What Is Hold Harmless Agreement? Does Your Business Need One?
by Shahnawaz Alam Legal 02 January 2024
Do you run a bungee jumping or a paragliding business? Wait, let’s make it a little more relatable. Do you own a house and rent it to people? What if the roof collapses and your tenants get injured? Do you have anything to help you avoid getting sued? What then? That’s where a hold harmless agreement comes in.
This is a clause in your contract keeping you from getting sued by a third party. Well, if that sounds a little too technical, I would suggest going through this piece of content.
Here, you will learn all about HHA and if your business needs it.
What is a Hold Harmless Agreement?
A hold harmless agreement or an HHA is a clause in a contract that relieves one party from the liability of specific types of damages. These damages can be bodily damages, property damages, or financial loss. Professionals and business owners often call these agreements as liability waivers, release liability, or hold harmless letters.
Companies running a small business in an enormous-risk industry might want to get small business insurance that comes with a hold harmless agreement. Thanks to the HHA, a small business can avoid being sued by any third party. They can also slip past some expensive litigations as well.
Types of Hold Harmless Agreements
The business world has two different types of HHA – unilateral and reciprocal HHA. Based on the business requirements, they can choose either of the types that protect one or both parties from damage. Here is a better explanation –
Under this type of HHA agreement, one party agrees not to hold the other party responsible should any damage were to happen.
Under a reciprocal agreement, both parties agree not to hold either of them responsible.
Which Industries Use Hold Harmless Agreements?
Well, now that you know what the Hold Harmless Agreement is, it is time to learn about different industries that have adopted this agreement.
Here is a set of companies and industries that usually have an HHA in place –
- Real estate
- Service Industry engaging in high-risk work environment.
Although these industries have a high saturation of HHA clauses in their contracts, it is not alien to other businesses. Besides, it wouldn’t hurt if you got HHA clauses in your businesses. Moreover, it would help you mitigate unnecessary exposures to different liabilities.
What is an Example of a Hold Harmless Agreement?
Now, for the example, it would be better to understand which industries benefit the most from an HHA. If you work in a high-risk industry like real estate or construction, an HHA is more than important. You will always have some third party working on site where property or personal injury can easily take place. Here is an example –
- When a real estate company or a contractor is working for you, you may have to sign an HHA with them. They wouldn’t want to be held responsible for any damage caused during their work on the construction site.
- A real estate company with an agent taking clients to show around a property may need a hold harmless contract. They wouldn’t want the client to sue them for any event or injury occurring during their visit to the site of the property.
Pros & Cons of Hold Harmless Agreements?
Here are some benefits and disadvantages of using a harmless agreement –
Pros of HHA
Low Risk Of Business Lawsuit:
If you want to avoid getting sued quite often, then a hold harmless agreement is a must-have clause in your business contracts.
Lower Legal Expenses:
A higher number of business lawsuits increases the chance of hiring legal attorneys. Also, the fees of business attorneys are not getting low. So this means that you have more legal expenses to deal with.
Less Stress Handling A Business:
Legal charges on your business are not only heavy on your pocket but also have some effect on your mind. You don’t want your vendors and customers to be on the lookout to sue you. But, with a hold harmless agreement, you can build a wall of protection to bounce off all legal accusations. Yes, you can say bye-bye to stress and anxiety.
Stop Putting your business’s reputation at risk:
Frequent lawsuits on your business can put your business’s reputation in front of a difficult question. Dealing with a business with serious questions about its brand image is like living with stage four lung cancer.
Cons of HHA
Here are some of the cons of a hold harmless agreement –
Limitations In Some States:
HHA can be under serious limitations in some states. HHAs that are unclear and too broad often get overlooked. Some States do not honor the HHA much.
Can be claimed null & void:
Types of Hold harmless agreements: different types of HHAs can be claimed as null and void under certain circumstances, especially if the signer believes that they were tricked into signing the contract in the first place.
HHA cannot always be foolproof:
Just having a harmless agreement is not enough to keep a business away from the risk of unexpected risks. It means this clause is not foolproof, not always. It would be better if you consulted the same with an attorney before incorporating it into your contract.
When to Have a Hold Harmless Agreement?
Many businesses run operations that can potentially cause personal injury to the clients or the customers. Under such cases, a business needs to have an HHA included in its contracts. Certain types of businesses can cause personal injuries.
For example –
- rock Climbing
- zipline courses
- working out at the gym
- horseback riding
These businesses do involve certain levels of personal injury risks. More so, if you are a home renter, you might want to create a hold harmless agreement to avoid getting sued by your tenants should any damage occur to them. However, you could be held responsible for any property-related damages caused to them.
Hold harmless agreement has another name as well. It is called an Indemnity agreement. People doing business in a risky sector may want to keep themselves from unnecessary legal troubles. They can have an HHA in place to keep themselves legally defended. However, whether your business needs it or not depends on the landscape you work in. You must also take the pros and cons of the same into account if you are opting for one.
So, did you find the answer you were looking for? Take it to the comment section and let us know. Thanks for the time and attention on the page. We like readers like you.