Hold Harmless Agreement: Everything You Need to Know
Hold harmless clauses can be reciprocal or unilateral. If the clause is reciprocal, both parties agree not to hold the other liable for damages, losses or liabilities. 3 min read updated on February 01, 2023
A hold harmless agreement or clause refers to a statement within a contract or a separate document stipulating that an organization or individual is not responsible for any damages or injuries caused to the party signing the contract. Also known as an indemnity agreement, a waiver of liability, no-fault agreement, release of liability or hold harmless release/provision, a hold harmless clause is commonly used when drawing up construction and real estate contracts.
The hold harmless agreement is usually provided by a subcontractor to the builder, contractor, or other professionals, insuring them against work executed by the subcontractor. In certain cases, such an agreement protects the contractor from claims brought against it by companies or corporations that are not party to the agreement.
Also, businesses and sports clubs that engage in high-risk activities like skydiving, regularly make use of such agreements. Situations that warrant the use of the clause include where one party wants to use the property of another or participates in activities hosted by the other party.
Types of Hold Harmless Clauses
Hold harmless clauses can be reciprocal or unilateral. If the clause is reciprocal, both parties agree not to hold the other liable for damages, losses or liabilities. With unilateral clauses, one party agrees not to hold the other responsible for damages or injuries incurred. A hold harmless agreement may be rendered invalid if either party commits fraud, or engage in illegal activities or negligent behavior.
Conditions for Hold Harmless Clauses
Though it can be used alone, a hold harmless form could also be included in a more involved liability waiver. Such forms are used when one party wishes to avoid all financial and legal responsibility towards those they conduct business with. However, it should be noted that a hold harmless agreement doesn't make an entity invincible; it doesn't free the indemnified party from all basic, reasonable and standard legal responsibility.
Such responsibilities include providing an environment that is as safe as possible or following local/standard rules and regulations. If the entity does not comply with safety and procedural requirements, then the hold harmless agreement offers little or no legal protection. Businesses that are aware of faulty machinery or equipment, and don't fix it on time or use proper signage while broken, are responsible for any injury or liabilities that may occur.
For instance, if a gym member falls off a treadmill and breaks a leg due to a defective mechanism within the treadmill that the management is aware of, it is very likely that a hold harmless agreement would not void or mitigate their liability.
Hold harmless agreements are meant to provide entities protection from unfair and malicious litigation and can be easily incorporated into day to day business practices. Once the hold harmless template has been drawn, the participant's signature is required to make the document valid and legally binding.
Situations Where Hold Harmless Clauses Can Be Used
Hold harmless agreements are not enforceable when the indemnitee is the cause of the accident, negligent or inattentive when operating a piece of equipment. The following are some of the scenarios where hold harmless agreements may be used.
- A tennis club may require members to sign a hold harmless agreement or include it within its contract to prevent club members from bringing a claim if they are hurt during a tennis match. The agreement asks that the participant accept all injuries and waives all liabilities arising from said activity.
- Contractors often require clients to sign a hold harmless agreement to protect themselves from liabilities arising from their work. When adding a structure to a client's private residence, contractors may include the hold harmless clause in the contract to avoid being liable for injuries that may occur in the future.
- A homeowner may also request contractors to sign a hold harmless agreement to preempt a lawsuit if the contractor is injured while working on the property. This is an example of a reciprocal clause while the situation described above epitomizes a unilateral clause.
- A landlord may also include a hold harmless clause within the lease agreement, declaring that he/she is not liable for negligence within the rental property.
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