My insurance company wants me to add some ‘hold harmless’ language to my ad sales contract. Can someone give me a background on them?
Based on my experience on this board I predict that you will get a flurry of posts that provide general information that will be interesting but not specific enough for your particular situation, oodles of disclaimers by lawyers, and a few posts of speculation by non-lawyers.
IANAL but you need one. Who drafted the contract for you in the first place?
CookingWithGas is right, you should use a lawyer to get the appropriate language for your particular situation. It sounds like your insurance company wants you to add an indemnification or limitation of liability section to your standard contract (reducing the likelihood they’ll have to pay out on your behalf). I do not know the specifics of your situation, but I will give you some example mutual limitation of liability and indemnification language. I emphasize: THIS IS MODEL, EXAMPLE LANGUAGE ONLY, AND IS NOT SUITABLE FOR YOUR SPECIFIC NEEDS. I’m not your lawyer, and I’m not providing legal advice.
Limitations on Liability. Neither party shall have any liability under this Agreement (including any liability for its own negligence) for damages, losses or expenses suffered by the other party as a result of the performance or non-performance of such party’s obligations hereunder, unless such damages, losses or expenses are caused by or arise out of the willful misconduct or gross negligence of such party or a breach by such party of any of the express provisions hereof. In no event shall either party have any liability to the other party for indirect, incidental or consequential damages that such other party or any third party may incur or experience on account of the performance or non-performance of such party’s obligations hereunder.
Indemnification. Subject to the limitations set forth [above], Client shall defend, indemnify and hold the Company harmless from any and all damages, demands, liabilities, losses, costs and claims, including, without limitation, reasonable attorneys’ fees, compensatory damages, punitive damages and statutory damages (hereinafter “Liabilities”) asserted against the Company, its agents, its customers, servants, officers and employees, that may arise or result from the breach of any of Client’s obligations under this Agreement, or any use or application of the Company’s work product produced in connection with the Services by Client or any direct or indirect assignee or licensee of Client. The Company shall defend, indemnify, and hold Client harmless from any and all Liabilities asserted against Client, its agents, its customers, servants, officers and employees that may arise or result from the Company’s breach of any of its obligations under this Agreement.
Oh, I’ve already got a call into my lawyer to draft some language. I just wanted some background and discussion.
I often see language like this in product manuals and sales contracts. My question is, what are the limits of disclaimers? I’ve read that many of them would not stand up in court and are there mostly to intimidate the customer.
I once bought some software that included a license requiring the forfeiture of my soul if I violated the terms of the license. I think the author had cracked after reading too many license agreements for other people’s software.
The answer will vary depending on state law, but generally I believe that clause would be enforceable, especially if the parties had relatively equal bargaining power. Contracts that are “take it or leave it” (known as contracts of adhesion), however, are not usually enforceable to the extent that they contain unconscionable terms (i.e. the weaker party is often relieved from onerous terms of the contact). It’s possible someone could come up with a hypothetical where it would be unconscionable to deny consequential damages.
A quick search turned up a relatively recent Minnesota case (construing PA’s Uniform Commercial Code) upholding the enforceability of a similar clause in a software contract between sophisticated parties: Warning: PDF
Johnathan Chance, you don’t have enough information even for a discusson. “Hold Harmless” is typically in the indemnification section. The posts before mine are pretty on-target, especially considering the lacking information. However, I wouldn’t use it because the information provided to you is without context, and it takes a trained professional to apply context to it.
Hold Harmless is exactly as it sounds. It’s kind of onerous for a party to ask for it, particularly if they are being indemnified by the other party in the first place, but that’s just my opinion. I typically strike it if I’m sellng something to a party, but will gladly put it in if I’m buying something. If you carry the thought experiment out, all it means is that the indemnified party is askng not to be blamed by the indemnifying party. However, this analysis really depends on what context the language is in, because there can be situations where one can be held harmless, but still is responsible for some damages (again, depending on the rest of the agreement).
This is commonly referred to as the disclaimer of consequential damages (the english sometimes call it ‘special damages.’) Consequential damages go beyond the scope of direct damages, i.e. direct losses suffered by a party due to the action or inaction of the harming party.
Parties of like bargaining power often place this into the contract because such damages are very hard to ascertain. Parties will often readily agree to be liable to one another for direct damages. Parties will further limit their direct damages to the value of the contract (or some small multiple thereof). The short message board answer for this is because, hey, it’s just business.
This depends a lot on the context of the agreement and the parties involved. If it is between two merchants of like experience in a mature industry, then yeah, it’s pretty much black letter law. The line starts to gray when you have two parties of unequal bargaining power, when the circumstances are such that it is reasonable for certain damages to exist, and finally when it is unconsciounable as a matter of public policy. The degree that these exceptions take place is exponential to one another, with the last one mentioned as being very rare to apply.