Hold Harmless: Everything You Need to Know
A hold harmless clause is a legal statement that an individual or enterprise will not be held liable for the risk, danger, injury, or damages to another party. 13 min read
What Is a Hold Harmless Clause?
A hold harmless clause is a clear legal statement indicating that an individual or enterprise will not be held liable in any way for the risk, danger, injury, or damages caused to the other party. Often, such a clause is signed when an individual embarks on an activity or purchase that involves some degree of unavoidable risk.
This is a decision between two people or groups. It can protect either one party or both. Whoever is protected by the clause cannot be sued for whatever problem may arise.
A hold harmless clause is also called a hold harmless letter or release, a save harmless clause, a waiver of liability, or a release of liability. These agreements are usually seen in leases, contracts, and easements.
When Is a Hold Harmless Clause Used?
A hold harmless clause can be useful in any situation where there is some risk of financial or personal danger, but it is quite often relevant in cases of real estate transfer or construction development. Any other high-risk business, such as adventure travel or extreme sports, will likely use a clause such as this.
There are two types of hold harmless clauses:
- Unilateral, in which one party will agree not to make the other responsible.
- Reciprocal, in which both parties agree not to hold the other accountable.
In the event of extreme sports, for example, it is likely that only a unilateral clause would be needed. However, when both parties are at risk, a reciprocal clause may be required.
What Are Some Examples of Hold Harmless Clauses?
- Sports: A participant may sign over their right to sue the sporting enterprise in the event that they are injured. In this situation, all risks are accepted by the participant — even that of death or dismemberment.
- Contractors: Contractors may require a hold harmless clause from those purchasing their services. For example, a contractor may agree to perform a service for a home renovation project on the condition that if any piece of his work causes harm later, he will not be held liable financially or legally. This would be a unilateral agreement, but it could be made reciprocal if the homeowners wish to not be liable if the contractor hurts himself while on their property.
- Governing documents: Covenants, conditions, and restrictions (CC&Rs) and bylaws often explain liability specifically, placing it on particular groups in the case of potential errors or damages. An example would be that a mistake made by a volunteer would fall on the shoulders of a business. In this example, it is clear that if this shift of liability did not occur, it would indeed be difficult to convince a person to volunteer for many organizations.
Examples of When to Use a Hold Harmless Clause
Here are some situations in which a hold harmless clause can often be found:
- A person or company is using your property, and you don't want to be liable for any bad things that may occur to them or may be caused by them.
- Someone will be doing services for you, and you want to be protected if a third party is harmed in the process.
- You are engaging in a risky activity, and you don't want others to take responsibility or be liable for the risk.
- You are writing a contract. In contracts, one should be particularly careful and certainly seek the guidance of legal counsel. If such contracts are not drafted with care and precision, there can be negative fall-out from circumstances that were not planned for.
- You are proposing a covenant. A hold harmless clause is common in the case of a covenant between two parties when one party decides to make a change of their own volition. An example would be that a homeowner makes a change in a public area of the property and therefore solicits a hold harmless requisition, as well as regulations securing indemnity from injury or damages that could occur from such changes.
- You are renting or leasing a property or facility. In the case that a large area is rented by a group, such as a clubhouse, pool, open space for a party, or a private room for a secluded event, a hold harmless and indemnity clause are likely. These will protect the owner of the property in case someone is harmed during the event.
In a hold harmless agreement, responsibility is shifted from one person to another. Depending on the circumstances, this arrangement can be beneficial and fair, or it could prove unreasonable.
What Information Do I Need to Create A Hold Harmless Agreement?
- The names and addresses of the people who will not be held liable.
- The name of the individual who will sign the agreement to represent the side protected from liability.
- The name of the party who is offering protection from liability, along with their and address.
- The name of the individual who is representing and signing on behalf of the side offering protection from liability.
- The date upon which the agreement will be signed and go into effect. If you're not sure yet, leave it blank for the time being.
- The state whose laws will govern the agreement. This may be the state where either party resides, where the property stands, or where services will take place. If your state requires specific language or
Additionally, when you create a hold harmless agreement, you can choose between three kinds of protection:
- General protection: In a situation when you use general protection, the other person or company will be protected; they will not be liable during the particular event you agree upon in the contract. Therefore, the particular circumstance in question should be outlined in detail and presented. For example, rather than writing that travelers will hold the traveling company harmless for an expedition, you can write that they will hold the company harmless for the hiking event in Singapore.
- Services protection: Services protection is used in a situation when one person provides services to another, and the service provider holds the recipient harmless in case anything happens to them while they are performing the services. An example would be when someone comes to renovate a house and holds the homeowner harmless if anything happens to them at the home.
- Property use protection: Property use protection occurs when one person is using another's property, and the person using the property agrees to hold the property owner harmless in case anything should happen. For example, a person could hold a party at a friend's house and agree to hold the friend harmless.
The Validity of a Hold Harmless Agreement
A hold harmless agreement may not always protect from liability. The reality is that some states and nations do not respect such clauses, and even where they are respected, such clauses can generally be argued 45against if they are worded too vaguely. It would be simple to attach a hold harmless clause to anything one does, but the clause can only be enforced if the company or individual gives a fair assessment of the risk involved and all parties are aware and prepared. These concepts should be made explicit with detailed language.
Other states also have anti-indemnity regulations that limit or prohibit hold harmless clauses within certain professions or under some circumstances, such as when working in construction. In addition, if one party has a very persuasive argument that they were forced into signing the clause against their wishes, the agreement can be annulled. Sometimes, the clause is prohibited altogether, and this is especially true in some lines of work where it would be unfair for a person or company to escape responsibility.
Consider these examples:
- A valid agreement: A business notes in an employee's contract that it will cover all costs if the employee is sued for injuries by a plaintiff, as long as their employee was working on company time and well within the bounds and regulations of her position.
- An invalid agreement: A passenger exempts a train company from all liability for loss or injury upon embarking on a journey. This agreement would be void because it's against public policy. Some people or groups cannot be excused from liability for those things for which they should reasonably be held accountable.
Some jurisdictions believe that these clauses and contracts can only resolve problems that come up between the two signing parties. Others allow such agreements to protect against claims brought by entities who had no part in the contract.
Either way, a hold harmless clause can prove useful in a number of scenarios and cases. It can be used in many business transactions, even between a doctor and patient. However, since there are many caveats worldwide, you should seek the advice of legal counsel when drafting the agreement. UpCounsel has competent and experienced lawyers who can determine the impact of a hold harmless clause on your situation.
Which Documents Do I Need to Create a Hold Harmless Agreement?
As you develop a hold harmless clause, these documents will be useful to you:
- Quit Claim Deed
- Real Estate Easement Agreement
- Bid Form
- Mechanic's Lien
An acknowledgment of risk form may be used alongside a hold harmless form. An indemnification may be included as well, so the other person can be easily reimbursed in case a legal dispute does occur.
Hold Harmless in the Construction Industry
In construction work, a hold harmless or indemnity agreement will likely be given by the subcontractor to the contractor, builder, or other professional, to protect against the work done by the subcontractor. Such an agreement will limit the risk of going to court and help the protected party access reimbursements in case anyone is injured.
Within the contract itself, the language should be very specific. Provisions for claims, damages, losses, expenses, or any other cause of suffering should be noted in detail in case any conflict comes up in the project.
In general, such an agreement is relative to the state in which it is written, as different areas perceive a hold harmless agreement in different lights. Sometimes, the contract will protect the contractor from major companies or parties not even associated with the agreement.
Within the field of construction, there are three distinctly recognized types of hold harmless contracts:
- Broad Form: In this case, the subcontractor takes on all liability for mistakes or damages, its own errors, and the overall accidents of both contractor and subcontractor. This option is not recommended because it is vague and general. Many areas of the U.S. won't validate such a general approach. However, if you do choose this option, the subcontractor can finance his liability with an insurance policy in order to increase the validity of the contract.
- Limited Form: In this case, the subcontractor will be responsible for the accident or mistake in a much more limited way. He will be held liable only for the part that truly is his fault. Others will have their own hold harmless agreements for their own contributions to the accident.
- Intermediate Form: In this case, the subcontractor takes on all liability for the accidents and mistakes he causes. He is liable for his related behavior but will not be responsible for the general contractor's errors. This version is the one most commonly used in construction agreements because it is not dependent upon whose fault it was, but rather, relies on who actually performed the action in question. If both parties acted wrongly, then the subcontractor will only be liable for his own behavior and mistakes.
What Is Included in a Hold Harmless Agreement?
The most important aspect to keep in mind when drafting a hold harmless agreement is that one should recruit an expert lawyer to ensure that there are no errors. Second to that, the use of very specific, nuanced language will help protect both parties by sealing your intentions. If you are dealing with an insurance company or with another contract issuer, some of this will already be provided to you.
A hold harmless agreement may take the form of a Terms Definition sheet, an Indemnification, a List of Exceptions for Indemnification, a Notice of Claim, an Authorization of Indemnification, an Assumption of Defense, a Failure to Defend, or a Settlement and Consent for both parties.
Hold harmless clauses may also come under the headings of Cooperation, Expenses, Payment, Enforcement, Insurance, Duration, Subrogation, Amendments, Rights and Obligations of Both Parties, Liability, Notices, Governing Law, Jurisdiction, General Provisions, and more.
Here is an example of what the clause may sound like:
"The Contractor agrees to defend, indemnify, and hold harmless the Owner and [any other parties] from liability and claim for damages due to bodily injury, death, property damage, sickness, illness, disease, or expenses or losses from the Contractor's performance under this agreement to renovate a home to be paid for out of Owner's pocket. The Contractor will behave in the capacity of an independent contractor with respect to the Owner."
It is common for every country, city, or state to use different language to make everything clear, so be sure to check your clauses and contract rhetoric to ensure it is valid and acceptable for your region and circumstances.
What Is Indemnity?
To indemnify means to protect another party from damages or loss. For example, a business' contracts will protect their employees against fines, losses, and legal fees, to a reasonable scale. In civil proceedings, officers or directors might be protected if they truly acted with rightful intention and in a reasonable manner as a representative of the company. In criminal court, they could also be protected if they didn't have any reason to think they were behaving immorally.
Hold harmless clauses will likely include indemnity language, though some people feel the two concepts are so closely related as to be functionally the same. An example of a hold harmless clause that uses indemnity language is one stating that one party shall "indemnity, defend, and hold harmless" the other "from and against claims, damages, losses, and expenses, including but not limited to attorney's fees, arising out of or resulting from negligence or misconduct in relation to the work defined in this contract."
Hold harmless, indemnity, and exculpatory clauses can seriously mitigate a business or person's risk and help keep the peace. However, errors when drafting contracts can be harmful to either party. It is advisable to seek extensive legal counsel in order to draft such contracts and to have them reviewed by the associations' lawyers before signed off.
Indemnity and Hold Harmless: What's the Difference?
The distinction between indemnity clauses and hold harmless clauses varies from state to state. Many legal professionals behave as though these terms are similar, but there are subtle differences that lead some professionals to favor one over the other. Thus it is recommended that you always make contracts as specific and nuanced in language as possible.
Some suggest that hold harmless clauses regard losses and liabilities specifically, while indemnity registers only losses. However, that explanation cannot be taken as absolute across courts and states. Others believe that "hold harmless" is not as specific as the term "indemnify." For example, a hold harmless stops a business from making a customer responsible for the customer's mistake, whereas the term "indemnify" makes it clear that the business hopes to protect against any claims that emerge from the customer's error.
Still, some people believe that hold harmless clauses offer greater protection, an idea which is explored below.
It is generally best to include both terms for maximum clarity. You can also add extra wording, just in case, to show what the indemnifying person is protecting. For example, a business can hold harmless and indemnify the customer against losses, liabilities, and claims. By stating the exact items being protected, the statement is made increasingly clear and direct and thereby relatively irrefutable. You may also wish to specify timing, such as when or at what point the business will be indemnified. It could be indemnified if or when there is a loss, or after a year, and so on.
If the business hopes to defend the customer against any possible claims, the word "defend" can simply be added to the clause, as in, "The business will hold harmless, indemnify, and defend..."
Degrees of Protection: Contractual Obligation, Indemnity, and Hold Harmless
As mentioned above, people differ in their views regarding the differences between hold harmless and indemnity clauses. To be on the safe side, you can use both.
Is there a difference in protection to you between using a regular contract, an indemnity agreement, or a hold harmless clause? The answer is yes. Though there is still some debate, it is safe to say that an order of preference exists among the three.
- The lowest level of protection is activated in a breach of contract.
In a binding contract, there is a unilateral decision to accomplish something for the other party, and if this is not done, or not done properly, then the contract is breached. You can be sued for any damage you caused. There is minimal protection via concepts such as mitigation and remoteness.
- The second level of protection is secured by indemnity.
In this situation, if someone suffers a loss due to your negligence, you reimburse them. Originally, indemnity was meant to ensure that one party helped the other by making up for losses from an event for which the first party was responsible. The responsibility is triggered by the indemnified party's loss, with no contractual breach having occurred.
Therefore, indemnity is different than a claim for damages. They are completely separate things, born of distinct situations.
Another distinction between a breach of contract and indemnity comes in the form of limitation. For any limitations that apply to a breach of contract, the countdown starts when the breach occurs. For an indemnity, the clock does not start until the party has a right to be indemnified or perhaps until the other party fails to indemnify.
- The third level of protection is a hold harmless clause.
This is the highest protection possible. It is not limited to a breached contract and claiming damages, nor is it a pre-made blanket of protection like an indemnification.
With a hold harmless clause, you claim that you not only indemnify and protect the other party but that you hold them completely harmless. You deny that it is their fault at all.
If you hold the party harmless, you are not simply claiming they will not be harmed. It means you consider them blameless, theoretically and practically. In this respect, a hold harmless clause negates the argument of blame. The indemnifier will not point fingers at the beneficiary, even if that person made the loss happen.
There is a huge significance here, especially in relation to contributory negligence, gross negligence, or even willful or deliberate actions. Indemnity and contractual obligations do not waive liability for those situations. Therefore, despite the similarly between the terms, a hold harmless clause offers the greatest protection of the three options.
It is certainly true that a breached contract or a failure to mitigate could warrant that same protection. However, it depends upon the written contract itself.
Reference to Common Law
It is useful to remember that common law rules relating to damages are always reliant upon what is stated in the contract. Common law cannot be relied upon exclusively. That's why insurance companies have a tendency to exclude.
If you are holding harmless, consider stating explicitly the exact protection and indemnity you are willing to offer, as well as the things you do not wish to cover. This may include gross negligence, deliberate acts, or unforeseeable loss, which a hold harmless clause may otherwise make you accountable for.
Forms For You: Hold Harmless Template
UpCounsel offers a free hold harmless template that you can customize to meet your needs. When possible, it is always best to have a lawyer draft such documents to employ specific language that offers the best protection for your specific situation.
If you need help with a hold harmless agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.