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:

Defendant contractor appealed from a judgment for plaintiff utility company in an action to collect damages under an indemnity clause of a contract. Defendant contracted to repair plaintiff's steam turbine, promising to indemnify plaintiff for all property damage. The turbine was damaged during repairs. Defendant argued that the parties intended that defendant would indemnify plaintiff only for damage to the property of third parties. Relying on the plain meaning of the contract language, the trial court concluded that defendant was liable. Defendant appealed. The court reversed the judgment.

ISSUE:

Can extrinsic evidence be admitted to prove the meaning of contractual terms when the intention of the parties to the contract is ambiguous?

ANSWER:

Yes.

CONCLUSION:

Looking only at the plain meaning of contractual language ignored the possibility that the parties had contrary intentions. The court therefore held that parol evidence was admissible to ascertain the true intent of the contractual parties even where the writing seemed clear and unambiguous.

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