69 Cal. 2d 33
Defendant contractor appealed from a judgment of the Superior Court of the City and County of San Francisco (CA), holding that an indemnity clause covered damages to all property, regardless of ownership, in plaintiff utility company’s action to recover damages to property under the indemnity clause.
-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.
The court reversed the judgment, holding that 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.
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.
- A rule that would limit the determination of the meaning of a written instrument to its four-corners merely because it seems to the court to be clear and unambiguous would either deny the relevance of the intention of the parties or presuppose a degree of verbal precision and stability our language has not attained.
- A court must ascertain and give effect to this 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.
- The meaning of a writing can only be found by interpretation in the light of all the circumstances that reveal the sense in which the writer used the words. The exclusion of parol evidence regarding such circumstances merely because the words do not appear ambiguous to the reader can easily lead to the attribution to a written instrument of a meaning that was never intended.
- Although extrinsic evidence is not admissible to add to, detract from, or vary the terms of a written contract, these terms must first be determined before it can be decided whether or not extrinsic evidence is being offered for a prohibited purpose. The fact that the terms of an instrument appear clear to a judge does not preclude the possibility that the parties chose the language of the instrument to express different terms. That possibility is not limited to contracts whose terms have acquired a particular meaning by trade usage, but exists whenever the parties’ understanding of the words used may have differed from the judge’s understanding.
The court reversed the judgment, holding 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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