A hold harmless agreement is a contract that protects a business against lawsuits when someone suffers damage, bodily injury or financial loss on business property or while a service is being provided. This agreement can be either unilateral, meaning the contract protects only one party, or reciprocal, where both parties waive liability against each other.
A hold harmless agreement is also referred to as a hold harmless clause, hold harmless letter, hold harmless release, hold harmless provision, indemnity agreement, release of liability or waiver of liability.
What type of businesses use hold harmless agreements?
Hold harmless agreements are common in cases when there is a high degree of bodily injury or property damage risk. These are common in industries including:
Contractors in the construction industry 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.
In real estate, a hold harmless agreement moves any property liability from the seller to the buyer and is commonly used in foreclosures. In addition, landlords usually include a hold harmless clause in their leases that release them from responsibility should the lessee or tenant cause damage to the rental property, or if an invitee of the lessee or tenant is injured while visiting the property.
Events and High-Risk Activities
If you sponsor, host or organize an event, you may be held liable for any injuries or damage that occurs. An event business or sports agency may utilize hold harmless agreements in case an attendee or participant becomes injured, such as at a concert or 5k race. In addition, high-risk activity businesses, such as a company that offers skydiving sessions, will include hold harmless clauses in waivers required to participate.
What information should a hold harmless agreement include?
A hold harmless agreement requires specific language and should include:
- The protected party: This is the person or company that wants liability shifted away from them. Be sure to include their legal name and contact information.
- The other party: This is the party that assumes the risk. Include their name and contact information.
- Agreement date: This may be before or at the onset of the activity listed.
- Location details: This is where the event or activity will be conducted.
- Activity details: List exactly what the other party will be doing that has them assuming risk. This might be bungee jumping or electrical work. Be sure to clearly describe what’s being done.
- Effective dates: List when the hold harmless agreement starts and for how long it will be effective.
- Signatures: All parties should sign and date the agreement.
What are the types of protections offered by a hold harmless agreement?
When you create a hold harmless agreement, you can choose between three kinds of protection:
General Protection
A general hold harmless agreement insulates the protected party against legal action related to a specific activity. The legal protection is framed narrowly. For example, it might only apply for participation at a specific company-sponsored event, like a 5k fun run.
Services Protection
Protects against liabilities that occur while someone performs a defined service. For example, a contractor on a construction job agrees to hold the homeowner harmless if anything happens to the contractor while working on the project.
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 landlord may have a hold harmless agreement for someone renting one of his properties.
What are some potential benefits and drawbacks of a hold harmless agreement?
Potential benefits can include:
- Lower your lawsuit risk.
- Reduce your legal expenses.
- Minimize a hit on your reputation.
Potential drawbacks can include:
- Some states do not honor hold harmless agreements that are too broad or unclear.
- Some types of hold harmless agreements can be voided if the person signing believed he or she was forced or tricked into the hold harmless agreement.
- Being held harmless may not always protect your business from a lawsuit. Consult with an attorney for legal advice on any unexpected risks.
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