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Business Contracts

  1. Defeasance
  2. Grandfather Clause
  3. Hold Harmless Clause
  4. Voidable Contract
  5. Cooperation Clause
  6. Capital Commitment
  7. Escrow

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Hold Harmless Clause: Definition & Overview

Updated: November 17, 2022

Whatever you are doing, there will always be some level of risk involved. Whether it’s simply crossing the road, going to the shops, or working at your job. However, some jobs, events, or activities are inherently riskier than others. When this is the case, it is common for businesses or individuals to sign a hold harmless clause.

But what exactly is a hold harmless clause? And does it fully protect you from liability?

Read on as we take a closer look at the hold harmless clause, show you the pros and cons, and give some examples of the clause at work. 

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    KEY TAKEAWAYS

    • A hold harmless clause can be inserted to protect one or both parties in a contract from liability for losses or damages.
    • When a hold harmless clause is signed, the other party is accepting responsibility for certain risks involved.
    • In some states, any contract that has a hold harmless clause would be prohibited in certain jobs or industries. Mainly the construction industry. 

    What Is a Hold Harmless Clause?

    The hold harmless clause is a statement in a legal contract. It absolves both or one party in a contract of any legal liability for any damage or injuries suffered by the party signing the contract. 

    A company may add a hold harmless agreement to a contract when the service being retained inherently holds a certain level of risk that the business doesn’t want to be held responsible for on a financial or legal basis. 

    The hold harmless clause is also commonly known as a hold harmless provision. 

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    How Does a Hold Harmless Clause Work?

    Businesses that offer activities that can be considered high-risk, such as scuba diving lessons or skydiving sessions, commonly use a hold harmless clause. This clause isn’t a 100% form of protection from liability. It does however indicate that the customer has acknowledged that they will be open to certain risks and have agreed to take them. 

    A hold harmless clause is often in the form of a letter or a segment of a contract. 

    Types of Hold Harmless Agreements

    There are two types of hold harmless agreements:

    1. Unilateral clause: With a unilateral clause, one party will agree in the contract to not hold the other party liable for any damages or injuries incurred.
    1. Reciprocal clause: With the reciprocal clause, both parties involved with the contract agree to not hold the other party responsible.

    Advantages of Hold Harmless Clauses

    The primary benefit of hold harmless clauses is for businesses that inherently hold a fair level of risk. By signing a hold harmless agreement with clients, workers, or any other party, they can effectively reduce their liability in case of an accident. 

    By doing this, they can carry on with their high-risk activities whilst minimizing risks in the commercial agreement. 

    Disadvantages of Hold Harmless Clauses

    The main disadvantage of hold harmless clauses is that they do not 100% of the time protect against lawsuits or liability. Some states also do not honor hold harmless agreements that are overly broad in scope or are vague or ill-defined. 

    In most cases, a hold harmless agreement contains specific language that rules out any confusion. This will most likely be provided by either the contract issuer or the insurance company. 

    The clause may also be deemed null and void if the signers present a strong case that they were forced, coerced, or tricked into signing the hold harmless clause. 

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    Examples of Hold Harmless Clauses

    Hold harmless clauses aren’t just for businesses that deal with high-intensity, high-risk activities. There are many more examples where a hold harmless clause may be deemed necessary. 

    For example, a lease for an apartment may have a hold harmless clause. It could state that the landlord is not responsible for any damage that is caused by the tenant. Or a homeowner that is hiring a handyman to work on their roof may request that the worker first sign a hold harmless clause to protect against a lawsuit. This would be if the worker falls off the roof or accidentally injures themselves. 

    A sports club could want to include a hold harmless clause in its contract with members. This would be to prevent any members from suing them if they are injured in the course of participating in an activity at the club, say a golf or tennis game. In this example, the hold harmless clause may ask that the participant accept all risks that are associated with the activity in question, this often includes the risk of death. 

    Independent contractors often will add a hold harmless clause to their contract. This would be with the express intention of protecting their business against any potential liability arising from the work they are undertaking. For example, if a contractor is hired to extend the kitchen in somebody’s private home, they may add a clause with the intention of preempting a lawsuit if an injury occurs in the kitchen at a later date. On the other hand, the homeowner may want to add a hold harmless clause to prevent any potential lawsuit if the contractor suffers a bodily injury whilst they’re on the work site. 

    To put the two types of clauses into perspective, the first situation described would represent a unilateral hold harmless clause. This is because it is only the contractor who is demanding to be held harmless. The second example would represent a reciprocal clause. The contractor wishes to be held harmless, and the homeowner is also requesting that they are not held accountable for the actions of the contractor. 

    Summary

    A hold harmless clause is a legal contract that can be used to protect one or both parties from liability in certain situations. They are beneficial to both individuals and businesses that undergo processes that involve an inherent level of risk. 

    It is important to remember that just because a hold harmless contract has been signed, you aren’t automatically absolved from any form of liability. They are more likely to protect you in the event of something going wrong, but they are not a bulletproof vest. 

    With this in mind, you should always exercise the utmost caution when presented with any risky activity even if you have previously signed off on a hold harmless clause.

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    FAQS About Hold Harmless Clauses

    How Do You Write a Hold Harmless Clause?

    A hold harmless clause should include:

    • The names of both parties and their addresses
    • The date when the document was signed
    • The full signature of both parties plus a printed name
    • The date the agreement was written
    • Full set of information about the entity holding the event or activity and the location
    • The date the agreement comes into effect
    • The length of the agreement
    • The specifics of the event or activity

    What Is an Example of a Hold Harmless Agreement?

    Let’s take a skydiving business as an example. Skydiving is an inherently dangerous activity, and many things can go wrong. A business that is based around skydiving sessions may want any customers responsible to acknowledge that a chance of death is present. They would therefore write a hold harmless clause into any contract that the customer would sign.

    Are Hold Harmless Clauses Enforceable?

    There is some precedent for these clauses to not be held up. However, it is commonly accepted that any signed hold harmless clause is enforceable. Though the exact terms and conditions of the hold harmless clause in a contract may have a bearing on the outcome of the circumstances. 

    Can I Write My Own Hold Harmless Agreement?

    Yes, you can write your own hold harmless agreements. However, you need to write them in a way that they are legally acceptable and do not use unclear language, or have a broad scope. It is recommended that a legal representative should look over any agreement that has been written to make sure that it would stand up in a legal setting. 

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