Hold Harmless Clause in Australia: What You Need To Know

If you sell products, provide services, run events or step onto third‑party sites, you’re exposed to risk. A hold harmless clause is a simple contract tool that can help manage that risk by shifting certain losses away from your business.

Used well, it can reduce disputes, support your insurance position and give your customers or partners clarity about “who pays if something goes wrong”. Used poorly, it can be unenforceable - or worse, put you in breach of Australian law.

In this guide, we explain what a hold harmless clause is, how it works in Australian contracts, when it’s useful, and the traps to avoid. We’ll also cover the related clauses you should consider so your contract works as a whole.

What Is A Hold Harmless Clause?

A hold harmless clause is a contractual promise that one party will not hold the other legally responsible for specific losses, claims or damages. You’ll often see it alongside an indemnity. In everyday terms, it says “if X happens, you agree not to pursue us for those losses.”

Businesses commonly include hold harmless wording in a Customer Contract, Services Agreement, venue hire terms, subcontractor agreements and event waivers.

Typical scenarios include:

• Service delivery risks (for example, clients using your advice or instructions at their own risk).
• On‑site activities (for example, a contractor working on a client’s premises).
• Participation risks (for example, attendees at a class, workshop or fitness session).
• Third‑party claims (for example, a customer’s use of supplied materials causing a claim by someone else).

How Do Hold Harmless Clauses Work In Australian Contracts?

In Australia, hold harmless clauses are generally enforceable if they are clear, reasonable and consistent with the law. However, there are important limits.

They must be clear and specific

Vague or catch‑all wording can be read narrowly or struck out, especially in standard form contracts with small businesses where the unfair contract terms regime now applies Australia‑wide.

You can’t contract out of certain laws

Some obligations cannot be waived, including key work health and safety duties, many statutory consumer protections and criminal or wilful misconduct. You also cannot exclude the non‑excludable consumer guarantees under the Australian Consumer Law (ACL) for certain supplies.

They sit alongside other risk clauses

A hold harmless is only one part of your risk framework. It should be aligned with your limitation of liability, waiver and indemnity provisions, and with your insurance. For example, your insurer may require you to include - or avoid - particular indemnities.

They interact with state civil liability rules

State and territory proportionate liability regimes and negligence principles can affect how far you can push a hold harmless or indemnity. Tailored drafting matters.

When Should Your Business Use A Hold Harmless Clause?

Think about where the real risks arise in your operations, then target the clause to those scenarios. A few common use cases:

1) Client‑side risks you can’t control

Where the client provides materials, instructions or access (e.g. you’re a tradie using client‑supplied parts), it’s reasonable to require the client to hold you harmless from defects or claims caused by those inputs.

2) Participation in higher‑risk activities

Gyms, fitness classes, workshops or experiences often include a participant hold harmless and waiver covering inherent activity risks that can’t be eliminated by reasonable care. These must be drafted carefully and fairly.

3) Third‑party premises

If your staff work at a client’s site, your agreement can require the client to hold you harmless for pre‑existing site hazards or issues outside your control, while you still accept responsibility for your own negligence.

4) Subcontracting and project work

Head contractors often require subcontractors to hold them harmless for losses arising from the subcontractor’s work, aligning responsibility with control.

Hold Harmless, Indemnity, Waiver And Limitation Of Liability: What’s The Difference?

These clauses work together, but each does a different job.

• Hold Harmless: A promise not to pursue the other party for certain losses.
• Indemnity: A promise to compensate the other party for specified losses (e.g. third‑party claims). It is more active than “do not pursue”.
• Waiver: A participant or customer gives up a right they might otherwise have, typically for defined risks. See our guide to legal waivers for how this works in Australia.
• Limitation Of Liability: Caps or excludes certain types of losses (like loss of profit) to keep exposure predictable. It should align with your hold harmless and indemnity. Read more on limitation of liability clauses.

You don’t have to use every tool in every contract. The right mix depends on your industry, the deal and commercial leverage. The goal is fair and clear risk allocation that reflects who controls each risk.

Key Risks, Pitfalls And Drafting Tips

Here are practical tips to keep your clause enforceable and commercially sensible.

Be specific about scope

Spell out exactly which activities, timeframes and loss categories are covered. For example: “the client agrees to hold the supplier harmless from claims arising from client‑supplied specifications.” Specific beats sweeping language.

Carve out serious misconduct

It’s common - and sensible - to carve out your fraud, wilful misconduct or criminal acts, and often your own negligence. This supports fairness, helps with insurance and reduces the chance of the term being considered unfair in a standard form small business contract.

Align with the ACL and mandatory guarantees

Don’t exclude non‑excludable consumer guarantees where the ACL applies. If you supply to businesses, you may still face ACL obligations depending on the goods/services and price - get tailored advice.

Coordinate with your liability cap

If you cap liability at a set amount, make sure your hold harmless and indemnities don’t accidentally bypass that cap. Many businesses also exclude certain consequential loss types, but the definition needs careful drafting to avoid disputes about what’s “consequential”.

Address third‑party claims clearly

State whether the hold harmless applies to third‑party claims and set out how claims will be notified, defended and settled. Consider who controls the defence and how costs are managed.

Check your insurance

Some insurers restrict broad indemnities or hold harmless promises. Make sure your clauses are compatible with your public liability and professional indemnity cover.

Watch for unfair contract terms

Under the unfair contract terms regime, a term in a standard form contract with a small business can be void (and penalties can apply) if it’s unfair. One‑sided or unclear hold harmless wording is at higher risk. Balance matters.

Keep it consistent across the contract

Your hold harmless should work with your limitation of liability, indemnity, exclusions, payment provisions and any set‑off clause. Inconsistencies create ambiguity - and litigation risk.

Where Should You Put A Hold Harmless Clause?

Most small businesses include this kind of risk allocation in their core customer‑facing and supplier contracts. Depending on how you operate, you might use:

• Customer Contract for one‑to‑one client engagements with tailored scope and deliverables.
• Service Agreement if you provide ongoing or project‑based services where responsibilities and site access should be clearly allocated.
• Online terms (for example, website or platform terms) if your customers accept terms digitally at checkout or sign‑up.
• Terms of Trade for product supply and installation, where client‑supplied plans or materials can introduce risk.
• Event or participation waivers for classes, workshops or experiences with inherent activity risks.
• A settlement or Deed of Release when resolving a dispute, to permanently release claims about defined issues.

For higher‑risk relationships, some businesses use a Deed of Waiver, Release and Indemnity in addition to their main agreement, especially for once‑off activities that warrant stronger formality.

Example Hold Harmless Use Cases (And How To Frame Them)

Professional services (advisory, design, consulting)

Where clients implement your advice themselves or provide inputs (briefs, data, user content), your contract can require them to hold you harmless for losses caused by those inputs or by implementation outside the agreed scope.

Pair this with a clear limitation of liability and exclusions for indirect or consequential loss to keep exposure predictable.

Trades and installation

If you install client‑supplied equipment or work from client plans, require the client to hold you harmless for defects in those items or inaccuracies in the plans, while you accept responsibility for your workmanship under Australian law and any agreed warranties.

Events, classes and activities

Use a fair, plain‑English waiver and hold harmless clause focused on inherent risks that can’t be removed by reasonable care. Don’t try to waive obligations you cannot legally avoid, and make the risks obvious to participants before they agree.

Subcontractors and suppliers

Where a subcontractor controls how work is done, require them to hold you harmless and indemnify you for losses caused by their acts or omissions. Align this with insurance requirements and your head‑contract obligations.

What Else Should Be In Your Contract To Manage Risk?

A hold harmless clause works best as part of a complete risk framework. Consider adding these elements (and make sure they fit together):

• Limitation Of Liability: Set a reasonable cap (for example, fees paid) and exclude defined categories of loss where appropriate.
• Insurance Requirements: Confirm the types and levels of cover each party must maintain, and proof on request.
• Indemnities: Address third‑party claims (e.g. IP infringement, personal injury caused by a party’s negligence) with clear procedures for defence and settlement.
• Warranties And Responsibilities: Say who is responsible for what, and what they promise about inputs, approvals and access.
• Acceptance And Sign‑Off: Reduce scope creep and disputes by defining acceptance criteria and timelines.
• Change Control: A simple process for variations minimises arguments about responsibility when the scope shifts.
• Dispute Resolution: Escalation steps and mediation before court can save time and cost.

The most effective contracts are tailored to how you actually operate. If you’re updating your core templates, our team can help you align your hold harmless, indemnity and limitation terms so they’re clear, fair and enforceable.

How To Get Started: Practical Steps

1. Map your risk: List where injuries, property damage, IP issues or financial loss could occur in your delivery process - and who controls each risk.
2. Choose the right document: Decide whether you need a proposal + Customer Contract, a standing Service Agreement, online terms, or a once‑off deed for particular activities.
3. Draft targeted wording: Use clear, specific hold harmless language matched to the risks you don’t control, with appropriate carve‑outs.
4. Align the suite: Make sure your hold harmless aligns with limitation of liability, indemnities, warranties and any liability caps.
5. Check insurance and the ACL: Confirm your insurer is comfortable with the drafting, and that your wording doesn’t try to exclude non‑excludable rights.
6. Train your team: Ensure sales and delivery teams understand what they are promising and how claims should be handled.

Key Takeaways

• A hold harmless clause helps allocate risk by preventing one party from pursuing the other for defined losses, but it must be clear, fair and consistent with Australian law.
• Use it where the other party controls the risk (client inputs, third‑party sites, participation in activities), and pair it with aligned indemnity, waiver and limitation of liability terms.
• You can’t contract out of certain duties (like key WHS obligations or non‑excludable ACL guarantees), and broad one‑sided wording risks being void under the unfair contract terms regime.
• Tailor the clause: define scope, carve out serious misconduct, set claim procedures and ensure it fits with your insurance.
• Build a complete risk framework by aligning your hold harmless with liability caps, exclusions for defined categories of loss, insurance requirements and clear responsibilities.
• Your core agreements - such as a Customer Contract, Service Agreement or Terms of Trade - are the best place to embed well‑drafted hold harmless provisions.

If you’d like a consultation on drafting or reviewing a hold harmless clause for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.