A hold harmless clause is a clause in a contract that indicates that one party agrees not to hold the other responsible for damages, liabilities, and losses that may be incurred. In a unilateral version, only one party agrees to this, while in a reciprocal clause, both parties to the contract endorse the clause. It is important for individuals to review all contracts carefully to confirm that they do not contain any surprises, and if a contract contains a hold harmless clause, people should make sure that they understand when and how the clause may apply.
In a simple example, a homeowner might agree not to hold a contractor responsible if she or he is unable to complete work due to circumstances beyond his or her control. These might include weather that slows work, supplier failures that hold up the process by making it impossible to obtain materials, and so forth. In this case, the contractor cannot be held liable for problems experienced by the homeowner as a result of slowed construction; for instance, the homeowner cannot sue to force the contractor to pay for a hotel room if the homeowner is obliged to stay in a hotel as a result of slowed or stopped work.
The language that surrounds the clause is usually specific to the situation, and describes the circumstances that it covers. If the language appears unclear or ambiguous, this should be discussed before the contract is signed. In the example above, for instance, a homeowner wants to make sure that he or she does have legal options if a contractor simply walks off the job, or starts showing up to work late repeatedly, causing work to slow or stop. As a result, there would be a need to confirm that the hold harmless clause does not apply to circumstances that the contractor can control.
Agreeing to a clause does not mean that someone has no legal options if there is a problem with the contract. It only applies to the specific situations that are spelled out. If a party behaves negligently, breaches the contract, or engages in other activities that are not legal, the other party can take action. The purpose of a hold harmless clause is to absolve people of liability in the event of a clearly defined problem that could foreseeably arise during the completion of the contract or could present an obstacle to its fulfillment.