A hold harmless clause or agreement is a contract between two parties. It implies that one party can assume legal liability associated with a certain act, action, or activity. The clause or agreement relieves the other party of that liability.
One can use a hold harmless provision in a variety of different situations and settings. For example, they are used by individuals that take part in an activity that has some risk of injury. The following review will explain this clause in detail. See how one can use it for his or her advantage in business.
What are the Specifics of a Hold Harmless Clause?
A hold harmless clause must utilize specific language. Describing the act, action, event, or activity that is the subject of the provision is a delicate matter. If the clause is too vague, it may end up being unenforceable. If the description of what is inside is not clear and specific, the hold harmless provision may end up having no effect.
First, one must identify the parties to the clause or agreement. If a business is one of the parties, the agreement identifies it by typically using its legal name. In many cases, the geographic location is needed in order to be more specific. If a party is an individual, his or her legal names will obligatorily make an appearance in the document.
The person who signs a document containing this type of clause must be legally capable of entering into a contract. In the final analysis, a clause of this nature is a contract. To put it bluntly, a person agreeing to a hold harmless provision must be mentally competent and an adult. In some cases, a minor will take part in an activity or event that requires agreement to such a clause. When such situations arise, a parent or guardian must execute it on the child’s behalf.
When are Hold Harmless Clauses Important?
Hold harmless clauses are in use in a wide array of different settings and for a variety of purposes. Let’s look at a prime example of when a hold harmless clause is important. When a person is going to participate in a potentially dangerous activity, or in one that poses at least some level of risk. In this case, a signed clause could save your business from total disaster.
For example, if a person is going to bungee jump, he or she will probably have to sign a hold harmless provision. The sponsor of the jump is likely to require agreement to a hold harmless clause in advance of permitting a person to participate in the activity. Other examples of when a hold harmless agreement may be required include travel experiences, certain recreational activities, and similar functions and activities.
How to Implement a Hold Harmless Clause
The first step in implementing a hold harmless clause is to ensure that it properly is drafted. An error in drafting a hold harmless provision can result in it being of no effect.
In the best case scenarios, the thing to do is call an attorney to draft a hold harmless provision or agreement. There are attorneys who are familiar with ensuring this type of provision turns out with an appropriate structure.
You will also want to discuss the complete set of ramifications that come with a hold harmless agreement with a legal counsel. You need to question an attorney specifically about any potential negative consequences associated with a business electing to utilize a hold harmless agreement.
There are standard form hold harmless agreements available online and elsewhere. While these might be suitable, it is important for you to understand that these types documents are governed by state law. These laws can vary somewhat from one state to another.
Once the draft is ready, implementing the clause requires that both parties to it have the opportunity to review it. One must make sure both parties have an opportunity to fully understand the conditions of the provision and how it applies to a party.
Coercing a person into a hold harmless provision is illegal. The act of agreeing to a hold harmless provision must be voluntary.
How a Hold Harmless Clause Can Help Your Business
A hold harmless provision can assist your business in a number of different ways. First and foremost, depending on the nature of your business, hold harmless provision can limit its financial exposure if a patron somehow suffers injury by participating in an activity somehow in link with the business.
The use of a hold harmless provision helps to defray potential legal expenses. In addition, it lessens the risk of legal action that could result in some sort of judgment against a business.
You do need to keep in mind that a hold harmless agreement is not necessarily absolute. One can challenge it in a court of law. However, if that ends up happening, the burden typically ends up on the party challenging a hold harmless provision to demonstrate why it should not be the case.
Depending on the laws in a particular state, there can be some types of activities that have an associated risk for which a party cannot execute an agreement to hold harmless. Typically, these are some types of particularly hazardous activities.
Insurance and Hold Harmless Agreement
There is one factor that needs to be borne in mind when it comes to the use of a hold harmless provision. First, the business must maintain insurance coverage for some type of activity. Second, the business also must seek a hold harmless agreement from a patron, customer, or client. When a business meets these two requirements, the insurance coverage in question may be cancelled by the insurer. In the final analysis, utilizing a hold harmless agreement may be helpful in a particular situation, however it may result in an unforeseen, negative consequence.
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