Definition of Hold Harmless
A hold harmless agreement is essentially a contractual agreement wherein one party agrees to take liability for any potential loss or damage that has been caused by another party or arises out of a particular event. As a legal contract, it is used to manage risk and potentially protect against legal liability in a variety of situations, including when construction, manufacturing, or distribution work is being done or when a service is contracted. The party that takes on the responsibility for liability in an agreement is referred to as the indemnifying party, whereas the person or entity that does not take on the responsibility is the indemnified party.
Hold harmless agreements can be bilateral or unilateral in nature . A unilateral agreement places the onus on just one party to indemnify the other. This is commonly seen when an individual agrees to indemnify an organization in a business contract before engaging in skilled labor for the company. Conversely, a bilateral agreement means that both parties have taken on responsibility. These are often used for construction projects and can be useful for employees who may cause damage at work.
Regardless of the type of hold harmless agreement, they can be useful in minimizing disclosure, liability and financial costs risk, meaning it’s important to have a clear understanding on the conditions of indemnity handling before undertaking a job.
Required Language in Missouri
In Missouri, the law does not specifically require that hold harmless agreements be in writing to be enforceable. However, any new or amended contract that contains an express assumption of tort liability must be in writing to comply with state law. The critical issue under the statute is whether the hold harmless agreement in the contract creates, "on its face," an express assumption of tort liability that covers the claim. If so, the agreement must be in writing to be enforceable. The statute does not preclude the assumption of tort liability by implication or by items not expressly mentioned in the document. For example, the intention of the parties is a relevant factor. Also relevant is whether the assumption is necessary to the agreement’s main purpose or is collateral to the main purpose.
For any act or omissions that are negligent, the intent of the parties must be clearly shown if the hold harmless agreement is to be construed to protect against the negligence of the indemnitee. In the absence of such language, a hold harmless agreement is interpreted to protect only against claims arising from the conduct of the indemnitee which is not negligent as a matter of law. Even if the agreement does include express, written assumption of tort liability to the extent that the indemnitor has acted negligently, this has requirements as well. To prove that the indemnitor was negligent (where the indemnity is for the indemnitor’s own negligent conduct), the Plaintiff must show more than simple negligence such as willfulness, unreasonable and reckless disregard of a legal duty, or an evil purpose.
The statute does not apply to contracts between family members or related entities where there is no monetary consideration. It permits an owner/indemnitor to indemnify and hold harmless a contractor from an award, whether based on negligence or strict liability under the product liability act, or both, unless the parties agree otherwise. However, an owner/indemnitor may not indemnify and hold a contractor harmless for an award against the owner/indemnitor based upon the owner’s negligence, with certain stated exceptions. For injuries to a person who is not a party to the contract, the statute does not apply where the damages are caused by the sole negligence of the indemnitee or his or her employees or agents. Under the statute, where the indemnitee and the recipient of the hold harmless agreement are in the same business and therefore are not bargaining from an equal position, the court may limit the scope of the indemnity provision. A court may also construe the indemnity provision not to induce additional negligence.
Common Varieties of a Hold Harmless Agreement
Generally, there are three types of hold harmless agreements: unilateral agreements, reciprocal agreements and mutual agreements. At their core, these agreements are essentially promises to indemnify one party from liability, such as losses or damages, created through a contract. For instance, in a unilateral agreement, one party agrees to indemnify the other for liability the other may have to a third party. In a reciprocal agreement, the parties indemnify each other for liability to third parties regardless of who is at fault. Meanwhile, in a mutual agreement, the hold harmless parties indemnify each other for losses and damages they may have with regard to each other.
Regardless of the type of agreement, they can be used in virtually any situation. For example, if you hire a contractor to renovate your home, you can have the contractor include a hold harmless provision in the contract. Likewise, business owners can indemnify each other for claims made by third parties to their customers.
Advantages and Disadvantages
The ability to transfer or limit liability is a significant benefit of a hold harmless agreement. The agreement enables a person to shift the risk of damages or injuries caused by his or her actions to the other party. In some cases, however, a hold harmless agreement may not be quite as binding as it seems. While under Missouri law a party cannot and should not be able to contract away liability for the party’s own negligence, Missouri courts have held that a hold harmless agreement may protect a party from the negligence of the other party. In school sponsorship cases, Missouri courts have enforced an agreement requiring the sponsor to hold the district harmless for claims arising from the event sponsored by the group. The courts held that such contractual agreements are enforceable even though some of the events were held on or in buildings or property owned or leased by the district. Although some courts have questioned whether contractual liability can exist in Missouri, the Missouri Supreme Court has continued to uphold the validity of many types of indemnity and hold harmless agreements. Missouri courts regularly uphold general liability release forms signed by participants in recreational activities. However, courts note that in order for the release to be valid, there must be consideration in some form other than the promise not to sue. As to agreements to indemnify the other party, Missouri courts will enforce them only when the terms unambiguously state the intention of the parties.
Preparation of the Hold Harmless Clause in Missouri
When it comes to drafting a hold harmless agreement, it is important to take the time to make sure that you include all of the necessary elements. Not including any essential elements could leave your argument for indemnification vulnerable to attack. The following are some of the most crucial elements to include: Comprehensive Language It is important for the language of your contract to include as many foreseeable scenarios as possible. The more carefully an indemnification provision is drafted, the less likely a party to the contract is to escape his or her obligation to indemnify. Additionally, the inclusion of "in addition," "without limitation," and "including, but not limited to" are phrases that are helpful in broadening the protection afforded in the indemnification provision. Language Identifying the Indemnifying Party Identifying the indemnifying party is an important part of drafting a hold harmless agreement. When the provisions are created , the agreement should clarify whether one/both/others in addition to the party named in the contract have an obligation to indemnify. A well-drafted indemnification provision will account for any potential third parties who may have some liability arising from a particular issue. Include a Prohibition On Contribution A hold harmless agreement may result in disputes between two or more indemnifying parties. A contribution provision in a hold harmless agreement is typically triggered where a lawsuit includes claims for affirmative negligence being brought against multiple indemnifying parties. The theory is that one party may end up with a significantly greater amount of liability than another party, and contribution would require the party with the greater amount of liability to reimburse the party with a lesser amount of liability for the difference. Including a provision prohibiting contribution can avoid the issue of it altogether. Governing Law A Missouri hold harmless agreement must be governed by Missouri state law. Therefore, it should be appropriately drafted to comply with the necessary requirements.
Common Applications of the Hold Harmless Clause
In Missouri, hold harmless agreements find application in various industries and situations. They are particularly prevalent in the construction sector. Typically, a general contractor will use a hold harmless agreement in its contracts with subcontractors. A hold harmless agreement will generally be used to shift liability to a subcontractor who is responsible for injuries or damages at a construction site. Moreover, general contractors often seek to have hold harmless agreements with owners as well. The purpose is the same as that with subcontractors – shifting liability for damages to innocent parties.
Hold harmless agreements are also common in rental or lease agreements. Landlords will often seek such provisions in clauses. By doing so, a landlord expects that the tenant will take responsibility for damage to the property and possible claims against the owner. Owners are likely to seek protection from claims arising from the tenants and guests of the premises.
Interpreting Hold Harmless Clauses in Missouri Courts
Courts in Missouri, too, have upheld hold harmless agreements. But an exact approach can vary. In Heffner v. St. Louis County, for example, the court explained that because the broad hold harmless language used in the agreement signed by the plaintiff clearly and unambiguously expressed the parties assumption of liability, the defendant had no responsibility whatsoever for the plaintiff’s injury.
The court, in Heffner, relied on two other cases. The first is Meyer v. Moeller, which involved a property settlement agreement. There the court observed that: "in Missouri, a property settlement agreement is treated as a contract; it is an enforceable legal obligation which will be enforced according to its terms…if the language of a contract is clear and unambiguous then the intent of the parties is to be determined from the language used."
The second case that the Heffner court cited was McKinney v. Cleveland Electric Railway Co., a 1920 case from the Missouri Supreme Court. In that case, the plaintiff was injured by the defendant’s negligence while he was acting in the scope of his employment and the plaintiff sued his employer. The trial court entered judgment for the defendant on the ground that it was released from all liability by a contract which the plaintiff had executed with his employer. The Missouri Supreme Court explained that the release was valid and could be enforced against the plaintiff. In doing so, the Supreme Court said that: "the right of one party to a contract to rely upon its terms and conditions, and to assert them as a defense to an action brought for the purpose of evading them, is the basis of the doctrine so firmly established in this state, that, in the absence of fraud, the parties to a contract are bound, regardless of the wisdom, folly or stupidity of its terms."
Heffner v. St. Louis County is another Missouri case that involved a pedestrian who was injured in a car accident. Again, there was a hold harmless agreement that the court enforced.
In the court’s review of the record, some of the driver’s passengers testified that the driver was speeding. But this testimony was inconclusive. The court noted that there was no evidence of the speed limit on the street where the accident occurred. Thus, the court concluded that even if there was evidence of speeding, it couldn’t be used to support the argument that the pedestrian was not negligent as a matter of law. That evidence of a material issue of fact about how fast, if at all, the driver had been speeding was sufficient to defeat the motion for summary judgment.
Consulting an Attorney in Missouri
When creating or signing such an agreement in Missouri, it’s critical that you obtain legal advice. You can contact our office at (314) 361-4300 to meet with us right away . We can negotiate the language of a hold harmless agreement before it is created and we can review it afterwards. The important thing is that you get legal help either before you sign the agreement, or after.