A hold harmless agreement helps protect someone who hired a contractor or another individual from liability if they harm themselves while working for them. It acts as a form of insurance and lets people work together who might otherwise be unable to because of legal liability.
You don’t need to get this document notarized for it to be valid. However, some institutions, like banks, could refuse the document if it’s not notarized due to having signing requirements in place. Check with the institution where you plan to use the document to ensure it doesn’t require notarization.
Types of Hold Harmless Agreements
Explore the three main types of hold harmless agreements in the construction industry to understand the concept better:
- Broad-form: Broad-form hold harmless agreements transfer all the liability from the hiring party to the subcontractor. The subcontractor accepts responsibility for its negligence, the general contractor’s negligence, and negligence for which both parties are equally responsible. Many jurisdictions reject the use of this type.
- Intermediate-form: Intermediate-form hold harmless agreements state that the subcontractor is wholly responsible for their own actions. However, it also says that they can’t be liable for the general contractor’s negligence.
- Limited-form: Limited-form hold harmless agreements state that the subcontractor is only responsible for their proportional negligence. If the subcontractor and general contractor are negligent or cause an accident, the subcontractor will only have liability for their fraction of the incident.
More generally, a hold harmless agreement can be unilateral or bilateral. A unilateral hold harmless agreement only applies to one party, while a bilateral one applies to both.
When to Use A Hold Harmless Agreement
Engaging in business activities comes with some type of risk. A hold harmless agreement lets parties shift risk based on their needs and protect themselves against future lawsuits or losses. It incentivizes parties to enter into contracts they’d otherwise hesitate to sign.
Here are some examples of where you may use a hold harmless agreement:
- Hiring or working as a contractor: Contractors and subcontractors use hold-harmless agreements to distribute responsibility for property damage, personal injuries, or accidents that could occur on construction sites.
- Leasing a property: Landlords and tenants may introduce hold harmless clauses to address liabilities relating to property alterations, maintenance, or use.
- Buying real estate: Sellers can limit their liability for property defects, title disputes, and environmental concerns. Buyers may agree to hold the seller harmless under specific conditions.
- Sponsoring or hosting an event: Property owners and event organizers use these clauses to allocate responsibility for incidents that may occur during a wedding, graduation party, or another event.
- Facilitating potentially risky activities: If you’re having someone engage in a sport or participate in an adventurous activity, you may use a hold harmless agreement to minimize your liability if they sustain a personal injury.
- Providing a service: If you have a business contract in which you provide a service to another entity, you can use a hold harmless clause to protect yourself from legal claims resulting from the outcome of your services. You can also state that you’re not responsible for omissions or errors that may arise while you work.
- Hiring an employee: Employers may have employees sign hold harmless agreements to ensure the employers are harmless for any decisions or actions the employees make while they work.
Example Scenario
Suppose you wanted to remodel your kitchen. You may be reluctant to hire a contractor to come into your home. The contractor may want to sue you if they or one of their employees sustains a bodily injury while performing work at your residence.
By having the contractor sign a hold harmless agreement, you can protect yourself against a lawsuit.
When the contractor signs this agreement, they promise not to sue if they get injured. Also, suppose the contractor’s employee gets hurt and sues you. In that case, the contractor will have to defend the suit or reimburse you for your expenses in defending the claim.
Furthermore, suppose the contractor accidentally drops your old kitchen sink onto the neighbor’s new car. This document can absolve you of any responsibility for the damage. It can also protect you against third-party claims.
Benefits of Using a Hold Harmless Agreement
Explore the significant benefits of having a hold harmless agreement:
- Reduced Risk of a Lawsuit: With this type of agreement, you can reduce your risk of a lawsuit. A person signing the agreement will know they cannot file a lawsuit against you in most circumstances because they have already agreed to hold you harmless.
- Fewer Legal Expenses: Mitigating your chances of facing a lawsuit can also reduce potential legal expenses. Because you can avoid having a party file a lawsuit against you, you may not have to hire an attorney to represent and defend you.
- Limited Negative Public Exposure: You can also reduce potential negative public exposure. If someone files a lawsuit against you, the public knowledge of this suit can harm your brand reputation even if you win. Protecting yourself against a lawsuit also means protecting your brand identity for the long term.
Here are some sufferings this agreement could help avoid:
| Promisor | Promisee |
|---|---|
| Lost Money - Unable to get a job or contract - Did not obtain proper insurance | Lost Money - Responsible for unanticipated losses and liabilities - Did not obtain proper insurance |
| Lost Time - Extended argument involving attorneys in a courtroom | Lost Time - Time spent fighting legal battles instead of building a business |
| Mental Anguish - Prolonged problem hanging over your head | Mental Anguish - Fear of hiring another contractor |
Do I Need to Separate My Hold Harmless Agreement?
Hold harmless agreements, whether separate or a clause within another agreement, can be effective ways to protect a party from liability.
Regardless of their form, a hold harmless agreement always connects to an activity associated with risk. It’s up to the parties’ discretion to separate this agreement or include it in a larger document.
Some examples of situations when you could benefit from having a separate hold harmless agreement include the following:
- You want to incentivize potential board members to work for you and hold them harmless for any decisions they make while on your company’s board.
- This document can be used as a condition for releasing company information and to prevent liabilities that may arise from exploiting that information.
- You can use this agreement to verify that customers know the risks of an activity even if they don’t read your company’s contract.
Do I Always Have to Use a Hold Harmless Agreement?
A hold harmless agreement provides great benefits in many scenarios. However, it’s not always unnecessary, especially in two main instances:
- When the risk is implied: Some activities have inherent and obvious risks. For example, if you attend a soccer match, there’s an inherent risk of a ball hitting a spectator or a stampede because of the large crowds. Because of the innate risks involved with this kind of event, you likely won’t need to make spectators sign a hold harmless agreement.
- When it’s impractical: It might be impractical for businesses to get every customer to sign a hold harmless agreement. For example, a grocery store can’t realistically stop every customer and ask them to sign an agreement before they shop. Instead, the grocery store managers follow realistic protocols, like cleaning spills promptly, to minimize their liabilities.
It might be a good idea to have a hold-harmless agreement. Even if the non-offending party chooses not to enforce the agreement when a breach occurs, they can still implement it in the future, whether the breach is of the same or another covenant or condition.
