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Hold harmless clause
Also called hold harmless agreement, save harmless.
A promise not to hold the other party responsible for specified losses, usually bundled with an indemnity and a duty to defend, and read as one obligation by most courts.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
In strict theory, indemnify means reimburse a loss, hold harmless means do not assert a claim for it, and defend means pay for the lawyer from the first day of the lawsuit. In practice the three appear together as "indemnify, defend and hold harmless", and courts in most states read the phrase as a single indemnity obligation rather than three separable ones — though a handful of jurisdictions have given hold harmless independent meaning, so the distinction is not entirely theoretical.
Where it sits in funding documents
- Merchant to funder: the merchant holds the funder harmless from claims arising out of the merchant's business, its dealings with account debtors, chargebacks, and any breach of the agreement
- ISO to funder: the broker holds the funder harmless from claims arising out of the broker's conduct — misrepresentations to the merchant, telemarketing violations, disclosure failures
- Merchant to processor: standard in card processing agreements, covering chargebacks and fines
What to look at
Scope (does it cover only third-party claims, or also the counterparty's own losses?), carve-outs (is the indemnified party's own negligence excluded?), whether it is capped, whether it survives termination, and whether it includes attorney's fees.
Where this one catches people
In the ISO agreement the hold harmless runs from the broker to the funder. It gives the merchant nothing. A merchant who was misled by a broker and points to the indemnity in the ISO agreement is pointing at a clause that exists to let the funder recover from the broker after paying the merchant — not a promise made to the merchant, who is not a party to that contract and generally cannot enforce it.
Where you will meet this term
Read next
Hold harmless clause — common questions
What does hold harmless clause mean?
A promise not to hold the other party responsible for specified losses, usually bundled with an indemnity and a duty to defend, and read as one obligation by most courts.
Where does hold harmless clause catch people out?
In the ISO agreement the hold harmless runs from the broker to the funder. It gives the merchant nothing. A merchant who was misled by a broker and points to the indemnity in the ISO agreement is pointing at a clause that exists to let the funder recover from the broker after paying the merchant — not a promise made to the merchant, who is not a party to that contract and generally cannot enforce it.
Is hold harmless clause the same as an interest rate?
Hold harmless clause is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does hold harmless clause apply to?
Merchant Cash Advance, Invoice Financing, Credit Card Processing.
Is there a worked example of hold harmless clause?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside hold harmless clause?
ISO agreement, Indemnity, Independent sales organization, Liability, Loan agreement.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.