What is the purpose of a hold harmless agreement in contracts?

A hold harmless agreement serves the purpose of limiting liability between the parties involved in a contract. Essentially, it allows one party to protect themselves from legal claims or damages that may arise from the actions or negligence of the other party. This type of agreement is particularly common in construction contracts, service agreements, and similar arrangements where one party might assume responsibility for potential accidents or losses.

By including a hold harmless provision, a party can explicitly state that they will not hold the other party responsible for certain types of claims, thereby effectively limiting their own liability. This risk management tool is crucial in contractual relationships, as it helps to define the extent of liability and responsibilities upfront, giving both parties clarity and security in their dealings.

Understanding the function of hold harmless agreements is important for those in the insurance or legal fields, as these agreements impact how liability is managed and can play a key role in the resolution of disputes that may arise during the contract's execution.