Alex is Sprintlaw’s co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
If you run a small business, you’ve probably signed (or sent) contracts that include a “hold harmless” clause or an “indemnity”. They often look like standard legal boilerplate, but they can shift serious financial risk onto your business if something goes wrong.
Whether you’re supplying services, hosting events, hiring contractors, or leasing a premises, getting the wording of your hold harmless clause in New Zealand right can be the difference between a manageable issue and a costly dispute.
In this guide, we’ll break down what hold harmless clauses and indemnity agreements actually do in New Zealand, where they commonly show up, what makes them enforceable, and how to negotiate them in a practical way (without the legal jargon).
What Is A Hold Harmless Clause In New Zealand?
A hold harmless clause is a contract term where one party agrees they won’t hold the other party responsible for certain losses, claims, or liabilities.
In plain English: it’s a clause that tries to shift (or limit) responsibility between the parties if something goes wrong.
In a hold harmless clause New Zealand context, you’ll often see it framed like:
- “Party A holds Party B harmless against any loss arising from…”
- “You release and hold harmless the supplier from all claims…”
- “The customer will not hold the provider liable for…”
Hold harmless clauses are closely related to (and often bundled with) indemnities and liability limitation wording. You’ll commonly see all three sitting together in a “Liability”, “Indemnity”, or “Risk” section.
Is “Hold Harmless” The Same As “Indemnity”?
They’re related, but they’re not always identical.
- Hold harmless usually focuses on not making a claim against someone (or protecting them if a claim is made).
- Indemnity usually focuses on reimbursing someone for specific losses or costs if something happens.
In practice, many contracts use the two concepts together, and courts will look at the overall wording and intention of the clause.
If you’re trying to work out what an “indemnity” really means in your contract (and what risks it creates), it can help to start with the basics of an indemnity clause.
When Do Small Businesses Commonly See Hold Harmless Clauses?
Most small businesses run into hold harmless and indemnity wording more often than they realise. Common situations include:
Service-Based Work (B2B Or B2C)
If you provide services (consulting, design, marketing, trades, IT, events, coaching), your client may ask for broad protection if anything goes wrong. Or you may want protection when the client uses your deliverables in ways you can’t control.
This is one reason it’s worth having properly drafted Service Agreement terms that allocate risk clearly, instead of relying on a generic template.
Engaging Contractors Or Subcontractors
If you engage contractors, you might be exposed if they injure someone, damage property, or infringe third-party rights while working for you.
Hold harmless and indemnity clauses can help manage this risk, but they need to match how the work is actually done (and who controls what).
If you’re onboarding third parties to do work for your business, it’s often a good idea to document responsibilities in a Contractor Agreement rather than trying to “patch” risk issues later.
Leases, Licences, And Use Of Premises
Landlords often include strong indemnities and hold harmless wording in lease documents. This can require the tenant to cover certain losses even if the tenant didn’t directly cause them (depending on the wording).
If you’re signing a premises agreement, it’s worth getting a Commercial Lease Review before you commit, because risk clauses in leases can be surprisingly one-sided.
Events, Workshops, And Customer Activities
If customers attend an activity (fitness, events, tours, classes, children’s activities), you’ll often want a release/hold harmless clause and other risk management terms.
These clauses can help, but they won’t fix everything on their own (for example, you can’t contract out of certain statutory obligations, and you still need good safety practices).
Depending on your setup, you may also need a tailored disclaimer as part of your booking flow or terms.
How Do Indemnity Agreements Work In New Zealand (And What Can Go Wrong)?
An indemnity agreement (or indemnity clause in a contract) is a promise to cover certain losses. For small businesses, the main problem isn’t that indemnities exist - it’s that they can be drafted far too broadly.
If you sign a broad indemnity, you may end up paying for:
- another party’s legal fees (even before liability is proven)
- third-party claims (including claims you didn’t directly cause)
- indirect losses such as lost profits, reputational harm, or business interruption (depending on the wording)
- regulatory penalties or compliance costs (sometimes included, sometimes not enforceable in practice)
Common Indemnity “Traps” To Watch For
Here are a few drafting issues that regularly create risk for business owners:
- Indemnity triggered by “any” loss: If the clause says “any loss arising out of the agreement”, it may go far beyond what you assumed.
- No fault requirement: Some indemnities apply even if you weren’t negligent, or even if the other party contributed to the issue.
- Unlimited liability: The indemnity may override the contract’s liability cap (or the contract may have no cap at all).
- Control of defence: If you’re paying for a claim, you’ll often want the right to control or participate in how it’s defended and settled.
- Insurance mismatch: An indemnity can require you to cover losses that your insurance policy won’t cover.
Indemnities are often negotiated alongside caps and exclusions, which is why it helps to understand limitation of liability clauses too - the way these clauses interact matters.
Are Hold Harmless Clauses Enforceable In New Zealand?
Generally, hold harmless clauses and indemnities can be enforceable in New Zealand, but enforceability depends on:
- the specific wording
- the circumstances in which the contract was signed
- whether key obligations can legally be excluded or reduced
- whether the term is considered unfair in certain standard form contract contexts
New Zealand contract law also looks closely at clarity. If the clause is vague, inconsistent, or buried in a way that makes it hard to understand, you’re more likely to see disputes about what it actually covers.
It also helps to remember the basics: a clause can’t protect you if the underlying contract formation is shaky. If you’re unsure what makes an agreement enforceable in the first place, start with what makes a contract legally binding.
What New Zealand Laws Can Limit Hold Harmless And Indemnity Clauses?
This is where a lot of business owners get caught out: even a well-drafted hold harmless clause isn’t a magic shield. New Zealand law places limits on what you can exclude, and some obligations can’t simply be “signed away”.
Consumer Guarantees Act 1993 (CGA)
If you sell goods or services to consumers in New Zealand, the Consumer Guarantees Act 1993 can imply automatic guarantees (for example, that services will be carried out with reasonable care and skill, and goods will be of acceptable quality).
In many consumer situations, you can’t contract out of the CGA. That means a hold harmless clause may not prevent a consumer from enforcing their CGA rights.
If your customers are mostly businesses (not consumers), you may be able to contract out of the CGA in writing and if it’s fair and reasonable to do so - but this needs careful drafting and context.
Fair Trading Act 1986 (FTA)
The Fair Trading Act 1986 prohibits misleading or deceptive conduct in trade. If a hold harmless clause is paired with marketing or representations that don’t match reality (for example, suggesting “no refunds ever” when consumer law applies), you could still face risk under the FTA.
Practical takeaway: your liability clauses should align with what you tell customers in your advertising, website copy, and sales conversations.
Contract And Commercial Law Act 2017 (CCLA)
The Contract and Commercial Law Act 2017 covers a range of contract principles in New Zealand (including issues around misrepresentation and remedies). In real-world terms, if a contract was entered into based on misleading statements, a hold harmless clause may not save the party who made the misrepresentation.
Health And Safety At Work Act 2015 (HSWA)
If you’re running a business that involves workers, contractors, a workplace, physical activity, or public attendance, health and safety is a major consideration.
Under the Health and Safety at Work Act 2015, you have duties to manage risks so far as is reasonably practicable. A hold harmless clause doesn’t replace safe systems of work, training, supervision, or incident response.
From a business perspective, this means your contracts should support (not undermine) your safety practices. For example, you might use clauses requiring contractors to comply with your safety policies - but you still need to actively manage the risk.
Unfair Contract Terms (UCT) In Standard Form Contracts
If you use standard terms (for example, online terms and conditions, booking forms, or standard service packages), there are rules that can make certain terms unenforceable if they’re considered unfair.
These unfair contract terms protections can apply in consumer contracts, and they can also apply to some standard form “small trade” contracts (for example, where one party employs 19 or fewer staff and the upfront price payable is within the relevant statutory threshold).
Broad “we’re never liable for anything” clauses are more likely to attract scrutiny.
This doesn’t mean you can’t manage risk - it just means your clauses need to be balanced, transparent, and tailored to what your business actually does.
How To Draft (Or Negotiate) A Hold Harmless Clause The Smart Way
Most small businesses aren’t trying to “win” a contract negotiation - you just want to be protected from day one, without signing something that could blow up later.
Here are practical ways to approach a hold harmless clause New Zealand negotiation.
1) Be Clear About What Risk You’re Actually Taking On
Start by asking: what could realistically go wrong in this relationship?
- If you’re providing advice, the risk might be reliance on that advice.
- If you’re installing something, the risk might be property damage or defects.
- If you’re hosting an event, the risk might be participant injury or venue damage.
Your clause should match those real risks, not try to cover “everything forever”.
2) Limit The Clause To What You Control
A good rule of thumb: don’t indemnify someone for things you can’t control.
For example, if a client misuses your product, modifies your deliverables, or ignores your instructions, you shouldn’t be responsible for the fallout. That’s the kind of scenario where a carefully drafted hold harmless clause makes sense.
3) Consider Carve-Outs For Negligence And Misconduct
Many businesses assume a hold harmless clause means “no liability, full stop”. But in negotiations, it’s common to carve out situations like:
- fraud or dishonesty
- gross negligence
- wilful misconduct
- breach of law
These carve-outs can make the clause more commercially acceptable and reduce the risk of an “unfair” label.
4) Align The Indemnity With Insurance
Before you accept an indemnity, check your insurance:
- Does your public liability or professional indemnity policy actually cover that risk?
- Are there exclusions (for example, contractual liability exclusions)?
- Is the cap high enough for the potential exposure?
It’s surprisingly common for a contract to impose an indemnity that goes well beyond what the business’s insurance will respond to.
5) Put A Liability Cap In Writing (And Make Sure It Applies To Indemnities)
Many contracts include a liability cap (for example, “total liability is limited to fees paid in the last 12 months”). But sometimes the indemnity is drafted to sit outside the cap, which can defeat the purpose.
If you want a cap to protect you, it often needs to be drafted so it applies to indemnities too (or the indemnity needs its own cap).
6) Use The Right Document For The Job
Sometimes, a hold harmless clause sits inside a bigger agreement. Other times, it’s a standalone deed (for example, a release and indemnity deed for an event, property access, or a special arrangement).
As a business owner, you don’t need to guess which format is best - but it’s helpful to know that the structure matters, including how it’s signed and enforced. If you’re weighing up a deed vs a standard contract, the difference between a deed and agreement is a good starting point.
Key Takeaways
- A hold harmless clause New Zealand businesses use is typically designed to allocate risk for certain losses, but it must be drafted clearly and fairly to be effective.
- Hold harmless clauses and indemnities are often used together, but they can do different things - one may prevent claims, while the other may require reimbursement of losses.
- Indemnities can create major financial exposure if they’re too broad, uncapped, not tied to fault, or misaligned with your insurance.
- New Zealand laws like the Consumer Guarantees Act 1993, Fair Trading Act 1986, and Health and Safety at Work Act 2015 can limit what your contract can exclude or shift.
- Unfair contract terms rules can apply not just to standard form consumer contracts, but also to some standard form small trade contracts.
- The most practical approach is to tailor clauses to the real risks in your business, limit them to what you control, and ensure liability caps and insurance arrangements work together.
- Because small wording changes can have big consequences, it’s worth getting your contracts reviewed so you’re protected from day one (instead of finding out the hard way later).
This article is general information only and does not constitute legal advice. If you need advice for your specific situation, consider getting legal advice tailored to your business.
If you’d like help reviewing or drafting hold harmless clauses or indemnity agreements for your business, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.
