What to Know When Using a Hold Harmless Agreement
Some level of risk is built into every interaction with clients. Among the many concerns that make business leaders wary: the possibility of being held liable for issues that are out of their control.Download Template
A hold harmless agreement (HHA) mitigates this risk by ensuring that a particular business cannot be held liable for any potential injuries or losses that occur while clients are using its products or services.
Sometimes referred to as indemnity contracts, these documents are typically signed at the outset of business relationships — or before clients move forward with activities that involve any element of unavoidable risk.
While HHAs are designed to reduce risk, they come with their own set of hazards. If these documents aren't sufficiently thorough, for example, businesses can still be held liable. As such, we've compiled a helpful guide to let you know what an HHA might include and why attention to detail is so important. We'll discuss basics worth covering in an HHA, as well as best practices for using a template and getting the document signed.
Basics to Cover in a Hold Harmless Agreement
Because covered activities vary to such a wide degree, HHAs often look quite different from one business to the next. Still, a few basics must be covered to protect the business in question. As such, the typical hold harmless agreement template will aim to fulfill the following essentials:
- Identify the indemnitor and the indemnitee. First and foremost, an HHA must designate the indemnitor (who is obliged to hold the other party harmless) and the indemnitee (who will be held harmless once the contract is signed). This clause may also identify the locations of the indemnitor and indemnitee.
- Define activities for which the indemnitee will be held harmless. This section should be as specific as possible so as to avoid confusion. When completing this clause, consider: which business activities involve built-in risk? When might a client attempt to hold a business liable if a particular activity isn't identified in this section?
- Explain termination and severability. How can the HHA be ended or altered? Often, this section will describe the role of written notice in terminating or amending the agreement. The document should also explain that, if one of its sections is deemed unenforceable, this should not affect the contract's other clauses.
Best Practices for Signing a Hold Harmless Agreement
Understanding what a hold harmless agreement includes is important, of course, but this knowledge matters little if you fail to properly execute the contract. Keep these best practices in mind as you make the most of every HHA:
- Use a hold harmless agreement template. Businesses developing hold harmless agreements often struggle to use clear language, which is essential for creating an ironclad contract. A hold harmless agreement template provides a sense of direction while also offering opportunities for customization.
- Periodically review agreements to determine whether the listed activities are relevant. Many businesses shift their services over time but fail to adjust their HHAs accordingly. Then, as clients take advantage of newly offered services, they have the opportunity to pursue liability. If HHAs outline options for amendment, however, these agreements can be altered as needed.
- Pay attention to local legislation. The validity of an HHA can vary from one location to the next — in part because many states have implemented anti-indemnity statutes. These regulations often apply exclusively to select industries, such as construction. As such, it's important to determine in advance whether a desired HHA will be deemed valid in your jurisdiction or for your purposes.
Final Steps: Getting the Contract Signed
Once you've checked and double-checked your HHA, it's time to get it signed. Pay close attention to document security as you consult with clients and complete this final step. Nitro delivers peace of mind with an eSign solution strategically designed to keep your information safe and organized. Get started today with a free trial.