Contractual Provisions Regarding Attorneys' Fees

If a legal dispute emerges, the parties to a contract can agree on the payment of attorneys' fees and charges

When a legal problem emerges and people go to court to resolve it, the basic rule is that each party to a lawsuit is responsible for their own legal bills. When two people or businesses sign a contract, they can stipulate that the losing party in a legal dispute must pay the winning (or "prevailing") party's attorneys' fees and costs. Continue reading to find out how to include an attorney's fee provision in your contract.

What Does a Provision for Attorney Fees Look Like?

An example of the wording of a standard attorney's fee provision is as follows:

Attorney's Fees. These are a type of legal fee that is paid to an attorney. The successful party has the right to recover reasonable expenses and necessary disbursements, as well as attorneys' fees, incurred in executing this Agreement from the losing party. A provision for attorney's fees can be found in a variety of contracts, from leasing agreements to consulting agreements.

What Costs Are Included?

Filing fees, expenses for serving the summons, complaint, and other court papers, fees to pay a court reporter to record depositions (pre-trial interviews of witnesses) and in-court testimony, and fees to pay the daily stipend of jurors are all examples of "costs." Photocopies of court papers and exhibits are frequently included in the price.

Keep an eye out for one-way attorney fees clauses.

Attorneys' fees are granted to the side who wins the action under a mutual provision, such as the one described above. This is reasonable and promotes cases to be resolved quickly. A "one-way provision," on the other hand, allows only one of the parties, usually the one with the better bargaining position, to earn attorneys' fees. One-way provisions, regardless of which side they favor, create an unequal playing field when it comes to settling conflicts. California, for example, has recognized this inequity and immediately converts a one-way attorneys' fees contract clause into a reciprocal provision.

Attorneys' Fees Provisions: Judicial Enforcement

You shouldn't assume that just because your contract has an attorneys' fees provision that the clause will be enforced if a lawsuit emerges and one party seeks reimbursement for their legal bills from the other. Courts have the authority to review contracts for fairness and to modify their terms if they determine that this is the most equitable approach. If a judge determines that enforcing a requirement that one party pay the other's attorneys' fees would be unjust or that one of the parties was coerced into signing the agreement, the demand may be canceled or the amount of fees to be paid changed. However, if a judge finds that an attorney's fee clause is reasonable and was negotiated by two parties with equal negotiating power, the judge is likely to uphold it.

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