Drafting Enforceable “Hold Harmless” Clauses and Contracts
Hold harmless provisions in agreements are becoming more and more common. Whether in a business transaction, in trying to mitigate risk of a lawsuit, or in trying to avoid getting sued for injury or damage, hold harmless or exculpatory clauses can be helpful to your business—if they are drafted properly.
Business Exculpatory Clauses
Like any contract, the first rule to having an enforceable agreement is to make sure that the language is clear, unambiguous, and non-contradictory. Often, terms in documents contradict, without the business even being aware that there is an ambiguity. For example, saying that your business cannot be sued for any reason, and is not liable for any damages, but then later saying that the business’ only liability will be for a given reason, has been held to be contradictory, thus nullifying the entire exculpatory clause.
In business transactions, where both parties are equally sophisticated, there is some dispute whether a contract that holds one party to the contract completely harmless from any damages is enforceable. Some say that this defeats the point of a contract—if there is no penalty for breach, there is no binding contract, because the party being held harmless isn’t bound to abide by the terms of the contract. However, if properly drafted, these hold harmless agreements are enforceable for the time being.
Hold Harmless Provisions for Personal Injuries
For businesses trying to avoid being sued for injuries, the same rules apply, but there are also some additional rules.
A business must make sure that they clearly state that they are, by way of the hold harmless, disclaiming liability for any injury, regardless of whether the injury is in the course and scope of the activity.
For example, let’s assume that you run a trampoline park. A patron goes in, and while on the premises, is bitten by a spider. Unless your hold harmless clearly disclaims all liability for any reason, whether an injury is anticipated, or in the expected course and scope of the activity (trampolining), your business could have a problem.
Your hold harmless also must specifically say that you are holding yourself harmless even from injury that is caused by your own negligence. This may seem obvious—after all, holding yourself harmless is the entire point of an exculpatory clause—but without this language, courts have held exculpatory clauses to be invalid where the party that is seeking to disclaim liability is the negligent party that allegedly caused the injury or accident.
There are some courts that have overlooked this requirement, where the hold harmless was drafted very clearly, and in plain language, such that anybody could understand it. Still, any hold harmless that doesn’t have this language, specifically waiving liability for the party’s own actions, omissions, or negligence, risks being challenged in court.