What Is A Hold Harmless Agreement? – Let’s Take A Look

hold harmless agreement

With the help of a hold harmless provision, you can protect your business from being sued by someone. A user can be someone who has suffered damage, bodily personal injury, or a financial loss on their business property while your business is offering a service. The hold harmless agreement can ensure you that some other party cannot hold you responsible for any risks during the service.

In this article, you will get a general idea of the hold harmless clause that comes in a legal contract. Furthermore, we will also discuss some of the general details of the importance of this legal clause in business and how it can be helpful for you. Hence, to learn more about the importance of this important clause, read on through to the end of the article.


What Is A Hold Harmless Agreement?

What Is A Hold Harmless Agreement

According to the definition of Investopedia,

A hold harmless agreement 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.”

The hold harmless clause in your legal contract helps your business to release from liabilities such as financial loss, property damage, or bodily injury to another party while offering services. The hold harmless agreement allows business owners of all levels, especially the ones in high-risk industries, to protect their businesses from lawsuits. This agreement can be a great addition to the business.

What Is A Hold Harmless Letter?

A hold harmless letter is just the agreement or clause that is a part of the agreement, which releases the business’ liability in the contract. It is just another name for the hold harmless agreement.

What Are The Major Uses Of The Hold Harmless Agreement?

What Are The Major Uses Of The Hold Harmless Agreement

As per the information provided by The Hartford,

A hold harmless clause is used as a release of liability in a contract that protects one party from injury or property damage caused by another party. By signing the clause, the other party is agreeing not to hold business owners legally responsible for the risks involved in certain services.”

The major use of a hold harmless agreement is that your business will likely get less sued than usual. Hence, you will not need to incur the high cost of getting legal bits of advice from your lawyer or attorney. Furthermore, you will also be able to focus more on your business rather than thinking about the possibilities of facing problems in your business.

A hold harmless agreement is especially beneficial at times when a third party will be using your services. For example, a third party might be using your property, or your business is responsible for providing services to another party. In such cases, having a hold harmless clause in the agreement helps not to get involved in the legal process when there is damage to the other party.

If you are renting or leasing a property to someone, you will not want to get sued if that person gets injured or experience property damage during their visit. Although you will get sued, insurance in this regard will help you to cover the expenses.

Another example can be the one when you are a general contractor, and you want to avoid a legal proceeding if the other person gets injured on the job.

Is A Hold Harmless Agreement Binding?

Is A Hold Harmless Agreement Binding

According to The Hartford,

In most cases, a hold harmless agreement is binding and legally enforceable. Business owners should include specific language in their contract, stipulating a release of liability from lawsuits that occur as a result of negligence.”

However, the service consumer or customer can still claim legal liability from a third party, especially when the business owner has signed the agreement.

Major Pros And Cons Of A Hold Harmless Agreement

Major Pros And Cons Of A Hold Harmless Agreement

You have already seen that the hold harmless agreement is a crucial aspect of the liability insurance policy of a business’ commercial insurance. It minimizes the risks of the business’s reputation from getting hampered and the major financial impact if the business faces litigation.

The following are the major pros and cons of a hold harmless agreement that you must be aware of for your business:

Pros Of Hold Harmless Agreement  

Here are the major pros of a hold harmless agreement from which you shall benefit:

1. Having a hold harmless clause on your insurance policy will help your business by reducing legal liability. This will further lessen the likely expenses you can have with a law firm.

2. A business that has a hold harmless agreement has less likelihood of getting sued. This helps the business not to hire lawyers often for the business.

3. You will not have to worry about legal problems, for example, getting sued. You will, thus, be able to focus more on your work, and this, in turn, will enable your business to thrive.

4. Your business’ reputation will not get hit, especially in a public litigation conflict.

Cons Of Hold Harmless Agreement

A hold harmless agreement enables a business to hold a party harmless despite damages and injuries. This leads to various drawbacks as well. Here are a few cons of the hold harmless agreement that you must know:

1. Many states in the US do not honor the provisions of a hold harmless agreement, especially the ones that are unclear and too broad.

2. A certain hold harmless agreement can go to avoid if the signer believes that he/she was tricked or forced into the given indemnity agreement.

3. Just because someone is held harmless, it does not mean that the hold harmless agreement can protect the business from a lawsuit. In such cases, you will need to consult with your business attorney to take legal advice on any unforeseen risks.

Summing Up

Hope this article was helpful for you in getting a better idea of the hold harmless agreement and the various uses, pros, and cons of it. What do you think of the ethical dilemma that occurs with such an agreement? Share your thoughts on the issue with us in the comments section below.

Read Also:


Please enter your comment!
Please enter your name here