Legal agreements are part of doing business. They define the terms of transactions and relationships. They also can transfer all sorts of liability to you and your business – even liability that you are not obligated to take on.
Let’s say, for example, you enter into a lease agreement for office space. The lease agreement between your company and the building owner (landlord) includes a lot of obvious things, such as the rental rate and terms, but it also says you agree to indemnify the landlord if one of your customers or employees sues the landlord for an injury suffered in the building. Are you sure you want to take on that liability? Should the landlord be responsible for the overall safety of the building?
Indemnify means “to protect from or secure against loss, damage or harm.” In most cases, we would expect to remain responsible for our own actions or negligence. But few of us want to take on liability for another person’s actions or negligence. Many agreements today attempt to pass liability from one party to another. Make sure it’s not passed on to you through legal agreements you sign.
Laura Conway, an attorney who specializes in insurance-related litigation with Porzio, Bromberg & Newman, PC, says, “This is a real issue. People are shocked to find out that, through an agreement they signed, such as one that a distributor might sign with a product manufacturer, they took on financial responsibility for a liability they did not create. Business owners need to read their contracts and agreements carefully and, if necessary, have them reviewed by their legal counsel.”
Watch out particularly for the words indemnify, indemnity, “hold harmless,” and any language that addresses responsibility or liability.
This article originally appeared in The Business Owner Journal, the periodical of choice for owners of small and midsize private businesses. All rights reserved, D.L. Perkins LLC. © 2012.
This publication is intended to provide general information on the subject matters covered. It is sold and distributed with the understanding that neither the publisher nor any distributor or advertiser is engaged in providing legal, tax, insurance, investment or other professional advice. The advice of a qualified professional should be sought before any reader applies a concept presented herein to his or her particular situation or business.
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