A hold harmless waiver is a provision found in contracts that states that one party will not hold the other liable for losses, damages, or other legal issues. Such waivers can apply to only one of the two parties in a contract or both.

What Is a Hold Harmless Waiver?

Hold harmless waivers are used to limit the liability of one or both parties in an agreement. Such potential liabilities can include:

  • Risks
  • Dangers
  • Injuries
  • Damages
  • Losses

Frequently, hold harmless waivers are found in contracts where an individual is taking part in a potentially dangerous activity or purchasing something that presents possible risks. They can apply to just one side or both sides of the contract.

Other names for hold harmless waivers include:

  • Hold harmless letter
  • Hold harmless release
  • Save harmless clause
  • Waiver of liability
  • Release of liability

Hold harmless waivers can be found in many different contract types but are most often seen in construction contracts, leases, and easements.

Hold harmless waivers are similar to indemnity clauses because the liability is shifted to one of the two parties. The main difference is that hold harmless waivers can cover liabilities as well as losses, while indemnification tends to only cover losses.

When to Use a Hold Harmless Waiver

It is wise to use a hold harmless waiver in any agreement that presents potential financial or physical risks. When transferring real estate, a hold harmless waiver can be included in the property transfer agreement in case anything goes wrong with the property. If the buyer signs the contract with the hold harmless clause present, they cannot sue the seller if something happens that costs them money or causes harm.

Construction developers will also use hold harmless waivers to protect their companies from liability while workers are operating dangerous machinery. Once a building is finished, a hold harmless clause can protect the construction company from any future issues as the owners of the building put it to use.

Other high-risk organizations and businesses will use such waivers with their customers. Think of companies that provide access to adventurous activities like rock-climbing, sky-diving, mountain biking, and more.

Types of Hold Harmless Waivers

There are two different forms of hold harmless clauses:

  • Reciprocal
  • Unilateral

A reciprocal hold harmless clause applies to both parties involved in the agreement. Neither party is allowed to hold the other liable for damages or losses under this type of clause. A unilateral clause only covers one of the two parties. Unilateral clauses are usually used in the adventure activities previously mentioned because the company is the only party taking a legal risk in that case.

When a contract poses a risk to both sides, a reciprocal hold harmless waiver may be used.

Examples of Hold Harmless Waivers

Some common examples of hold harmless waivers are used with sports, contractors, and business organizations.

In the case of sports, hold harmless clauses are used to make sure that the athlete or participant understands the risk of the activity they are choosing to participate in and they accept full responsibility for any injuries sustained while participating. Marathon runners are frequently asked to sign some form of a hold harmless waiver so that they don't try to sue the race organizers if the run causes medical issues. Family members won't be able to sue either if the person who signed the waiver dies.

Contractors will sometimes use hold harmless clauses when working on a house. The waiver will protect the contractor from being sued if they fix the roof, but then it somehow causes an issue later on. Contractor agreements might use a reciprocal hold harmless waiver in order to also protect the homeowners from being sued if any workers are injured on their property.

The formation documents and bylaws of a business structure might also include hold harmless waivers. This would be more likely to protect against financial liabilities rather than physical injuries. For example, the ownership of a limited liability company (LLC) might assume financial responsibility for mistakes made by volunteers or employees.

Necessary Information for a Hold Harmless Waiver

There are a few things that must be included in a hold harmless waiver to help ensure that it will hold up in court, including:

  • Names of all parties involved in the contract and waiver
  • Signature of both parties, or their representatives
  • Date of the agreement and when it becomes effective

When forming a hold harmless clause, you'll want to double check any state-specific requirements to be sure that the contract is enforceable in the state that the sale or activity is taking place.

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