Extrinsic evidence, as used in the context of contract construction, is evidence relating to a contract but not appearing on the four corners of the contract because it comes from other sources involving the setting in which the parties negotiated the contract.
These other sources are objectively determinable factors that give a context to the transaction between the parties. These can include statements between parties, circumstances surrounding the agreement, the reasonableness of the parties’ respective interpretations, general trade practice, and the parties’ subsequent conduct.
Generally, no extrinsic evidence is used if a contract is unambiguous. The parol evidence rule, bars extrinsic evidence (as well as prior and/or contemporaneous oral agreements and prior written agreements) that contradict or vary a term in a writing that the parties intended to be completely integrated. In other words, any information leading up to or during a contract that is not included in the writing itself is excluded from the jury unless there is evidence of fraud, duress, or mutual mistake.
To fill an apparent gap from ambiguity, however, a court may interpret the written contract language in light of extrinsic evidence and the circumstances by which the parties negotiated the contract. In Pacific Gas v. G.W., the court held that a contract can never have a plain meaning that is concretely understood without looking at the intentions of the parties; therefore, the court must look to all credible parol evidence to determine the intentions of the parties. The test of admissibility is whether the offered extrinsic evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible.
[Last updated in February of 2022 by the Wex Definitions Team]