Sophisticated contracts are getting more common

There is an old adage that goes like this: "A Man is only as Good as his word".  It implies that the integrity of a man or woman is the most important thing in a relationship.   It also implies that if the other party has integrity having 'his word' is probably enough and also implies that there is no need for a formal contract.  That relationship can be personal, professional, peer-to-peer, buyer-seller, etc. and can often involve parties that have different levels of control over a situation.   A decade or two ago no one knew what a 'pre-nup' was; warning labels on consumer products were much simpler; local attorneys didn't advertise on TV; and there seemed to be more trust in both people and systems.   Those days are gone and may never return.  One by-product of this is contracts are everywhere - from EULA agreements that dictate internet terms to the small print on the back of your garbage service 'contract' to signs posted everywhere declaring 'Not Responsible for Damage or Loss'... it's hard to go through an hour of a day without having to check "I AGREE" on some document somewhere.

Contracts aren't the whole story  

On the surface, all contracts might claim that they are merely trying to clarify the obligations of one party to another.   Sometimes that makes sense, but sometimes that can be an attempt to exercise control over another party by gaining an 'upper hand' over the other party.  Other times a contract or warning might actually be trying to take advantage of innocent parties and make them believe that the law won't protect them.  We can't and don't give legal advice; suffice it to say that the operation of the law AND the terms of a 'contract' dictate responsibilities that one party might have to another.  Keep in mind that just because a sign says 'Not Responsible' doesn't necessarily mean that the party is NOT responsible any more than a 'Contract Killer' can claim that they aren't responsible because they had a 'Contract' that obligated them 'under law'.  This can all be very complex and the foundation of a life of study and argument through the courts to definitively say who is-and-isn't responsible in a particular circumstance.  It is also true that there are many responsibilities that can be shifted by contracts under the right circumstances.  

Contracts can be beneficial, neutral, or impose new liabilities

Where people of integrity might disagree, clarifying responsibilities is almost always a 'good' thing.  If I borrowed your shovel and a contract said that if I broke the handle I would have to replace it those would be reasonable terms unless there were defects that you were aware of like a crack running down the handle.  That opens up an opportunity for one party to potentially take advantage of another party.   Contracts must be reviewed very carefully with these principals in mind.   A rental car contract that says you must return the car in the same condition it was in when you rented it might be designed to address bangs and scratches but it might also cause a dispute over whether or not the engine failure was a defect before the car left the rental agency or some neglect of the renter.   Contract language can broadly be divided into three categories: Beneficial, Neutral, or Imposing New Liabilities:

• Beneficial contract terms might say that you are not responsible for something that might otherwise be your responsibility.  Insurance contracts are an example of Beneficial contracts that shift your responsibility to the insurance company under the right conditions.  Some other contracts might use terms like 'hold harmless' or 'indemnify' to reflect that the responsibility is assumed by one particular party.   In our rental example buying the collision damage waiver makes the rental company responsible for collision losses no matter the cause.
• Neutral contract terms might use the same terminology, but may have two similar statements saying that one party takes all responsibility for their part and declares that the other party is responsible for their part.   These are sometimes referred to as Mutual Hold Harmless or Mutual Indemnity terms because they seek to clarify who will be responsible in possibly disputed or overlapping areas of responsibility.  In Contractor-Subcontractor agreements another common and fairly neutral term that might be seen says that the person with the most direct control over a project (often the Subcontractor) will hold the other party harmless for all injuries or damage except for those that were the direct or sole control of the other party.  This is still 'Neutral' or 'Mutual' because authority and responsibility go hand-in-hand.
• Imposing contract terms involve attempts to shift responsibility to one particular party regardless of who is actually and really responsible.  These contracts may contain language saying you are to indemnify them for injury, death, or property damage, even where they are solely negligent or 'regardless of negligence'.  Contracts like this often reflect attempts to shift real responsibilty to another party and might even say things like 'any and all injuries' or 'regardless of fault' that emphasize this shift.

Beware one-sided contracts. 

It goes without saying that Contractors, Subcontractors, and even Individuals should all try to avoid contracts that assume the ordinary responsibility of another party.  Some common areas that this can happen involve Waivers or similar documents at Sporting activities or similar dangerous circumstances; some of which might prove to be valid and enforceable in the courts and others the courts might contest.  If you must engage in this activity or event or you are entirely willing to take personal responsibility for your own injuries and injuries to others then be certain that your eyes are wide-open to the potential consequences of that act.  Subcontractors should be particularly careful of contracts that they sign and consider whether the related added business is truly worthwhile or if it might be possible to move toward a more beneficial set of contract terms.

Some 'Contractual Liability' may not be covered by insurance.

Lastly, one of the areas that we see Subcontractors taking on huge potential liability is by assuming that the Contractual Liability coverage in their insurance policy will respond to the new liability imposed by the contract.   THIS IS NOT THE CASE.  The Contractual Liability coverage in a General Liability policy extends only to certain types of contracts such as contracts to rent space.   More importantly, it doesn't change what the General Liability policy covers.   A General Liability policy covers Bodily Injury and Property Damage under the conditions stated in the policy form and under the conditions of the policy form up to the limits of the policy form - a contract that demands payment (i.e. Indemnity) for a broader range of circumstnces can't impose that responsibility on the insurance company any more than a 'Contract Killer' can transfer his responsibility to another party 'by contract'.  Insurance policies cover 'Bodily Injury', but they don't cover 'Intentional Acts' leading to Bodily Injury and that's reasonable, but a contract that makes you responsible for 'All Bodily Injury' doesn't absolve you from intentional acts even of another party.  Hundreds of examples could be shown.

In summary, the best contracts restate, reinforce, and clarify Common Law responsibilities so that there are fewer disputes when parties disagree about final responsibility.  Not all contracts are like that and may impose liability on otherwise innocent parties, even if the available insurance policies don't provide coverage.   Use the utmost caution and good sense before signing contracts that contain language that you don't understand and always consult with both an Attorney and your Trusted Risk Manager when there are questions about whether insurance coverage exists or is available to address these areas - often you are entirely on your own!