Release of Liability Contract: What You Need to Know

A release of liability, also known as a liability waiver or a hold harmless agreement, is a contract in which one party agrees not to hold another party liable for damages or injury. These contracts are common in fields that involve some risk to property, finances, or health. They are also used when two parties settle existing damage or liability claims. 

The party that agrees to waive future claims is known as the releasor. The agreement is usually drawn up by the releasee, and both parties sign and date the document. Although the law will make exceptions, the releasor pledges an understanding of any risks involved in the covered activity and agrees not to sue for damages. 

The release of liability is usually a brief legal contract with several sections, typically including the following. 

Identification

The release begins by identifying all parties to the agreement and their role, either releasor or releasee. A prominent, fillable text block lists names and contact information. The document should also include effective dates, either in this or a later section.  

Indemnification

A release form details the specific circumstances covered by the agreement and indemnifies the releasee from damage claims. For example, as a condition of using a fitness center, the owner may ask a new member to sign a release agreeing not to hold the business liable for injuries. 

The release should state the expected use of the equipment, the ordinary risks of using fitness gear, the hours of operation, etc. The releasor assumes responsibility for the risks inherent in the activity. 

The contract language may use several synonymous terms to cover all possible future situations. It mentions any and all releasor “claims,” for example, but also lawsuits, claims, damages, demands, and causes of action. 

Fees or compensation

A section detailing fees or subscriptions to be paid by either party may be included, although this information may be in a separate business contract. If a personal injury or similar release settles a claim, the document gives the compensation paid to the releasor. A release in this situation would also list conditions of the settlement—for example, the obligation of the releasor to pay for any future medical treatment or to keep the terms of the settlement confidential.   

Applicable law

The release agreement gives the state law applicable to any disputes. This section may include a clause requiring any disputes over liability to be resolved through arbitration. 

No duress

The releasor states they are under no duress to sign the release and is doing so freely. 

Physical risk is a normal part of activities such as 

• Recreational boating 
• Horseback riding
• Mountain climbing
• Skydiving
• Hot air ballooning 
• Target shooting 

In a business offering such activities, a business owner or his clientele will experience mishaps, some involving injury. A release is meant to cover this risk and lessen any claims or monetary damages for the owner. For many in the business of offering risky activities, the release of liability is necessary for doing business. The liability insurance carrier may also require it.

Not all risky businesses need to have their customers sign releases. Anyone entering a casino to play blackjack or the slots, for example, understands there’s a certain financial risk involved. In most instances, losing at the gaming tables would not give rise to a lawsuit. 

Certain businesses can’t ask for releases as a practical matter. Grocery stores may have the occasional slippery floor, but they don’t have the time or resources to ask every shopper to sign a release of claims related to a fall. For that reason, grocery stores and other businesses are usually quick to clean up spills, put up “wet floor” pylons, have customers fill out incident reports in case of a fall, and follow up on any medical treatment. 

The law also will deny claims of liability in circumstances where a normal and rational person would be aware of mild risks. Roller coasters, passenger ferries, national parks, sun-splashed beaches, and skyscraper observation decks all contain an element of risk—well understood by those who use them.  

A release of liability will not protect a releasee in all situations. State law governs how to structure these contracts and what they can cover. For example, in case of a deliberate act causing an injury, the law will not allow a business owner to claim a release waives any and all responsibility. Nor would gross negligence, as the law defines it, shield that owner from a lawsuit. Gym owners, skydivers, and hot air balloonists must maintain equipment, and anyone offering hazardous activities must have the property safety equipment and follow procedures. 

Nor do state laws allow employers to demand releases from their employees or escape a basic duty to ensure workplace safety. In the world of employment, workers’ compensation law generally guarantees benefits to injured workers and shields employers from liability claims. 

Releases can run to several pages of dense legalese. Executing them can be time-consuming and bothersome to both parties. As a business owner, you can’t be expected to specify all possible injuries in a release, nor as a customer or client can you, in ordinary circumstances, negotiate the language of a release before signing it. There’s a serious cost of employee time in presenting, explaining, storing, and keeping track of liability releases. Yet, for many, they’re essential documents—a cost of doing business. 

One effective answer to the problem of releases is to automate the process. The contract management site Ironclad has created a self-serve tool known as Workflow Designer. This tool uses a drag-and-drop interface to build and manage releases (and other contracts) tailored to your specific business. The process takes a relatively brief amount of time and minimizes the need for costly professional guidance. 

Workflow Designer works through a modifiable template. The release can be tailored as business conditions change while keeping standard and required legal language. Documents can be securely stored online, signed and/or initiated online, dated, placed on a timeline, and transmitted to releasors via email or mobile text link. They can also be printed out for hardcopy storage.

Private businesses and government agencies dealing with mass releases have also automated the process by offering the documents online. The California DMV has created a release of liability that can be signed and submitted via an online form. 

When a registered vehicle owner sells that vehicle to another party, the state requires this Notice of Transfer and Release of Liability. The document notifies the Cal DMV that the seller is no longer responsible for any traffic violations or criminal actions committed by the driver/owner of the vehicle. The form requires the old and new owners’ names and addresses, the license plate number, the last five digits of the vehicle identification number, and the odometer reading. With a click, the form is then uploaded and officially submitted. 

Ironclad has created Clickwrap, a process where contracts embedded into websites and mobile apps can be signed with a click, saving time on both sides. This function is well-suited for copyright releases, for example, when a creator allows the conditional use of a photograph or logo via a download. The Clickwrap method effectively manages online agreements and spares both parties the trouble and uncertainty of transmitting contracts via email.

Many customer-facing businesses are now on board with digital contract management. Their releases are available on a device or a terminal and signed/initiated with a few clicks. The business can print out a signed copy for the customer’s records. The digital method has found wide acceptance among the masses who already shop and work online and have grown used to reading online documents.  

However, clicking on a contract in PDF on-site may not always be the ideal solution. In the case of COVID releases, for example, having a customer agree to hold the business harmless from possible infection won’t work if the customer has to be physically present before signing.  The workaround is a clickable COVID waiver sent out via email or text link to potential customers and clients before they arrive. 

Clickwrap releases work well for those holding events or competitions. Participants, who may only be in attendance once, can be sent a clickwrap liability release before showing up and as a condition of taking part. This saves the venue the trouble of having all participants sign on site. It also gives a means of tracking and storing the documents.

Digital contract management has streamlined the world of legal contracts and agreements. The new approach is increasing among many different kinds of businesses and between individuals engaged in a partnership or transaction. Convenience is enhanced, time is spared, and the parties can get down to business, work, or play without too much trouble.