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Will Kenton is an expert on the economy and investing laws and regulations. He previously held senior editorial roles at Investopedia and Kapitall Wire and holds a MA in Economics from The New School for Social Research and Doctor of Philosophy in English literature from NYU.
Updated May 12, 2024 Reviewed by Reviewed by Robert C. KellyRobert Kelly is managing director of XTS Energy LLC, and has more than three decades of experience as a business executive. He is a professor of economics and has raised more than $4.5 billion in investment capital.
A hold harmless clause, also known as a hold harmless agreement or hold harmless provision, is a clause in a legal contract absolving one party of legal liability for any injuries or damages suffered by another party. It ensures that one party cannot hold the other party legally responsible for any risks incurred from services provided.
Hold harmless clauses can play a crucial role in business transactions. This type of agreement is especially prevalent in industries like sports, real estate, construction, and others where the potential for loss or injury is high. For example, in some real estate lease agreements, a commercial tenant might agree not to sue the landlord for injuries resulting from the landlord's failure to maintain the property.
Businesses that offer high-risk activities, such as skydiving sessions, commonly use a hold harmless clause. Although a hold harmless clause is not an absolute protection from liability, it indicates that the customer has acknowledged certain risks and agreed to take them. This agreement if often in the form of a letter or a waiver that the participant must sign.
The hold harmless agreement may be unilateral or reciprocal. With a unilateral agreement, one party to the contract agrees not to hold the other party liable for injuries or damages incurred. With a reciprocal agreement, both parties to the contract agree to hold the other harmless.
A hold harmless clause does not always protect a company against lawsuit or liability. The agreement must specifically state that the signee is waiving their right to sue for negligence.
Hold harmless agreements are not just for high-risk activities like skydiving. They are also found in more common, everyday situations.
For example, an apartment lease may include a hold harmless clause stating that the landlord is not responsible for any damage caused by the tenant. Similarly, a homeowner hiring a roofer might request a hold harmless agreement to protect against a lawsuit if the roofer falls off the roof. Sports clubs and fitness centers also use these agreements to prevent their members from suing if they are injured while exercising. In these examples, there might be a clause requiring the participant to accept all risks associated with the activity, including the risk of death.
In the construction industry, contractors often add hold harmless agreements to their contracts to protect their businesses against potential liability related to their work. For example, a contractor building a deck might add a clause to avoid future lawsuits for injuries occurring on that deck. The homeowner, in turn, may use a hold harmless agreement to prevent a lawsuit if the contractor suffers an injury while building the deck.
The first situation described just above represents a unilateral hold harmless agreement. The contractor is the only one demanding to be held harmless. The second example represents a reciprocal agreement. The homeowner is also requesting indemnity from the contractor.
A hold harmless agreement does not always protect against a lawsuit or liability. The effectiveness depends on the specific language and the nature of the agreement. For example, hold harmless agreements that are nebulous in language or overly broad in scope might be disregarded. Moreover, the clause may be deemed null and void if signers present a strong case that the agreement was fraudulent or they were coerced into signing a hold harmless clause.
Some states are less friendly toward hold harmless agreements than others. In some jurisdictions, anti-indemnity regulations limit or even prohibit the use of hold harmless clauses within certain professions or under some circumstances, such as residential tenancies.
Hold harmless essentially means just that: at least one of the participants in a contract is not held responsible or liable for losses. It appears as an agreement in a contract or a waiver before using a service. When signed, a hold harmless clause should result in the party requesting it being freed from liability for damages, injuries, or other losses.
If the state where a hold harmless agreement us being used recognizes these types of clauses and accepts their use in that particular context, then they should be binding. That's not a guarantee, however. If the agreement is vague and difficult to understand, overly broad, or if it can be proved that it wasn’t signed with free will, it will likely be disregarded by a court.
Hold harmless clauses go by many names. They may also be called hold harmless agreements, hold harmless provisions, or indemnity agreements.
Hold harmless agreements function as a type of insurance, preventing businesses or ordinary people from being held legally responsible for specified losses or damages for which they might otherwise be considered liable. They appear in legal contracts as a clause and must be understood before being signed.
Having such an agreement in place can be worth the legal expenses required to put it in motion for businesses deemed to be more at risk of getting sued, such as contractors, sports facilities, and landlords. However, these agreements are not always bulletproof. To be enforceable, they need to be clear, put together with care, and recognized by the state where the activities take place.
