What is the Difference Between Hold Harmless and Waiver of Liability?

Hold harmless agreements and waivers of liability are common risk management tools used in business contracts and agreements. But what exactly is the difference between the two? While they share some similarities, hold harmless clauses and liability waivers have distinct purposes.

Understanding when to use each type of agreement can help protect your business interests and transfer responsibility for potential losses to other parties.

Defining Hold Harmless Agreements

A hold harmless agreement, also known as an indemnity agreement, is a contract that transfers liability for certain risks from one party to another. It requires one party to assume financial responsibility and any associated costs for claims arising from specified activities or transactions.

The party being held harmless is released from liability. The other party accepts responsibility for potential losses or damages. Common examples where hold harmless agreements are used include:

• A contractor hiring subcontractors
• Businesses renting space or equipment
• Companies sponsoring events or activities
• Providers of recreational activities and services

The hold harmless agreement clarifies that one party will not pursue legal action or try to recover losses from the other party should an incident or accident occur. It “holds harmless” the protected party from financial or legal responsibility.

Key Elements of a Hold Harmless Clause

Hold harmless clauses contain certain key provisions to legally transfer liability:

• Names of Parties: Identifies the specific entities or individuals being released from liability and those accepting liability.

• Scope of Risks: Defines the specific activities, timeframes, locations, and potential risks that are covered by the liability transfer.

• Responsibilities: Specifies which types of claims, damages, and defense costs one party is responsible for.

• Exclusions: Lists any high-risk activities, pre-existing conditions, illegal actions or other excluded situations.

• Signatures: Contains signatures from authorized representatives of both parties agreeing to the terms.

Without clearly delineating the risks and liabilities being transferred, a hold harmless agreement may not offer full protection. An attorney can help craft a document that meets your business needs.

When Waivers of Liability Are Used

While a hold harmless clause transfers liability between two or more parties, a waiver of liability simply absolves one party of responsibility for potential losses. Also known as a liability waiver, this agreement is commonly required by businesses providing services, activities or access to property that pose inherent risks.

Examples of liability waivers include:

• Customers signing gym membership agreements

• Visitors to amusement parks or trails

• Spectators at sporting events

• Volunteers at charity events

• Students on school field trips

• Patients receiving medical treatments

Through the waiver, one party acknowledges understanding the risks involved and agrees not to hold the other party liable for injuries or damages. The business is absolved of legal claims or lawsuits should an incident occur.

Liability waivers provide protection without needing another entity to assume responsibility via a hold harmless agreement. They simply waive one party’s right to recover losses from the other’s negligence or liability.

Key Elements of a Liability Waiver

Liability waivers contain certain provisions to be legally enforceable:

• Description of Risks: Details the specific risks or hazards involved in the activity, service or property access.

• Assumption of Risk: Statement that the signing party understands the risks and voluntarily takes responsibility for them.

• Waiver Clause: Language specifying that the signing party will not pursue legal claims or damages against the other party.

• Severability Provision: Establishes that if one part of the waiver is deemed unenforceable, the rest still stands.

• Signatures: Contains signatures from the waiving party or their legal guardian.

A waiver of liability needs to be carefully written so those signing it understand what legal rights they are waiving. Consult an attorney when creating a waiver to ensure enforceability.

Key Differences Between the Agreements

While hold harmless clauses and liability waivers are similar tools to limit liability, there are important differences:

Hold harmless offers bidirectional protection while a waiver protects unilaterally. The scope, complexity, and customization also differ significantly between the two.

When To Use Each Agreement

Deciding whether to use a hold harmless clause or liability waiver depends on your situation:

Use a hold harmless agreement for business contracts when:

• There are inherent risks in contracted work or services
• You hire subcontractors or independent contractors
• You want another business to assume liability

Use a waiver of liability for customers and participants when:

• Providing inherently hazardous services or activities
• Granting access to dangerous equipment or property
• Wanting individuals to waive their right to sue

Talk to an attorney about crafting the right agreement for your particular business needs. Here are some examples of when to use each one:

Can They Be Used Together?

In certain contracts, it may make sense to include BOTH a hold harmless clause and a liability waiver.

For example, a building contractor hiring a subcontractor could use a hold harmless agreement between the companies to transfer risk. The contractor could also require a liability waiver from the specific employees working on the project.

Or an event venue rental contract may stipulate that the rental client assumes liability via an indemnity clause. But attendees could sign a participation waiver when entering the event.

When layered properly in this manner, the agreements provide overlapping protection at both organizational and individual levels.

The Bottom Line

Hold harmless agreements and waivers of liability help shield businesses from the risks inherent in their products, services and operations. Understand when each distinct tool applies to transfer responsibility and limit potential litigation. Consult legal counsel to ensure your contracts contain appropriate protections customized to your exposures. With the right risk transfer agreements in place, you can gain peace of mind over potential liabilities.