Hold harmless agreement

A hold harmless agreement is a clause typically included in construction contracts, in order not to hold one party liable for the acts of the other. It can be a unilateral or reciprocal agreement and is commonly provided by a subcontractor to the main contractor.

The provisions of such an agreement mean that the risk of being held liable for loss or damage due to the actions of another are minimised and a claim for indemnity can be pursued. In terms of a reciprocal agreement, both parties are covered, i.e. the subcontractor will not be held liable for loss or damage caused by the main contractor and vice versa.

The protection provided by the agreement varies according to the jurisdiction, but in general, they must include an express indemnification, that is, a written agreement that secures or protects a person/party from the legal responsibility of a loss. The named party who that takes responsibility is known as the ‘indemnitor’ while the named party to be protected is known as the ‘indemnitee’.

There are three basic types of hold harmless agreements:

• Broad form: This type holds that the indemnitor will assume all risk for liability regardless of whether responsibility lies with the indemnitee.
• Intermediate form: This is the most commonly used type and holds that the indemnitor will assume all risk for liability unless responsibility lies solely with the indemnitee.
• Limited form: This type holds that the indemnitor will only assume the risk of liability for loss caused by their own actions.

Key features of a hold harmless agreement include:

1. Indemnification: The party providing the hold harmless (the indemnitor) agrees to compensate the other party (the indemnitee) for any losses, damages, or legal costs that arise from specific circumstances outlined in the agreement.
2. Scope of Protection: Specifies the types of claims or liabilities covered, such as personal injury, property damage, or financial losses related to the construction project.
3. Duration: Defines the period during which the hold harmless provisions apply, which could be during the construction phase or extend beyond project completion.
4. Exclusions: Identifies any exclusions or limitations to the hold harmless provision, such as negligence or willful misconduct by the indemnitee.

Common scenarios for hold harmless agreements include:

• A contractor may agree to hold the client harmless for any claims arising from the contractor's work, such as accidents or property damage occurring on-site.
• A subcontractor might agree to indemnify the main contractor against any liabilities resulting from the subcontractor’s actions or omissions.
• A supplier may provide a hold harmless agreement protecting the contractor from claims related to defective materials or equipment supplied.

The terms of hold harmless agreements are often heavily negotiated to balance the interests and risk tolerance of both parties. The enforceability of hold harmless agreements can vary depending on the specific wording and circumstances. Courts may scrutinise these clauses, especially if they appear overly broad or unfair. It is essential for parties to have appropriate insurance coverage to back up their indemnity obligations.

[edit] Related articles on Designing Buildings

• Collateral warranties.
• Contractors' all-risk insurance.
• Indemnity.
• Insurance.
• Legal indemnities.
• Making sure your builder has appropriate insurance.
• Mechanic’s lien.
• Professional indemnity insurance.
• Surety.