Pacific v. Drayage

• Pacific Gas & Electric Co. = "Pacific" = Pacific Gas and Electric Company = PG&E
• G.W. Thomas Drayage & Rigging Co. = "Drayage" = a contractor
• Pacific hired Drayage to replace a turbine cover
• During the replacement, the cover fell & damaged the turbine rotor
• Repairing the rotor cost Pacific $25,000
• The contract between the 2 parties stated that Drayage would work at its own risk which included an indemnity clause
• Defendant agreed to work with the plaintiff to furnish him services and also agreed to work at his own risk and expense, and to indemnify the plaintiff against tall loss, damage, or expense resulting.
• The defendant stated that the intent of the contract was not to cover 3rd-party loss, although the language of the contract was plain.

Pacific sued Drayage for the cost of repairing the rotor.

The judge dis-allowed extrinsic evidence by Drayage to clarify the contract's meaning.

Drayage lost.

Drayage received a judgment as the party responsible for the rotor cost.

In the face of seemingly clear contract language, may a court admit extrinsic evidence as proof of a different intention?

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Whether parole evidence may be brought where there is a dispute as to what the intended meaning of the contract was, although the language of the written contract seems clear.

Pacific argued that Drayage had agreed--per the written contract--to reimburse Pacific for losses incurred as a result of Drayage's work.

Drayage retorted that it would be liable if the property of a 3rd party (neither Pacific nor Drayage) was damaged.

Chief Justice Roger Traynor: Yes. Even under those circumstances, extrinsic evidence must be admitted to prove the parties' intention.

Reversed for the defendant Drayage

Traynor: The trial judge erred by refusing to accept Drayage's extrinsic evidence.

Because the judge is a person and understands words differently than the parties, parole evidence may be allowed which offers evidence of trade usage terms when there is a dispute to the written contract.