Loading

Attorneys Fees Provisions

 

When a legal dispute arises and the matter ends up in court, the general rule is that each party pays their own attorneys fees unless a specific statute allows the prevailing party to collect attorneys fees, or the contract which is the subject of the dispute, contains an attorneys fees provision. Note that it is uncommon for statutes to provide for attorneys fees so many contracts contain such provisions.

Attorneys fees provisions in contracts are like two edged swords. They can work for you or against you. While not all attorneys fees clauses are the same, following is one example:

The Parties agree to mediate any dispute or claim arising between them out of this Agreement, or any resulting transaction, before resorting to court action. Mediation fees shall be divided equally among the parties involved. If, for any dispute or claim to which this paragraph applies, any Party (1) commences an action without first attempting to resolve the matter through mediation, or (2) before commencement of an action, refuses to mediate after a request has been made, then that Party shall not be entitled to recover attorney fees, even if they would otherwise be available to that Party in any such action.
 
In the event that any suit is instituted concerning or arising out of the Agreement, the prevailing party shall recover all of such Party's costs, including, without limitation, the court costs and reasonable attorneys fees incurred in each and every such action, suit or proceeding, including any and all appeals or petitions therefrom.

Following are key definitions:

Prevailing Party: The party to a lawsuit who successfully prosecutes the action or who successfully defends against it.

Reasonable: Fair or appropriate under the circumstances. Not excessive. The court has the right to determine what is reasonable.

Costs: Expenses in prosecuting or defending a case, not including attorneys fees.

 

Advantages to Attorneys Fees Provisions

If you file a lawsuit against a party and prevail, you will be entitled to reasonable attorneys fees;
   
If you are sued by someone and you prevail in defending yourself, you will be entitled to reasonable attorneys fees;
   
It is more economically feasible to file a lawsuit for smaller amounts of money if you are also able to collect reasonable attorneys fees. Remember, the Small Claim Court maximum is $10,000 for individual plaintiffs and only $5,000 for business entities filing lawsuits;
   
It is easier to obtain legal representation on a contingency basis or hybrid basis (percentage plus reduced hourly rate); and
   
Often attorneys fees provisions discourage frivolous lawsuits from being filed.

 

Disadvantages to Attorneys Fees Provisions

If you file a lawsuit and don't prevail, you will probably be required to pay the prevailing party's reasonable attorneys fees; and
   
If you are sued and don't prevail, you will probably be required to pay the prevailing party's attorneys fees and your own.
   

 

If you conduct your business ethically and carefully, an attorneys fees provision makes sense. If you cut corners, take unfair advantage of every available situation, and / or operate negligently, you should avoid attorneys fees provisions.

We prefer to work with clients that benefit from attorneys fees provisions and well drafted contracts. Please contact us if you need a contract or form drafted, reviewed, or modified.

 

 

Common Contract Provisions

 

 
 



Example of Attorneys Fees Provision
Working for and Against Parties





All contents ©2016 MTCLaw.com. All rights reserved.