Drafting contracts from scratch can be a costly and time-consuming exercise. Because of this, many small businesses use standard form documents obtained from the internet or from an acquaintance. However, doing so can be risky as these documents may not be suitable for your particular business. In particular, slight differences in the words and phrases used can significantly alter the effect of the contract.
In the recent case of CSR Limited v Adecco (Australia) Pty Limited  NSWCA 121, the NSW Court of Appeal held Adecco liable for injuries sustained by its truck driver whilst working on CSR’s site. The contract between Adecco and CSR provided that Adecco would indemnify CSR against any claim ‘arising out of or in connection with’ Adecco’s drivers’ work at CSR’s site. Adecco argued, amongst other things, that this indemnity did not apply because the injury was caused by CSR directing the driver to use a defective truck. It argued that the words ‘arising out of or in connection with’ could not encompass a situation where CSR had caused the injury to the driver.
The Court found that the words ‘arising out of’ and ‘in connection with’ were very wide; they captured relationships ranging from ‘direct and immediate to tenuous and remote’. On the other hand, the words ‘caused by’ require a direct causal connection. As such, the words used in the indemnity clause were wide enough to cover events caused by CSR.
The CSR case illustrates the importance of proper drafting in contracts. Whilst the words ‘caused by’ may have a similar meaning as ‘in connection with’ in ordinary parlance, the legal impact of these words can be vastly different. Failing to examine your standard form contract for these terms can lead to dire consequences when these clauses have been improperly drafted or have been drafted to suit someone else’s business. It is important that you seek legal advice on drafting a contract that fits your business’s unique circumstances.