Legal Definitions - extrinsic evidence

Extrinsic evidence refers to information that comes from outside a primary legal document, such as a written contract, but is relevant to understanding or interpreting that document. It is not found within the "four corners" of the agreement itself but provides context about the parties' intentions, the circumstances surrounding the agreement, or the meaning of specific terms.

In contract law, courts generally prefer to rely solely on the written contract if its terms are clear and unambiguous. This principle is often supported by the "parol evidence rule," which typically prevents parties from introducing outside evidence to contradict or change the terms of a contract that they intended to be the complete and final agreement.

However, extrinsic evidence can be crucial and admissible in certain situations, particularly when:

• Clarifying Ambiguous Terms: If a term in the written contract is vague or has multiple possible meanings, extrinsic evidence can be used to clarify what the parties intended.
• Explaining Specialized Meanings: Evidence of industry custom, trade usage, or prior dealings between the parties can explain the specific meaning of words or phrases that might not be obvious to an outsider.
• Proving Contractual Flaws: Extrinsic evidence can be introduced to demonstrate that the contract was entered into due to fraud, duress, a mutual mistake, or that the written document does not reflect the parties' true agreement.

Here are some examples:

• Clarifying a Construction Contract Term:

  Imagine a construction contract states that a builder will use "premium grade" flooring. After installation, the homeowner is unhappy, claiming the flooring isn't what they expected. The written contract doesn't define "premium grade." The homeowner might introduce extrinsic evidence, such as emails exchanged before the contract was signed where the builder specifically promised to use a particular brand of high-end flooring, or a brochure from that brand that the builder provided during negotiations. This outside information helps clarify the ambiguous term "premium grade" as understood by both parties.

• Interpreting an Employment Agreement with Industry Custom:

  A software developer's employment contract includes a clause about "standard intellectual property assignment." The developer later leaves the company and creates a new program, but the company claims ownership based on the contract. The developer might argue that "standard intellectual property assignment" in the tech industry typically excludes personal projects developed on one's own time, even if the contract doesn't explicitly state this. The developer could introduce extrinsic evidence in the form of expert testimony on common practices in the software development industry or examples of similar contracts from other companies to show the prevailing industry custom for such clauses.

• Demonstrating a Mutual Mistake in a Real Estate Deal:

  A contract is signed for the sale of a commercial property, specifying "Lot 3B." However, both the buyer and seller had consistently discussed and viewed "Lot 3A" during all prior negotiations, which was a larger, more desirable parcel. The final written contract mistakenly listed "Lot 3B." The buyer could introduce extrinsic evidence like text messages, emails, or even aerial maps with "Lot 3A" circled that were exchanged between the parties before the contract was signed. This evidence, though not part of the final signed document, would be used to prove that a mutual mistake occurred regarding the property being sold.