Demystifying Hold Harmless Agreements
A hold harmless agreement is a legal agreement or contract between two parties, typically the buyer and seller of a vehicle. The purpose of this agreement is fairly simple: To hold one party harmless from legal responsibility or liability relating to the subject vehicle. These agreements are commonly used in vehicle purchase transactions, usually between a dealer and the consumer. When you purchase a vehicle from a licensed dealer, it is common for them to require you to sign a hold harmless agreement. Simply put, if something happens with the vehicle after you take possession, the dealer is no longer responsible for any liabilities associated with the vehicle.
There are several important reasons why a hold harmless agreement may be necessary. Any time a vehicle changes ownership, the new owner is taking on any obligations or liabilities that may come along with the vehicle. Additionally, vehicles require a fair amount of maintenance and repair work, which is always a possibility . Finally, there is the possibility of an accident involving the vehicle.
There are several specific scenarios in which a hold harmless agreement may be necessary. The aforementioned vehicle purchase is one. Another possibility is once a lease for a vehicle terminates. Under those circumstances, the dealer must protect themselves if major damages exist. Thirdly, a hold harmless agreement may be necessary when a vehicle is repossessed. In the event the vehicle is damaged in some way, the seller does not want to be held responsible.
Although there are many different reasons why a purchase or sale transaction may require a hold harmless agreement, this document is usually used in front of the actual vehicle sale or transfer to either absolve the seller of responsibility or to remind the buyer of their responsibilities and liabilities should something happen with the vehicle after the sale.
Integral Elements of a Vehicle Hold Harmless Agreement
The vehicle hold harmless agreement or indemnity is like any other indemnity. It is a promise by a party to protect and indemnify the other party against the consequences of its own reckless or tortious conduct. The vehicle hold harmless agreement must be expressly written; the fact that one has been created cannot be inferred from the conduct of the parties. Like any contract, the courts will hold the drafting party to his express words and language.
A vehicle hold harmless agreement may be entered into with respect to leased equipment. With these agreements, the leasing company must be protected from consequences arising out of the use of equipment during the lease period. The lessor must be indemnified against the negligence of the lessee, but may also be liable for its own negligence. A lease indemnity may be a part of the equipment lease itself but is typically contained in a separate agreement. There may also be an implied lease indemnity.
A vehicle hold harmless agreement must have some essential elements:
The parties to this arrangement are the indemnitor and the indemnitee. In a vehicle bid proposal provision, these two parties would be the buyer and seller or town and equipment company. In most cases, the parties will not benefit from the indemnity agreement and will only be a witness to the agreement. But there are some states where parties to a transaction may benefit from an indemnity provision. A third party is someone to whom the indemnitor owes a direct duty of care. An indemnity provision in a construction contract could result in the general contractor assuming responsibility for the acts of the subcontractors toward the landowner.
The description of the vehicle is general. It may be used for any vehicle used by a business or organization. It is usually only required to be listed once by serial number or license plate number.
The indemnification clause requires the indemnitor to compensate the other party for the consequences of their reckless or tortious acts. The extent of the indemnification can be negotiated between the parties.
The limitation of liability clause is the apportionment of the liability between the parties. It limits the indemnity obligations. This is used to limit liability for persons who have engaged in interstate commerce. Limitation of liability clauses restrict the type and amount of recovery. Many jurisdictions do not abide with these clauses.
A vehicle hold harmless agreement has a broad public policy, but the extent to which parties are protected depends on what is provided in the contract.
Situations Calling for the Use of a Hold Harmless Agreement for Vehicles
A vehicle hold harmless agreement is used mostly when one person needs to use another person’s vehicle, and the owner wants to protect him or herself from liability associated with that action. There are many different ways this scenario can unfold, and each makes a vehicle hold harmless agreement necessary.
For example, if you’re renting out a car, you will want to have your renter sign an agreement that protects you from liability.
Another situation would be a simple sale. You might sell your car to somebody, who then runs into someone else while still using his or her new vehicle. That would mean both driver’s aren’t at fault, but on the off chance that a car accident claim is made against you, you’ll want to be 100 percent sure that you are in no way responsible for any damage or injuries.
What if you are just lending someone your vehicle? Maybe a customer at your shop leaves in your car and proceeds to cause an accident. Out of an abundance of caution, you may want to have them sign the agreement anyway.
If there is any situation in which your vehicle could potentially interact with vehicles owned by other people, that is a situation which could benefit from a vehicle hold harmless agreement.
Legal Implications and Recommendations
When drafting a vehicle hold harmless agreement, it is important to be aware of the legal considerations that apply to the various contractual obligations. An agreement may not be enforceable if it does not comply with the law. For example, if the liability is based such that it contravenes the statute of limitations, or the loss to be compensated is uncertain and the agreement is offered without consideration, then the contract may be void. It is essential for the car dealer to anticipate any future risks from offering the vehicle hold harmless and ensure that remedies are included to protect against, or compensate for, those risks. Any language that obliges the vehicle holder to indemnify the car dealer should be included and should be carefully reviewed. Any party may be held liable for their own negligence that results in damage to a third party. Consideration should also be given to potential claims brought by any third parties injured by the holder’s actions. Last but not least, the agreement should clearly identify any car dealer’s objectives. This will ensure that the agreement is well understood by all of the parties involved and free of any ambiguities. It is also useful to incorporate any federal acts that may apply.
Modifying a Vehicle Hold Harmless Agreement Template
It can be easy to customize a generic hold harmless agreement template to fit the specific needs, such as those involving various types of vehicles. Because the intent is to ensure that neither party is liable for any number of issues, there are certain considerations and clauses that should be tailored to fit the situation.
For example, if you are hiring a moving company to move your belongings, you may need to have specific clauses to address damage to both the items being moved and the property itself . If your agreement is with someone who has agreed to lend you their car, provisions for vehicle insurance coverage are going to need to be slightly different than if it was your friend who was going to be using a moving truck for a day.
The provisions of each vehicle hold harmless agreement will be as unique as the situation. Hiring legal guidance is always recommended to help provide an additional level of protection if something goes wrong during use.
Locating and Utilizing an Effective Template
There are plenty of great vehicle hold harmless agreement templates out there. Something as simple as an Internet search will not suffice, however. You need to be looking in the right places for the right types of templates — and even then, pay close attention to the qualities we have outlined here. An online template can give you a very handy start on creating your agreement, but you will still want to work with a detail-oriented lawyer who understands exactly what is required by your state laws and can write the final version that will most protect you. Drafting language in a powerful, precise way is not something that is easily learned online, for all the resources available. It really takes a knowledgeable hand. For one thing, every state has its own laws and regulations. A template from another state may have clauses or elements that belong only in that other state. To try to make a hold harmless agreement from Louisiana or Montana or Minnesota work right in California is to court disaster because of missing elements and erroneous contentions. You need a professional who works day in and day out in your jurisdiction so you are certain you are not relying on just a generic template that could leave you exposed. A good attorney will work with you to make sure that every clause in your agreement covers your bases. A boilerplate agreement template that seems very legal is not always what you actually need for your specific state or vehicle type. Your attorney and their staff will know your specific needs, but also they will be very familiar with both common and unusual special circumstances, and able to give you advice on the level of formality and precision required. Some people might think that they can make just a few phone calls, pay some nominal amount, and the "custom" version of the template will be enough. But when you consider when you will need it — when gone wrong, an agreement can cost you a great deal more than the cost of the legal work you do. Your hold harmless agreement is an important document that can be very useful to you in a variety of legal situations, protecting you and your business in case of accident or malfeasance. So, start looking for solutions online. Make a list of your specific hold harmless agreement needs. Then have that experienced attorney ready to make sure your needs are legally met.
Engaging with Legal Counsel
One of the final steps, but also the most important, is to seek the advice and guidance of an attorney. If you are unsure is a specific provision is necessary, ask your attorney if an explanation is necessary , or if the language in the agreement is enough. Another thing to consider, does this agreement make sense given the facts and circumstances? Remember, a lawyer versed in contracts will look at an agreement and evaluate it very differently than a non-lawyer.