Hold Harmless Agreement

Why Do You Need a Hold Harmless Agreement?

Have you ever heard about a hold harmless agreement? This is a contract that two parties sign to release one or maybe both parties from any legal claims. In most cases, a hold harmless agreement template document will be useful when one of the parties is agreeing not to sue the other for any damages, expenses, or losses which arise from an activity or transaction that they are involved in.

Hold Harmless Agreements are used commonly for real estate, construction, consultants, and contractors. It’s important to use this agreement when another is performing a service for you or is using your facility or property in order to limit your legal liability. In addition, you might be asked to sign this form of agreement if you are participating in an activity that another is hosting.

Bear in mind that the validity of this agreement will vary state-by-state. In some states, the agreements are not uphold if overly broad language is used to give protection from liability, while some have anti-indemnity laws which prohibit them in certain construction situations.

When this type of agreement is used in contracts, you might come across many terms that you don’t understand. These have always led to many questions, including this common one that people ask: Are “Indemnify” and “Hold Harmless” the same?

A clause with the phrase indemnify and hold harmless basically mean that you will indemnify the other person for the risk that the clause is related to, while “hold harmless” will typically relate to one person assuming the inherent liability in a situation and releasing the other of any responsibility.

It’s also worth mentioning that hold harmless agreement is referred to by other names such as no fault agreement and indemnity agreement.

The following will highlight the meaning of some other related terms:

Hold Harmless Clause: This is added to legal contracts to state that an organization or individual is not liable for any damages or injuries caused to the party signing the contract. It effectively bars the person liable for indemnification from suing the indemnified party.

It’s important to note that the hold harmless clauses in the agreements are not mutual all the time. In a mutual hold harmless indemnity agreement, each party in the contract is agreeing to take responsibility for, as well as to indemnify each other against loss and injury to person and property. This is meant to be effective even when someone’s negligence causes the related losses and accident, but not uphold in all circumstances.

Indemnity: An insurance that one party provides another if losses or damages result from an activity.

Indemnification: This clause compels one or both party to give compensation to the other for damages or losses outlined in the provision.

Release of liability: This is used in different scenarios, including organized trips, sporting events, or some other risky activity. This agreement clause will state that the participating party won’t hold the organization or company responsible for things such as personal injury, loss of property, or death.

Let us be really honest here—-not everyone actually reads the statements and clauses before clicking the “I Agree To The Terms And Conditions” box when we sign-up for something online. Chances are, most of us also do not go through the nitty-gritties of contracts in real life. Because truth be told, those things are too wordy and sometimes, those nerdy jargons get in the way. Who wants to read something so boring and barely understandable anyway? So the tendency is just to get it over with and sign as quickly as we can, right?

However, as any person in the legal profession would tell you, it pays to actually read the content and the fine print before signing any kind of document. So, for those of us who are not lawyers and not well versed with the legal language, here is a brief yet important ‘lesson’ on something called “hold harmless”.

You may or may not have seen this, but “hold harmless” is a necessary concept, especially for a range of people—- the owners of real estate and businesses, contractor and even those members of a sports club.

 What is hold harmless?

Hold harmless is basically a stipulation or term that specifies an agreement between one or both parties regarding the legal liability for loss, damage, or harm arising out of the contract. The provision includes a manner of determining the compensation or indemnity should the need arise.

  Definition of Hold Harmless Clause

Hold harmless clause in a legal contract or agreement means that a person, organization, business or otherwise called a party is not responsible or liable for any loss, injuries, or damages to another party who has signed the contract.

Hold harmless clause is also called hold harmless provision, Hold Harmless Agreement, or waiver of liability. They are stipulations that are commonly found in the section of leases and easements of contracts. . Most of the time, an individual is asked to sign a hold harmless form or a hold harmless letter before undertaking an activity with a certain amount of risk involved.

In simplest terms, the hold harmless agreement’s purpose is to transfer the risk from one party to another and to save the other party from the possible legal consequences (money, damages, etc.) in the event of harm.

 Kinds of Hold Harmless Clauses

  1. Limited – Party B is not held responsible and cannot be sued for the effects of Party A’s negligence
  2. Intermediate – Party A doesn’t not hold Party B responsible for the negligence of Party A or both parties
  3. Broad – Party A holds Party B harmless for lawsuits against based on the following circumstances:
  • Sole negligence of A
  • Joint negligence of A and B
  • Sole negligence of B

 When to use hold harmless agreement:

  1. When you are leasing your property or facility and you want protection from liabilities in cases of damages or loss experienced by the other party.
  2. A person, supplier, or contractor will be doing services for you and you do not want to be sued if a third party is harmed.
  3. You want to protect others from being sued because of your activities.

 Some examples of Hold Harmless Clauses

  1. A sports club contract for members may stipulate that the members accept all risks involved with their sporting activity—including injury or death. Members cannot sue the sports club for any injury they may sustain while participating in sports activities at the sports club.
  2. In the field of real estate construction, workers are made to sign a hold harmless agreement to stating that they recognize the nature of the construction tasks and frees the contractor and the real estate developer from responsibility should a work-related accident happen.
  3. When doing your home renovation with a contractor, you may want to protect yourself from a lawsuit in case your delivery man or the mailman sustains injury by tripping in your property amidst construction.

An example of hold harmless agreement template from the Risk Transfer Manual (page 16) published by C.M. Althoff Co. in 1999

“To the fullest extent permitted by law, the (contractor/vendor) agrees to defend (including attorney’s fees), pay on behalf of, indemnify, and hold harmless the (entity), its elected and appointed officials, employees and volunteers and others working on behalf of the (entity) against any and all claims, demands, suits or loss, including all costs connected therewith, and for any damages which may be asserted, claimed or recovered against or from the (entity), its elected and appointed officials, employees, volunteers or others working on behalf of the (entity), by reason of personal injury, including bodily injury or death and/or property damage, including loss of use thereof, which arises out of or is in any way connected or associated with this contract.”

 How to create a hold harmless agreement?

  1. Prepare the following information

-Name and address of the party who will be protected from liability

-Name and address of the party providing protection from liability

-Person to sign on behalf of the party being protected

-Person to sign on behalf of the party providing protection

-Date of agreement and enforcement of the provisions

-State laws that apply (this varies from different states)

 

  1. Follow the sample stated above to make your draft.
  2. If it will be a large-scale project you are undertaking such as in the case of real estate or business, it is best to consult with a lawyer regarding the enforceability of the hold harmless in your state.
  3. Print your hold harmless agreement in several copies.
  4. Have the parties sign in the designated areas. Have lawyers present in the signing if necessary.
  5. Keep your copy in a safe place. Who knows when you might have to bring it out again?

 

See, the hold harmless clause is a pretty useful piece of legal information that is great to have in mind. Hopefully you can apply it well and you will not be caught in any legal issues relating to it.

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