Defendant Thomas Drayage & Rigging Co. contracted with Plaintiff PG&E to remove and replace the cover of Plaintiff’s steam turbine and to indemnify PG&E “against all loss, damage, expense and liability resulting from…injury to property, arising out of or in any way connected with the performance of this contract.” The cover fell on an exposed rotor, leading to PG&E’s suit for the cost of repair.
The trial court ruled that the plain language of the agreement covered damage to property. It denied admission of evidence which Defendant sought to admit that the indemnity clause was only to cover damages to third parties.
Despite the clear language of the indemnity agreement, should Defendant’s evidence have been admitted? The Thomas Drayage court held, yes — at least for the limited question of whether the instrument was 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.”
As far as the same is lawful and ascertainable, giving effect to the “mutual intention” of the parties as it existed at the time of contracting is the goal when interpreting a contract or other written instrument. (Cal. Civil Code § 1636.)
Pacific Gas & Electric Co. v. GW Thomas Drayage, 69 Cal.2d 33