for all property damage. The turbine was damaged during repairs and a case was filed to collect damages. The utility company, however, argued that the intention was only to indemnify damages caused to property owned by third parties. Relying on the plain meaning of the contract language, the trial court found the contractor liable. The case was appealed to the Supreme Court of California.

Issue:

Is parol evidence admissible to ascertain the true intent of contractual parties even where the writing seems clear and unambiguous?

Answer:

Yes

Conclusion:

The Court held that the parole evidence is admissible to ascertain the true intention of the parties. It is the responsibility of the Court to ascertain and give effect to the parties true intention by determining what the parties meant by the words they used. Accordingly, the exclusion of relevant, extrinsic, evidence to explain the meaning of a written instrument could be justified only if it were feasible to determine the meaning the parties gave to the words from the instrument alone. As a result, the Court held it could not be the intention of the contractor to cover injuries to the utility company’s property.

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