What does it mean to prepare a hold harmless agreement: Why should you use a hold harmless agreement?

Hold harmless agreement saves business owners against lawsuits for any future liabilities that may arise with whom the businesses are connected and refrain other parties from suing them under particular circumstances.

Hold harmless agreements are specifically formed by real estate, construction, and service industries that are correlated with high-risk activities. Even if you are not connected with these services, adding harmless clauses in your contracts and agreements will protect you from exposure to future liabilities.

 Many professionals believe that ‘indemnify agreement’ only protects you against losses, whereas ‘hold harmless agreement’ covers you against both losses and liabilities. However, the statement does not apply to every situation. For instance, indemnification saves a business when a customer who is at fault makes a claim. On the contrary, the hold harmless clause protects businesses from being liable for any mistake done by the customer. Experts recommend adding both clauses before making a business contract to limit liabilities and maximize protection.

Hold harmless agreement protection clauses depend on the jurisdiction in which you intend to execute them. Moreover,  that may vary if parties are doing business in different jurisdictions. Hold harmless agreements can be unilateral or reciprocal and can be formed before initiating a project and even after the execution of an activity.

Why is it important to make a harmless agreement?

At times when you sponsor an event, you permit other parties to use your property to perform work for you, make sure to have them sign a hold harmless agreement. It is beneficial when:

You’re leasing or renting your property and on visiting, you don’t want to be legally claimed if anybody suffers from the property damage.

You’re sponsoring event(s) that relate to physical activities such as sports – and you don’t want to take responsibility if anyone gets hurt throughout the event.

You are hiring service providers to work on your construction project – and you want to limit your liabilities from the workers if they get injuries during their working hours.

You’re suggesting covenant changes and want to protect yourself from legal disputes.

You’re planning to start a business and want to protect yourself from getting into legal ramifications.

Benefits of hold harmless agreements

The hold harmless agreement shields your business from every negative impact that may process legal litigations through:

Diminishing your anxiety and mental health: By signing a harmless agreement, you can focus on your business rather than hold fears of being sued.

Reducing legal expenses: Firms that produce harmless agreements are less likely to be sued legally – so they normally don’t hire lawyers for themselves.

Reducing reputational risks: You can also protect your reputation by not getting involved in a public legal battle through a hold harmless agreemen If the media covers your business suit, your name can be at risk in these situations.

Different types of hold harmless agreements

These agreements are comprised of three categories:

General:  A hold harmless agreement that is made under the general category isolates its owner from legal actions associated with specific conditions and activities. Here, the legal actions that can be taken against such activities are narrowly framed. For instance, general agreements can be specified only for the participants of a sponsored event. 

Use of Property:  In this category of hold harmless agreement, the owner is protected against the lawsuits initiated from a party that rented or used the property for any means.

Services: This form of agreement protects a person from legal responsibility that arises while one performs a specific service. For instance, a contractor signed a hold harmless agreement with the general contractor who aimed to hire him.

Do you need a lawyer to draft a hold harmless agreement for you?

Although you will be able to find the needed legal information and templates to draft a hold harmless agreement. However, we recommend you consult a lawyer for the deed to minimize the risks.

What information do you need to create a harmless agreement?

You may have to answer some questions to make your hold harmless agreement. Other than that, you must know:

Category of the subject: You need to specify in which category your needs fall. If you are not renting your property, nor hiring any service provider, then you need to select a general.

The person who will be held harmless: The credentials of the person, name, address, and other contact information of the signee.

Description of transaction: The reason for which the first party holds the other party harmless. For instance, if a person got injured in an event, but on medical records, one was found healthy, so they hold the event manager harmless.

Some construction scenarios prohibit holding harmless agreements. You may need to hire a local lawyer to know about your jurisdiction laws and the enforceability of the agreement. Plus, your agreement may not protect you against negligence actions, such as the use of restricted equipment.